China’s first polysilicon consolidation steps unlikely to move prices in Q1

China’s largest polysilicon producers have begun early-stage coordination aimed at curbing overcapacity, but analysts say the measures are unlikely to materially affect prices in the first quarter of 2026, as key elements of the plan remain undefined.

Momentum picked up last week with the creation of a CNY 3 billion ($425.9 million) coordination platform in Beijing involving five of the country’s largest manufacturers, other investors and the China Photovoltaic Industry Association (CPIA). Separately, GCL Technology said it had established a $287 million entity to acquire a stake in Inner Mongolia Xinyuan Silicon Material Technology Co. Ltd.

The broader proposal would see leading producers raise about CNY 50 billion to acquire and idle roughly one-third of China’s polysilicon capacity from smaller manufacturers, potentially shutting about 1 million metric tons of lower-quality output.

“Industry sources said the plan’s effectiveness will hinge largely on the timing and scale of capital injections, including when the subscribed capital is fully paid in and whether follow-on funding can be sustained,” Summer Zhang, senior analyst for solar supply chain at OPIS, told pv magazine. “These parameters – particularly the continuity and magnitude of future funding – are expected to be clarified only gradually as the initiative progresses.”

Zhang said no official guidance has been released on the volume of capacity to be phased out, with the only confirmed figure being the platform’s registered capital of CNY 3 billion, implying that substantial additional shareholder funding would be required to approach the previously cited CNY 50 billion target.

“The overall consolidation blueprint encompasses a wide range of unresolved issues, including the scale of capacity to be acquired, the total amount of capital to be raised, the targeted pricing range for polysilicon, production and sales quotas, and the governance of future polysilicon construction or expansion projects,” Zhang said. “To date, many of these core elements have yet to be clearly defined, at least based on the information disclosed through official channels.”

When asked about the potential impact of expanding polysilicon capacity outside China, Zhang said the risk is conditional. Market participants generally believe non-Chinese polysilicon would become economically viable in China only if domestic prices stabilize above about CNY 80/kg, a level seen as difficult to achieve in the near term and more likely over one to two years.

“Non-Chinese polysilicon capacity is indeed expanding and we may see a notable increase in capacity next year,” Zhang added. “While this growth is unlikely to derail China’s ongoing efforts to reduce domestic overcapacity, any meaningful progress in capacity rationalization that lifts prices in the Chinese market could create an opportunity for non-Chinese producers, particularly those with relatively low production costs, to sell material into China, potentially reintroducing competitive pressure.”

Zhang argued that any sustainable increase in polysilicon prices would depend on the timing and scale of capital injections, including when subscribed capital is fully paid in and whether follow-on funding can be maintained.

“That said, more modest effects could emerge as early as next quarter,” she added. “Industry sources indicate that additional capital injections by participating companies are likely and could translate into firmer selling prices. Market participants noted that a portion of future polysilicon sales revenue may be allocated to the platform, effectively introducing a pricing structure that incorporates both manufacturing costs and acquisition-related costs.”

Weak end-market demand is likely to constrain near-term price support, Zhang said, adding that “a meaningful recovery in downstream manufacturing is therefore expected to depend on both the effective implementation of the consolidation plan and a sustained rebound in global end-market demand.”