Solar Silicon Prices Hit Rock Bottom Amid Overproduction

• The average price of solar silicon has dropped 22% to $9.6 per kilogram, the lowest level since summer 2020, due to the overproduction of polysilicon.
• Overproduction has led to a glut, forcing some manufacturers to sell polysilicon at a loss, while others have suspended production to avoid further losses.
• The price correction is attributed to new capacity increases by major global producers, with BloombergNEF expecting prices to stabilize in Q3 as production shutdowns ease supply pressures.

Spot prices for the main ingredient in solar photovoltaic systems are crashing hard and fast, fueled by a glut in China's solar panel supply chain. Some companies manufacturing polysilicon make solar panels at a loss, while others have shuttered production. 

Bloomberg data shows the average price of solar silicon plunged 22% from last week to $9.6 per kilogram, hitting levels not seen since the summer of 2020. Prices peaked on June 2022 at $39 and have since plunged 75.5%. 

The main reason for the plunge is "polysilicon production far exceeds expected global installation," according to BloombergNEF. 

Data from PV Infolink shows silicon prices fell even lower, to as low as $7.5 per kilogram. Some manufacturers are dumping polysilicon on the market to shed inventory amid a worsening glut. 

Some manufacturers, such as Daqo New Energy Corp., need $7.55 per kilogram to break even. Bloomberg quoted China Silicon Industry Association, who said, "Several factories have suspended production to avoid selling at a loss." 

Citigroup wrote in a note to clients that polysilicon prices are near the industry's average production cost after a year of declines, adding the price correction is due to increasing new capacity by most of the world's top producers. 

Citigroup analyst Pierre Lau noted that wafer, cell, and module market prices also declined, through the lower polysilicon costs, while solar glass prices were flat. 

He pointed out three polysilicon producers have suspended production due to low prices, and the timeline to restart still needs to be clarified. 

BloombergNEF expects polysilicon prices to stabilize in 3Q as production shutdowns will help alleviate supply.

Production has finally outpaced increasing demand as a polysilicon glut may cool solar panel prices that jumped during Covid. 

By Zerohedge.com

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