Is Polysilicon and Wafer Supply Tightness the Reason for New Long Term Contracts being Signed by Downstream Solar Producers

Polysilicon used to be Big in the Supply Constrained Days of 2007 and 2008.This commodity which is generally producers for $30/kg used to be sold at $400/kg  by Polysilicon Producers as the Exponential Demand Growth in the Crystalline Silicon Solar Cell Industry pushed the prices to astronomical levels.With Polysilicon being the only constraining link in the Supply Chain,Downstream Solar Companies with access to Cheap Polysilicon Contracts used to be the Kings of the Industry.Polysilicon Producers like MEMC,Wacker etc. managed to sign many sweetheart deals on those days with  10-15% prepayments and other favorable conditions loaded in the favor of the upstream suppliers.Long Term Polysilicon Contracts used to be signed almost every week and every new deal used to lead to stock price appreciation.However the GFC following the Lehman downfall in 2008,bought the industry to its knees.With newer suppliers like GCL Poly,OCI,LDK and others entering the poly industry and Demand Dying down,Polysilicon lost its sheen as prices crashed to  $50/kg by end of 2009.Many Solar Business Models like Applied Materials SunFab Division, Metallurgical Polysilicon etc  went bankrupt as c-Si based modules became extremely cheap.Many of the contracts were rewritten while the rest landed up in courts.

China Sunergy sues Norway’s REC over supply agreement – Reuters

Solar cell products maker China Sunergy Co Ltd (CSUN.O) said it started legal proceedings against Norwegian solar company Renewable Energy Corp (REC) (REC.OL) in connection with bank guarantees related to a silicon and wafer supply agreement signed last year. China Sunergy said a court in China has issued a ruling suspending the payment of $50 million in bank guarantees to REC. A court in Norway has also granted an injunction with respect to the payment of $50 million in bank guarantees, China Sunergy said.

Why are New Polysilicon/Wafer Contracts being Signed

Recently some new Polysilicon Supply Contracts have been signed between Polysilicon Producrs and Downstream Solar Companies.These deals have come about after a gap of almost 2 years.Though  contract details are not specified,the conditions are much more equal for both parties.Note in 2008,it was not unheard of to give equity stakes for a song to poly producers in order to secure long term access to polysilicon.Suntech,Gintech and Evergreen Solar had to give equity for zero price at that time to MEMC and OCI.Note Polysilicon prices have gone up slightly to $60-70/Kg as Solar Demand has grown by almost 100% in 2010 compared to 2009.This has caught everyone by surprise leading to Poly Prices trending up.This might be one reason for downstream solar producers to sign long term deals.This gives comfort to both parties about their production and with better worded conditions will be more sustainable than the Bubble Deals.

Yingli Green Energy Announces a Five-Year Polysilicon Supply Agreement with OCI – PR Newswire

Yingli Green Energy announced today that it has signed a five-year polysilicon supply agreement with OCI Chemical Corporation (“OCI”), a leading chemicals producer in Korea. Under the terms of the agreement, OCI has agreed to supply polysilicon with a total value of approximately US$442 million to Yingli Green Energy from 2011 to 2015.

Order Focus: GCL-Poly signs second PV wafer supply deal with DelSolar, extends terms to 2015 – PV-Tech

GCL-Poly Energy’s Solar Energy Technology subsidiary has signed a second long-term solar wafer supply deal with Taiwanese PV cell and module maker DelSolar. The new agreement, calling for 664MW of wafers, builds on a contract announced in late May and extends the terms from October 2010 to December 2015.The companies said that the agreement includes a mechanism by which the parties may adjust prices to better reflect prevailing market conditions. DelSolar noted that it expects the alliance to greatly enhance its overall operational needs and profitability.