Polysilicon Industry to see more cost reductions

The big polysilicon producers are making a lot of money after a loss making 2-3 years. The reason is that the large poly producers are reducing costs continuously, even as the poly prices have stabilized at $20-25/kg range. Most of the Tier 1 producers have costs ranging from $10-15/kg which allows them to make between 20-35% EBITDA margins. This is a nice margin in a commodity industry which is seeing high double digit growth every year. The smaller players have exited the industry as their cost structure was around $30/kg, allowing the big companies such as OCI, Hemlock, Wacker, REC and SunEdison to consolidate their position in the industry.

Companies have sharply reduced costs with process and technology improvements these days. The newer plants with FBR technology are expected to further reduce the costs with SunEdison claiming that its new FBR technology can reduce costs to just $6/kg (cash costs) from around $10-11/kg now. With profits coming in, the poly makers are now contemplating to unfreeze their expansion plans with REC announcing a 3000 ton FBR plant expansion in the USA. Wacker will also go ahead with a new plant in Tennessee which is the second big site after its original giant production site at Burghausen in Germany. SunEdison is also planning to open two new plants in China and Saudi Arabia though the timelines are hazy.

It is expected that the prices will remain stable for the next couple of years, as increasing demand will be adequately met with increasing supply from the main producers. It is also known that some of the companies which had mothballed their plants such as LDK Solar, will also restart their plants after putting in place new equipment to reduce costs. Solar panel costs are therefore expected to keep reducing as raw material costs should not increase. With improvement in technology the poly costs which are around 11-12c/watt, should reduce to 8-9c/watt as the polysilicon requirements reduce from around 5.4 grams/watt to 4.5 grams/watt. Also improvement in efficiency and increasing scale should help in cost reduction.

GTM

A total of 130 thousand metric tons (kilometric tons or KMT) of polysilicon manufacturing capacity, equivalent to roughly 25 gigawatts of crystalline silicon (c-Si) solar PV panels, is estimated to come on-line in 2015 and 2016, according to GTM Research’s newest report, Polysilicon 2015-2018: Supply, Demand, Cost and Pricing. By 2016, cumulative global polysilicon supply capability will reach 437 KMT, enough to enable 85 gigawatts’ worth of c-Si panel production. GTM Research estimates that global PV installations of at least 60 gigawatts will be required to maintain balance between polysilicon demand and supply in 2016. The report notes that the effects of overcapacity on polysilicon pricing could be exacerbated by the fact that by 2018, more than 150 KMT of polysilicon supply will come from plants with cash production costs of less than $15 per kilogram, including REC Silicon, GCL-Poly, Daqo New Energy and TBEA Xinjiang. Global demand for polysilicon is estimated to be between 347 KMT and 416 KMT in 2018, compared to 243 KMT in 2013 and 328 KMT in 2015.