Polysilicon makes a comeback

After an extremely bad couple of years which saw many of the older Polysilicon plants closing and prices crashing by almost 80%, Polysilicon has started to see some revival signs. Companies like OCI and REC Silicon are planning to expand capacity, while SunEdison (SUNE) has signed a JV with Saudi Arabia to build a new Greenfield plant in that kingdom. Even GTAT (GTAT) which makes the equipment (CVD reactors) for poly has indicated that they are seeing indications of a revival in orders as new plants are built in the Middle East.

Polysilicon prices have reached the $20/kg level after falling to the $15/kg level. This is a far cry when prices were at least $150/kg. With costs of most of the Tier 2 plant still at $30/kg, the industry is still bad for the smaller and newer companies. However, the Big 5 of the poly industry are starting to show increased profits and stock prices are shooting up. Demand has been going up sharply which means utilization levels have improved. Solar panel and cell companies have already started making decent profits and it is a matter of time before the poly firms start to make a profit.

Note the capacity in the industry is still quite big, which means we won’t see $100/kg ever again but if the price reaches $50/kg, then these companies would start to show bumper profits. Note poly capacity takes at least two years to get built, so that a sharp jump midway will mean spot prices will jump up sharply. This could adversely affect the panel companies while the upstream players will enjoy their share of this cycle’s profits. GCL Poly (GCL), Renesola (SOL) and Daqo (DQ) are the Chinese firms which would benefit, while REC Silicon and Wacker are the Western companies that one can stock up in anticipation of higher profits.