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March 30, 2016Polysilicon prices set to rise
We at Greenworldinvestor have become bullish on polysilicon companies because low prices have made major producers stall capacity growth, even as global demand for solar panels continues to grow in double digits. Polysilicon prices are languishing at $12-15/kg in the past 6 months, leading to bare minimum profits for most polysilicon companies. Some of the largest poly players such as Hemlock, REC Silicon and SunEdison have been locked out of the world’s biggest market China because of anti-dumping duties imposed on imports of polysilicon by China. While the Asian and European companies have managed to keep exporting polysilicon to China through smart deals made with the Chinese government, USA producers are making large losses and shutting down capacity.
Chinese poly prices are expected to shoot up soon by almost 30-40% as per HIS, as the FIT deadline in June spurs with massive demand pull in for solar panels and consequently polysilicon (which is the main raw material used for making panels). While the second half may see a tapering demand, the prices should keep at the same level as additional polysilicon capacity is not being added by key players.
Some of the better polysilicon companies that investors can look to buy at the bottom of this commodity cycles are GCL, Daqo and REC Silicon. These companies have low costs and decent technology. Companies like GCL and Daqo can benefit because they are located in China and not subject to import duties. They are also favored by the government, which wants to indigenize the production of polysilicon in China. Despite having large producers, China imports large amounts of polysilicon as most players are small and high cost. They are also not able to produce polysilicon of the requisite quality.
A rush to install projects in China before the deadline for feed in tariff (FIT) levels of those projects on June 30, 2016 is the primary reason polysilicon prices are increasing, according to IHS… In fact, before the Chinese New Year in February 2016, polysilicon sold for just $12 per kilogram, on average; however, prices are now expected to rise to $19 per kilogram by April 2016.