Solar Polysilicon Capacity Expansion stops after 4 crazy years of growth

Polysilicon capacity has almost grown by 10x in the last 5-6 years as massive demand growth from solar panels made suppliers add capacity without thinking about future sustainability. OCI and GCL Poly which had no polysilicon capacity till 4-5 years ago added almost a hundred thousands tons of polysilicon capacity to become the top 2 producers in the world. Other established Polysilicon Companies like Wacker, Hemlock too added capacity though in lower sizes. There were also numerous small companies which entered the polysilicon space but they were weeded out a year ago as they found the process too hard to master.

With polysilicon prices crashing to $20 levels from around $80-100/kg levels a year ago , even the biggest and lowest companies are feeling the heat. Smaller polysilicon companies have closed shop with only 3-4 players in China running their factories. The reason is that the price has become far lower than even the variable costs of these companies . OCI ,the Korean company which has one of the lowest costs in the industry announced that it is cancelling the plan to build 2 factories in Korea. The news is not unexpected given the massive overcapacity in all parts of the supply chain. There have been a large and increasing number of bankruptcies in the solar panel and solar thermal sectors. While there has been no big bankruptcy in polysilicon, LDK has fired 20% of its workers and its capacity is not competitive with the cost being much higher than the ASP.

Seoul-based OCI announced on May 18 after the stock market closed that it scrapped plans to build two polysilicon factories at home because Europe’s worsening fiscal crisis is affecting the volatility of the solar-power industry. An update on its investment position will be given within a year, OCI said.

The announcement may slow OCI’s efforts to cut expenses because the new plants are designed to be more cost effective, Nomura analysts, including CW Chung, said in a research note. Nomura has a “reduce” recommendation on OCI.