Polysilicon Shortage: Production Solar panels in Danger

Polysilicon Shortage: Production Solar panels in Danger

Prices drove from $14 to $19 a kilogram

A Polysilicon shortage probably is causing problems for the solar panel industry. Producers of solar panels expect high costs and lower margins due to an unexpected shortage of raw materials.

Last months, the price of pure metallurgical  silicon, the most important raw material for solar cells, rose by 35%. According to news agency Bloomberg, the price rose after officials in China closed several factories.

The largest producers in China such as Canadian Solar and Hanwha Q Cells have already reported a sharp fall in profits. Analysts expect other companies to be affected as well. Think of JA Solar and JinkoSolar, the largest listed company in solar panels.


The price spike came after an environmental crackdown in China coincided with an annual lull in polysilicon output, according to Jenny Chase, head solar analyst at Bloomberg New Energy Finance. Refiners in China typically cut back polysilicon production during the summer for routine maintenance.

Solar manufacturers anticipate the seasonal slowdown, but it was exacerbated this year when China’s Ministry of Environmental Protection shut down several plants that make metallurgical silicon, a partially refined polysilicon that other companies further purify for use in solar cells.

Four years ago, China imposed strict tariffs on material imported from the US and South Korea, forcing companies to buy locally.

The two events led to a polysilicon shortage that drove prices in China from $14 to $19 a kilogram over the past four months, according to Guelph, Ontario-based Canadian Solar, which has most of its manufacturing in China.

“We didn’t expect the polysilicon price to go so high inside China and nobody expected it,” Chief Executive Officer Shawn Qu said on a Nov. 9 call with analysts. The second-biggest solar company’s gross margin slumped to 17.5 percent in the third quarter, from 24.2 percent in the second quarter, and its net income was less than half of what analysts were expecting.

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Polysilicon is semiconducting material that’s refined from quartzite, a dense rock created when sandstone is crushed between tectonic plates. China-based companies including GCL-Poly Energy Holdings Ltd. and Xinte Energy Co. bake the material in giant ovens and treat it with chemicals until it condenses into ingots of near-pure polysilicon. Those ingots are sliced into wafers using diamond-edged saws, and then cut into squares to make solar cells that transform sunlight into electricity.


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