Polysilicon Prices Head for Steep Fall: Good News for Solar?

By Ucilia Wang

The shortage is over and the glut is just around the corner.

Although demand for polysilicon to make solar panels will grow by 34 percent next year, the supply will likely double, thanks to new factories that were planned out years ago, according to a new report by iSuppli.

As a result, the price for silicon will drop dramatically, the firm said. And since silicon is a major component in the cost of solar cells, those will likely swoon too (see abstract).

The slide will even likely accelerate in 2010.

Spot market prices for polysilicon hit $500 per kilogram earlier this year, compared with $200 per kilogram in 2007. iSupply expects the spot market prices to fall as low as $200 per kilogram next year. By 2010, the prices could drop as low as $100 per kilogram, wrote Henning Wicht, iSuppli's principal solar analyst.

Most silicon is bought under long-term contracts and not under the spot market. Movements in the spot market, however, can often reflect price directions in the industry. Companies also examine changes in the spot when renegotiating supply contracts.

Market and financial analysts have been predicting an end to the polysilicon shortage that began in late 2004 and early 2005 as solar companies began to compete more fiercely with chip companies, which use the silicon for making chips that run computers, cell phones and other gadgets. Subsidies offered by the German government also prompted demand to skyrocket.

Silicon remains the primary ingredient for making solar cells and panels today, although a raft of other companies are exploring different materials. First Solar (FSLR), one of a handful of successful thin-film companies, uses cadmium tellurium for its thin-film panels. Startups such as NanoSolar use copper indium gallium selenium instead, although CIGS panels have a market penetration right now that's close to zero.

In 2007, 90 percent of polysilicon came from seven companies, including Wacker, REC and MEMC (WFC). Since then, more than 60 additional companies have said they plan to start producing the material in 2009, said iSuppli.

iSupply's report echoes  what Travis Bradford, president of the Prometheus Institute, a research partner of Greentech Media, said earlier this year (see New Research Predicts End to Silicon Shortage and Oversupply of Silicon to Be Worse than Expected).

Although the drop in polysilicon prices is good news for solar cell and panel makers, their customers will expect lower prices for their solar energy equipment as well. That, in turn, could lead to a tough fight for market share, particularly during an economic downturn.

Solar company executives and analysts have predicted a drop of anywhere from 5 percent to more than 20 percent in solar panel prices next year. During an industry conference in September, SunPower Corp.'s (SPWRA) CEO Thomas Werner told Reuters that panel prices will likely fall between 10 percent to 20 percent in 2009.

click to enlarge

source: iSuppli

Comments

[caramba:]

what's new in this article? nothing
we know that long term poly supply contract are priced close to $50
most of poly new entrant, 55 out 60 are high cost producers and will lose their shirt once spot goes down. most of them are chinese companies.
last poly price has to come down for the solar industry to succeed on the long term.

2008 Nov 13 06:59 PM

[topost123:]

agree nothing new in this write up. it left out part of the story. MEMC has had a difficult time ramping up production. its a leap to believe that all the new startups will be immediately successful.

long term poly-sci price will decline dramatically. question is still how long will it take. 2009/2010 seems a little optomistic given all the real world mfg problems.

2008 Nov 13 08:15 PM

[oilsands:]

Capacity does not equal production. China may ramp up their solar to support their start-ups. By now, they are surely gaining an appreciation for the reward of such action as the cost of drilling for oil and gas climbs.

2008 Nov 14 09:33 AM

[disdaniel:]

"news" reports that focus on spot poly prices are the tail wagging the dog.

The spot price getting closer to the contract price is healthy for poly, not a sign of weakness.
Supply and demand are related, but a supply problem being resolved IS different than a demand problem.
Spot price over 2x contract price means poly had supply problems. If spot price gets down to 1/2 contract price...then we might have a demand problem.

2008 Nov 14 12:08 PM