Polysilicon prices expected to bottom out "soon"

Polysilicon prices are expected to begin stabilizing this month.Deutsche Solar

In its latest Polysilicon Price Index, IHS Solar predicts that polysilicon prices will soon bottom out, as production is more aligned with demand.

The research company is basing its forecasts on lower activity in the global photovoltaic market which, it said, indicates that supply and demand are becoming more balanced.

Indeed, IHS says spot market volumes have fallen by more than half and that spot market sales last December accounted for just 20% of total polysilicon sales – significantly down from a peak of 47% in May – thus indicating that pricing is approaching its bottom limit.

"The drop in spot market volume, along with a range of other indicators, suggest that the price plunge that hamstrung polysilicon supplier profits throughout 2012 will soon come to an end," stated Henning Wicht, director and principal analyst, photovoltaics, for IHS.

Tier 1 polysilicon suppliers are said to be leading the way in production reduction, following eroded profit margins, and reduced factory utilization rates, the latter of which has resulted in higher manufacturing costs.

Overall, IHS said average prices fell from US$31/kg last February to $21/kg at the end of last year. However, they are expected to begin stabilizing this month and should continue through March.

Despite this, only a "modest" increase in demand is expected to be seen in 2013. "Even if demand increases at a higher rate than expected, Tier 1 suppliers will be reticent to increase production, keeping in mind that oversupply would destroy any price recovery immediately," said IHS.

It added that until prices reach above $25/kg again, tier 2 and 3 polysilicon suppliers are likely to continued playing a reduced role.