Polysilicon gap is still close to 50%

Industry status • China's polysilicon production capacity and production are expected to exceed 80,000 tons and 40,000 tons respectively this year.

· It should be noted that the price of China's polysilicon spot market is higher than the international market.

At present, the international polysilicon companies mainly focus on the traditional 7 major companies (Hemlock, Wacker, REC, MEMC, Deshan, Mitsubishi and Sumitomo), and they accounted for more than 90% of the market share before 2008. After 2008, OCI Co., Ltd. of South Korea has suddenly emerged and its production capacity has expanded dramatically. It has now reached 17,000 tons. According to current statistical data, foreign polysilicon production capacity has reached 120,000 tons, 154,000 tons and 159,000 tons respectively from 2010 to 2012. As market demand continues to heat up, these polysilicon companies are also accelerating their deployment based on their technological and financial advantages, and have allegedly announced plans to expand production capacity. It is expected that after 2012, the production capacity of these international giants will reach a new high.

After 2005, the domestic and international photovoltaic market developed rapidly, and the demand for polysilicon increased rapidly. In the case of foreign technology, domestic enterprises with private capital resolutely invested to start construction, through independent research and development, and system integration. Innovation, the introduction of foreign advanced technology and other methods, in a short period of 3 to 5 years basically mastered the production technology of high-purity polysilicon materials, so that China's polysilicon industry has rapidly expanded.

In 2007, 2008 and 2009, China's polysilicon production capacity reached 1,093 tons, 4,685 tons and 20,357 tons, respectively, and this year's capacity and output are expected to exceed 80,000 tons and 40,000 tons, respectively. The polysilicon project has been put into production for about 2 years. Since the second half of 2009, the polysilicon project has been subject to the No. 38 document of the State Council. There are fewer new constructions and expansion projects. It is expected that the polysilicon production capacity in China will not change much from 2011 to 2012.

According to customs data, China’s imports of polysilicon from January to September were almost flat. Excluding a slight decrease in February, it was above 3,000 tons in other months. In particular, the import volume of polysilicon in September reached 4757 tons, an increase of 90.1% year-on-year, and a 26.3% increase from the previous month. %. From January to September, 31,503 tons were imported. At this rate, China's polysilicon imports this year will reach 40,000 tons. According to customs data, from January to September, China imported 11,655 tons of polysilicon from the United States, accounting for 36.9% of the total imports. Accumulative import of 7,680 tons from Germany accounted for 24.3% of total imports. The third place is South Korea, with a cumulative total of 7,457 tons and about 2,500 tons imported from Japan. In addition, China's exports of polysilicon in September amounted to 130 tons, from January to September a total of 1667 tons of exports.

Thanks to the rapid development of the photovoltaic industry, international polysilicon prices have continued to soar since 2005, rising to as high as US$500/kg in 2008. However, due to the impact of the international financial crisis in 2008, the polysilicon market price has been declining and has been falling until 2010. April's $40/kg. However, as the economy picks up and the price of photovoltaic modules declines, the global photovoltaic installed capacity continues to expand. It is estimated that the global installed capacity in 2010 will be around 15GW, which will also increase the demand for polysilicon and the price will gradually increase. The data disclosed by Pvsights website shows that the international polycrystalline spot price in October is between 60 and 80 US dollars / kg, and the long-term order price is between 55 and 60 US dollars / kg.

Since the beginning of June of this year, China's polysilicon prices have shown upward momentum, especially in the polysilicon spot market, prices have soared to more than 700,000 yuan/ton (100 US dollars/kg). In October, domestic polysilicon prices did not continue to rise. There was a slight decline in prices, with domestic prices falling from the peak of about 770,000 yuan/ton in September to 720,000 yuan/ton, and part of the spot transaction price falling to 600,000 yuan/ton. However, the long-term price has not changed much. China's GCL-Poly's third-quarter financial report shows that in 2010, the polysilicon sold in the first three quarters and the third quarter was US$50.6/kg and US$51.7/kg respectively. It should be noted that the price of China's polysilicon spot market is higher than the international market.

Market Demand From the perspective of China’s imports of polysilicon, the United States, Germany, and South Korea accounted for 85% of the total imports.

• With the global economy picking up and the photovoltaic market continuing to heat up, the demand for solar cells continues to increase.

From January to September this year, China imported 31,503 tons of polysilicon, but the gap is still about 50%. This is mainly due to the excessively rapid development of China's photovoltaic industry and the gap between polysilicon production technology and foreign countries. Mainly presents the following characteristics.

First, the contradiction between supply and demand for polysilicon in China needs to be eased. As the raw material of crystalline silicon cells, polysilicon has large initial investment (1000 tons requires 700 million yuan), long construction period (2 years), high technical threshold, and it is difficult to keep pace with the development of crystalline silicon cell manufacturing. China has already listed the photovoltaic industry as a strategic emerging industry in the future, and the dependence on imports of polysilicon will continue for some time.

Second, China's polysilicon production technology needs to be broken. Compared with foreign major competitors, the production technology of polysilicon enterprises in China still has a certain gap. Most companies have production costs of more than US$40/kg, while foreign advanced manufacturers have production costs of less than US$30/kg, and most of China’s polysilicon companies The scale of production is not large, the production time is not long, and the product quality needs to be further improved. Judging from the polysilicon market price, China's polysilicon price is higher than the international market. In fact, the price of imported polysilicon is indeed lower than domestic products. The choice of polysilicon material manufacturers by crystal silicon battery manufacturers can be imagined.

Finally, foreign polysilicon companies have significantly expanded production. From the perspective of China’s imports of polysilicon, imports from the United States, Germany, and South Korea accounted for 85% of the total imports. The major polysilicon companies in these countries are also expanding production, such as South Korea’s OCI plans to invest between 2010 and 2020. US$8.4 billion will increase its production capacity from the current 35,000 tons/year to 110,000 tons/year. (In fact, OCI exports more than 60% of its output to China this year.) Hemlock and WACKER are also expanding production capacity on a large scale. In order to ensure stable upstream polysilicon supply, photovoltaic companies generally choose long-term orders to purchase polysilicon. Therefore, foreign companies have a large advantage in the production, quality, and price of polysilicon, which will cause a certain impact on China's polysilicon industry.

Recently, the prices of polysilicon market have skyrocketed. From April 2010 to US$80/kg in April, the increase in polysilicon prices is mainly due to the following factors:

First, the economy continued to pick up after the international financial crisis, and the polysilicon market gradually recovered. With the global economy picking up and the photovoltaic market continuing to heat up, the market’s demand for solar cells continues to increase. In particular, Germany, which is the world’s largest photovoltaic market, has lowered its PV subsidies since July of this year, and many system integrators have rushed to lower the subsidies before The completion of the system installation led to the early release of its photovoltaic market. According to statistics, Germany's installed capacity in the first eight months of 2010 has reached 4.8 GW, accounting for 48% of the global installed capacity over the same period, and the polysilicon market has been further restored.

The second is that photovoltaic companies have expanded production, and the demand for polysilicon has continuously increased. On the one hand, based on good market expectations, investment in the photovoltaic market continues to increase, and many photovoltaic companies in China expand their production on a large scale. Most of the new production capacity is crystalline silicon cells, which will increase the market demand for polysilicon raw materials in the photovoltaic market; On the one hand, since most of the domestic and foreign sales of polysilicon manufacturers are achieved through the signing of long-term supply contracts with downstream manufacturers, the production capacity of the world's major polysilicon manufacturers is already full. For example, polysilicon orders from Germany's WACKER have been scheduled for 2012. As a result, the supply of polysilicon into the spot market has become smaller, leading to changes in the supply and demand relationship and causing price increases.

The third is the cancellation of preferential electricity prices, and the increase in polysilicon production costs. This year, the National Development and Reform Commission issued the "Notice on Clearing Preferential Electricity Prices for Highly-Energy-Consuming Enterprises, etc.", which began on June 1, 2010, and stopped the preferential tariff policies for polysilicon enterprises in China. In China's polysilicon production, the average integrated power consumption is about 160-200 degrees / kg, and the ratio of the cost of electricity to the total cost exceeds 30%. Individually lagging behind that of polysilicon companies, the proportion of their cost of electricity is even as high as 40%. The cancellation of polysilicon preferential electricity price policy will lead to the rise of polysilicon production costs, which is one of the factors that increase the price of polysilicon in China.

Development Strategies • Only through continuous investment in technology and production by large companies can we maintain our competitive advantage in the international market.

· Competent authorities should encourage enterprises with high production costs and strong competitiveness to merge and reform polysilicon companies with poor profitability and production problems.

First, to encourage low-cost, competitive polysilicon companies to expand the scale of development. The polysilicon industry is a capital and technology-intensive industry with a relatively high technical threshold. From the experience of foreign polysilicon industry development, large companies occupy a dominant position in industrial development. Only through large companies' continuous investment in technology and production can they Maintain a competitive advantage in the international market. Encourage China's polysilicon enterprises with low production costs and strong competitiveness to rely on technological progress, optimize stocks, expand the scale of development, implement the "go global" strategy, and actively participate in international industrial competition.

Second, the polysilicon project is encouraged to land in western regions where resources and energy are abundant. Polysilicon production and purification of high energy consumption, the current cost of electricity accounted for 30% to 40% of the cost of polysilicon. The western region of China has large reserves of quartz, abundant energy and resources, and low power costs. It is very suitable for the development of the polysilicon industry, realizing on-the-spot conversion of energy and increasing the added value of energy products. The development of the polysilicon industry in western regions such as Xinjiang is also a response to the national “Western Development” call and is conducive to obtaining differentiated policy support from government agencies.

Third, encourage polysilicon companies to merge and reorganize. The development of the polysilicon industry has a history of 50 years, but for a long time, the polysilicon in the international market is mainly supplied by seven major manufacturers. At present, there are more than 40 polysilicon companies that have already put into operation in China, and some enterprises have problems such as high energy consumption and large emissions. The competent authorities should give full play to the role of market mechanisms, integrate existing polysilicon resources, and implement intensive development and management. Encourage enterprises with high production costs and strong competitiveness to merge polysilicon companies with poor transformation and production problems.

Fourth, we will introduce polysilicon access conditions as soon as possible. Since the State Council promulgated the Circular No. 38 “Suppression of Overcapacity in Some Industries and Duplicate Construction of Guidance on Several Issues Concerning the Healthy Development of Industries”, the approvals for technical transformation, new construction, and modification/expansion of polysilicon projects have become very strict. Photovoltaic industry, as a strategic emerging industry in China, has great potential for future development. It is imperative to adopt polysilicon access conditions, define new access standards for the polysilicon industry, and guide polysilicon projects with advanced technological levels and low production energy consumption to enhance the confidence of investors. China's photovoltaic industry is stable and healthy.

China's polysilicon industry started in 2005. In the process of development, the adjustment of industrial structure and the integration within the industry are inevitable. Some enterprises that lack product quality and production cost are bound to be eliminated in the market competition.

Price trend · With the release of major polysilicon manufacturers' production capacity, polysilicon prices will gradually tend to a reasonable level.

· The government is required to properly guide the polysilicon industry and improve the competitiveness of polysilicon products in China through technological advancement and industrial layout.

The rise in polysilicon prices will be a partial phenomenon, and it will not be sustainable. With the release of the world's major polysilicon manufacturers, and in particular the polysilicon enterprises in China, the polysilicon price will gradually move toward a reasonable level.

First, polysilicon will oversupply in 2011. On the one hand, PV subsidy in the world's major PV countries has been gradually reduced. Major research institutions are generally pessimistic about the 2011 PV installation market forecast, especially in the first quarter of 2011, which will be a serious decline compared with 2010. According to the European Photovoltaic Industry Association, the polysilicon production capacity will be 15GW in 2011, 80% will be crystalline silicon, and 1GW of crystalline silicon will consume 10g of polysilicon, with a demand of about 120,000 tons. On the other hand, the production capacity of polysilicon enterprises will be gradually released, and the production capacity will reach 250,000 tons in 2011. The imbalance between supply and demand is obvious, and there will be insufficient incentive for polysilicon prices to rise in the coming period.

Second, the price reduction is the need for market development. Since the beginning of this year, photovoltaic subsidies in major PV countries in Europe, such as Germany, Italy, the Czech Republic, and France, have been gradually reduced. To ensure continued growth in installed capacity, PV installation costs will be reduced to offset the losses caused by the decline in PV subsidies to system integrators. According to estimates by experts, at an internal rate of return of 8%, the price of battery modules needs to be reduced from the current 1.9 US$/W to 1.5 US$/W, which also requires a corresponding drop in the price of polysilicon as a raw material for battery modules.

Finally, the production capacity was released one after another. The production capacity of the major polysilicon enterprises in China will be released at the end of 2010. For example, GCL-Poly, this year's production is expected to reach 16,000 tons, and only about 7,000 tons in the first half; LDK's second-phase production capacity will also be released in the second half of the year. , when the supply of polysilicon increases. The use of silicon in photovoltaic companies is mainly through long-term agreements with polysilicon enterprises, procurement frequency is relatively low, so in the current situation of polysilicon prices, these companies are unlikely to purchase polysilicon through the spot market, and other solar battery companies. Polysilicon inventories have also been increased in the early stage of polysilicon price increases. In the coming period, the demand for polysilicon by these companies will not be too large. With abundant supply of the market, the increase in the price of polysilicon will gradually slow down or even decline.

Recent domestic polysilicon prices are higher than the import prices. Domestic polysilicon prices are higher than imports, mainly due to the following factors.

First, the cost of producing polysilicon at foreign manufacturers is lower than that of domestic companies. First, the level of production technology is high, the overall energy consumption is low, and the recycling rate of by-products is high. Some enterprises have actually realized closed-loop production, and the comprehensive utilization rate of materials is obviously higher than that of domestic polysilicon enterprises. Second, foreign major polysilicon manufacturers have low power costs. Companies such as Hemlock and Wacker have their own power plants, which have lower power costs. Third, the low cost of raw materials, many foreign polysilicon companies themselves within the chemical group or have their own chemical plants, rich source of chemical materials, low prices.

Second, major foreign sales are mainly based on long-term orders. At present, the main international polysilicon manufacturers need long-term strategic cooperation, mainly based on long-term orders. First, the output of foreign polysilicon companies is high, long-term orders are conducive to mass production scheduling, reducing inventory pressure. Second, due to the high manufacturing cost, European and American countries' cell-chip manufacturing plants have shifted their manufacturing operations to Asian regions or manufactured by OEM methods, which has led to a decline in domestic demand for the polysilicon spot market. Third, the scale of production capacity of battery manufacturing companies continues to expand, and it is urgently needed to supply materials through long-term orders. In China, some polysilicon companies do not produce large quantities due to the short-term production. Most of them are spot goods, and prices are easily affected by market fluctuations. Long-term orders are mostly updated regularly. In the current case of sharp increase in polysilicon market prices, the low price of long-term orders. The advantage is more obvious.

In the current situation where batteries/components are heavily dependent on exports, China will not be able to raise tariffs on imported polysilicon in order to keep the spreads flat. Therefore, it is necessary for the government to properly guide the polysilicon industry and improve the competitiveness of polysilicon products in China through technological advancement and industrial layout.

Manufacturing Process · Current Good Physical Methods Polysilicon companies can reach 5N, and companies that can achieve 6N are rare.

· Companies adopting the silane method also need coordinated development in industries such as container preparation, storage, and transportation.

At present, the majority of the polysilicon enterprises in China are mainly based on the improved Siemens method. Due to its energy consumption and emission problems, the state has been encouraging enterprises to adopt new polysilicon production technologies. However, the current situation is not optimistic.

First, the industrialization of physical laws has yet to be broken. Due to the characteristics of low investment, low emissions, and low energy consumption, the physical method has witnessed a surge in the price of polysilicon from 2007 to 2008. However, as of now, there are still not many polysilicon companies that actually use physical methods to produce. Some companies claim that batteries made of polysilicon produced by physical methods have been connected to the grid for power generation, but most of them are produced for self use, and there are fewer products circulated on the market. The physical properties of polysilicon impurities determine that the physical method can not obtain high-purity polysilicon, although in theory can reach 6 ~ 7N, but in reality it is difficult to achieve this goal. Currently, there are very few physical companies that can achieve 5N in the polysilicon industry and 6N. In mass production, there are problems such as low repeatability, poor uniformity, and severe degradation of the manufactured solar cells. It is subject to the further breakthrough of the physical polysilicon enterprises, and also hopes that the battery companies “because of the cutting of vegetables” and achieve a breakthrough in battery technology to further fine Sub-PV market.

The second is the silane method just started. The key to the production of polysilicon by silane production is the preparation of silane. Silane is an indispensable specialty gas for the production of polycrystalline silicon, amorphous silicon thin-film batteries, and integrated circuits. It has always been monopolized by developed countries such as the United States and Japan, and China encountered it in 2008. Similar to the dilemma of soaring polysilicon prices. In the recent two years, the speed of localization of silane preparation technology has accelerated, and the production of polysilicon by the silane method adopted by the sixty-nine silicon industry and Zhejiang Zhongning Company has also successively announced trial production. Because silane is flammable, explosive, and irritating, it will bring certain challenges to safety and environmental protection. Some companies that use the silane method have been repeatedly complained by surrounding residents because of environmental issues such as gas leaks. Therefore, in addition to mastering the production technology of silanes, there is a need for coordinated development in industries such as container preparation, storage, and transportation.