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Buyers can expect contract and spot market prices for polysilicon – a key raw material in the production of solar panels and semiconductors – to decline this year because of excess supply, according to researcher IHS.
“Following major declines in 2011, the photovoltaic (PV) industry is in for another round of major price erosion in 2012, as polysilicon production runs far ahead of demand,” said Henning Wicht, director and principal analyst for photovoltaics at IHS. He noted that spot market prices for polysilicon plunged by 65 percent in 2011, the biggest decline since 2009.
“This year is expected to bring another 56 percent reduction. All this will have an impact on pricing for solar modules and systems as well,” said Wicht.
Price drops this year will vary based on purity level, supplier location, and contract terms. For example, contract pricing for 9N/9N+ pure polysilicon will decline to $32.20 per kilogram in June, down from $33.40 in February. However, spot market pricing for 9N/9N+ pure is predicted to decrease to $24.40 in June, down from $27.90 in February, according to IHS.
The decline in spot prices affects long-term contracts. PV buyers typically agree to long-term agreements of three to five years based on a fixed price. This guarantees buyers polysilicon supply and protection against any upward price increases. However, with spot prices falling below contract prices, buyers will be more likely to accept long-term contracts only if contract pricing can be adjusted to market conditions, the researcher reported.
Polysilicon prices are dropping because of excess capacity. Total polysilicon production capacity is projected to amount to 328,000 metric tons in 2012, up 15 percent from 285,000 last year, according to IHS. In comparison, demand this year for polysilicon is expected to reach only 196,000 metric tons, down about 4 percent from 205,000 in 2011. That means supply will exceed demand by 67 percent in 2012, up from 39 percent in 2011.
Spot prices this year for polysilicon are expected to decline further and reach $22 per kilogram by the end of 2012, down from $50 at the end of 2011. However, the supply/demand imbalance will start correcting next year when supply will not grow faster than demand. Spot market prices will stabilize at $23 per kilogram by the end of 2013, IHS reported.