Major Chinese companies such as Tongwei, Daqo and GCL-Poly have cut silicon production, raising concerns about rising polysilicon prices.
Several leading Chinese silicon manufacturers have cut production, raising concerns about upward pressure on polysilicon prices in the near term.
Tongwei and Daqo have confirmed plans for technical upgrades and maintenance of their polysilicon facilities, which will involve reducing production in phases. Similarly, Hong Kong-listed GCL-Poly has told Chinese media that it will enter a phase of maintenance and lower production.
The combined capacity of these three companies accounts for more than half of the global silicon supply, and their adjustments are expected to have significant impacts on the PV supply chain.
Tongwei attributes the cuts to the dry season in southwestern China, which has pushed up electricity prices. Due to low silicon prices, the company has temporarily reduced production. Subsidiary Yongxiang will make the cuts at six polysilicon production plants in Sichuan, Yunnan and Inner Mongolia, with a total capacity of more than 900,000 tons per year.
Daqo New Energy has cited a persistent supply-demand imbalance in the polysilicon market, which has widened losses in the sector. The company said it plans to gradually reduce production and carry out maintenance on production lines in Xinjiang and Inner Mongolia. Daqo has an annual polysilicon capacity of approximately 305,000 tons, mainly concentrated in these parts of China.
GCL-Poly has, although less specifically, expressed support for the China Photovoltaic Industry Association’s (CPIA) self-regulation initiative. It has promised to announce further production changes through official announcements. GCL-Poly expects silicon capacity to reach 480,000 tons by the end of 2024, with total deliveries of 207,000 tons in the first three quarters.
Silicon prices fell below cash costs in May 2024, causing heavy losses for major producers. Tongwei, Daqo and GCL-Poly reported combined net losses of CNY4 billion, CNY1.1 billion and CNY3 billion respectively for the first three quarters of 2024. Analysts said the production cuts are a collective measure to stabilize prices.
Following these announcements, Chinese silicon futures soared on December 26, with all contracts reaching the daily trading limit. Prices for all seven contracts rose 13.99% to close at CNY 44,000 per tonne.
Data from the Polysilicon Branch of the China Nonferrous Metals Industry Association (CNMIA) showed a modest increase in polysilicon transaction prices this week, with increases of 0.74% to 2.7% in major product categories.
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