China’s Solar Self-Discipline Sparks Rise in Key Material Price

Beijing: So, it looks like the price of polysilicon, which is super important for solar panels, is on the rise in China. This is happening because the industry is finally taking steps to fix the oversupply problem.

According to the China Silicon Industry Association, prices jumped by 2.2% this week, hitting 45,000 yuan, or about $6,139 a ton. That’s the highest it’s been since May!

The association mentioned that the self-discipline measures in the sector are kicking in, and manufacturers cutting back on production is helping boost prices. But they also warned not to get too excited, as there’s still a lot of inventory out there—enough to keep panel makers busy for two months.

Over 30 Chinese manufacturers agreed back in December to manage the supply of solar materials to stop the losses in this oversaturated market. Big names like Tongwei Co. and Xinjiang Daqo New Energy Co. have started to cut back on their output, and it’s estimated that production will drop by about 5% in January.

But there’s still some uncertainty about how effective these cuts will be. Analysts are saying that it’s not clear how committed the industry is to this self-regulation. Plus, output quotas for polysilicon companies are still up in the air.

And let’s not forget about demand. Global solar installations, which China dominates, are only expected to grow by 8% this year. That’s a big drop from the 34% growth last year and a whopping 76% in 2023. Developers in China might hold off on buying more panels until they get a better idea of how the government’s new market-based power sales will impact their returns.

China also launched its first polysilicon futures contract recently, but investors seem a bit cautious. After a strong start, prices have dipped a bit, closing at 42,700 yuan a ton.