GTM Research's report on polysilicon examines the epic price declines of 2011, the effect on the larger PV supply chain and the future of the polysilicon market

BOSTON--In 2011, the solar industry saw global oversupply drive PV prices to record lows, with crystalline silicon (c-Si) module prices falling from $1.80 per watt at the start of 2011 to $0.90 per watt by year's end.

GTM Research's latest report, Polysilicon 2012-2016: Supply, Demand & Implications for the Global PV Industry report (http://www.greentechmedia.com/research/report/polysilicon-2012-2016) is a comprehensive analysis of the industry, covering the technologies and key players in the space. The report contains a facility-by-facility cost analysis illustrating the firms best positioned to survive an extended period of oversupply. The report also includes capacity forecasts by manufacturer, by technology, and by region through 2016.

High purity silicon (polysilicon), the key feedstock for c-Si modules, played only a minor role in this price collapse, as over 80% of polysilicon is sold via long-term contracts, and the pricing on these contracts moved little for most of 2011. However, oversupply in the polysilicon market pushed the spot price of silicon down from $80 per kilogram in late March 2011 to under $30 per kilogram in December. This substantially lower spot price gave silicon customers the leverage to renegotiate contract pricing downward, and this will result in much lower realized silicon average selling prices (ASPs) in 2012.

Lower silicon prices in 2012 will likely lead to even lower c-Si module prices. Without any other improvements, a $30 per kilogram drop in silicon price would save module manufacturers approximately $0.20 per watt, which could bring module prices below $0.70 per watt.

"In 2011, polysilicon manufacturing outpaced end-use," said GTM Research Senior Analyst, Brett Prior. "After a half-decade of silicon demand outstripping supply, the aggressive expansion plans finally overshot. This supply/demand imbalance will push producers to lower contract prices closer to the level of manufacturing costs at $20 per kilogram, and will force higher-cost manufacturers to exit the industry. While the solar market will continue to grow at a 10 to 20% pace in the coming years, reductions in the amount of silicon used in each module means that end demand for polysilicon will grow at a slower pace. The end result is that the current roster of over 170 polysilicon manufacturers and start-ups will likely be winnowed down to a dozen survivors by the end of decade."

GTM Research expects to see established players such as GCL Solar (HKEX: 3800), REC (OSL: REC), OCI (KSC: OCI), Tokuyama (PNK: TKYMY), Hemlock and Wacker (XETRA: WCH) weather this extended period of pricing weakness, thanks to strong balance sheets, superior technology, and some of the lowest manufacturing costs due to economies of scale.

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