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PV spot market price expected to rise again

Posted: 15 Feb 2013 ?? ?Print Version ?Bookmark and Share

Keywords:PV? spot market? polysilicon?

According to the latest report from IHS, the global photovoltaic (PV) polysilicon spot market prices will start to ease as supply begins to meet demand. The spot market in December last year accounted for 20 per cent of total polysilicon sales, down dramatically from its peak of 47 per cent in May, noted the market research firm.

The high level of spot market volume in mid-2012 indicated that polysilicon was in an acute state of oversupply. Producers were dumping excess stockpiles on the spot market, driving down prices to bargain levels that lured buyers away from long-term contract agreements.

This phenomenon was associated with a major, sustained plunge in polysilicon prices, with the polysilicon price per kilogram falling to an average of $20/kg the end of 2012, down from $31 in February last year.

However, the fact that spot market volumes having fallen by more than half indicates that suppliers have reduced production to accommodate demand-suggesting that pricing is approaching the bottom.

"As IHS predicted in November, solar polysilicon pricing in early 2013 is nearing the end of its long, 24-month decline," said Henning Wicht, director and principal analyst, photovoltaics, for IHS. "The drop in spot market volume, along with a range of other indicators, suggest that the price plunge that hamstrung polysilicon supplier profits throughout 2012 will soon come to an end."

Tier 1 suppliers are leading the way in reducing production, following IHS's advisory issued in September 2012. These companies are attempting to avoid a replay of 2012's miserable conditions by controlling volumes and not inflating the spot market.

The top suppliers also have experienced erosion in their profit margins. Even the most competitive suppliers now are warning investors they cannot afford to continue lowering prices to gain market share.

With their factory utilisation reduced, these leading companies now are incurring higher unit costs per part manufactured. This also will compel the top-tier suppliers to cease reducing prices. Pricing is expected to start increasing this month and continues through March.

While supply is adjusting to reduced sales, demand is expected to increase only modestly in 2013.

Even if demand increases at a higher rate than expected, Tier 1 suppliers will be reticent to increase production, keeping in mind that oversupply would destroy any price recovery immediately.

IHS believes Tier 2 and Tier 3 suppliers are likely to play a reduced role in the market for several months. It will take prices higher than $25/kg to stimulate the ramping-up of the idled factories.

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