China Solar Silicon Production Curbed 30% to Lift Prices: Energy

China's polysilicon industry, the biggest supplier to solar-panel manufacturers worldwide, has idled almost one-third of production and may keep the plants closed until prices recover from a 60 percent plunge.

The price tumble spurred the smallest producers including units of Baoding Tianwei Baobian Electric Co and Dongfang Electric Corp to halt plants, according to Xie Chen, an analyst from the China Nonferrous Metals Industrial Association, a trade group that advises the government. China has about 45 percent of global production capacity to purify silicon into polysilicon.

The suspensions may be short-lived because the average spot price for the most expensive ingredient in making solar panels rose by 9 percent since mid-December from a decade low. A recovery would boost margins for the biggest makers such as GCL-Poly Energy Holdings Ltd, China's largest, and Hemlock Semiconductor Corp of the United States, which is No 1 in the world by capacity.

"The freeze in production won't last too long," Xie said in an interview. "Many companies have said they will return to manufacturing if prices rise to $47 a kilogram" from the current level of about $28.80.

Xie forecast prices will jump to $40 to $50 a kilogram this year. That's enough to prompt a return to production in the first half of most of the halted plants, which he estimated were about 30 percent of the total. Xie's view was shared by Lian Rui, a senior analyst in Beijing for New York-based research company Solarbuzz.

Price expectations

Polysilicon will average about $30 this year, and companies including the units of Baoding Tianwei and Dongfang Electric will probably resume production as early as May, Lian said in an interview.

Two phone calls placed to Gong Dan, spokesman for Dongfang Electric, and an e-mail sent to Yin Xiaonan, Baoding Tianwei's spokesman, weren't answered.

The rebound from polysilicon's 10-year low of $26.31 a kilogram in mid-December coincides with increased interest by China to install photovoltaic devices on its own soil.

Chinese producers will double the number of panels that will be installed this year from the 2.2 gigawatts erected in the country in 2011, according to predictions from manufacturers Suntech Power Holdings Co and Trina Solar Ltd. That would absorb some of the industry's excess inventory, which led to the drop in prices and profits.

Demand for solar products is recovering and is expected to shift from Europe to Asian and US markets, Renewable Energy Corp ASA, a Sandvika, Norway-based maker of polysilicon, said in its earnings presentation on Feb 8.

http://www.bloomberg.com/news/2012-02-16/china-solar-silicon-production-curbed-30-to-lift-prices-energy.html