China slows reduces silicon production by 30% to raise prices

China slows reduces silicon production by 30% to raise pricesChinese silicon manufacturers have cut production of polysilicon in an attempt to reduce the impact a flooded market has had on worldwide PV markets. But at least one analyst doesn’t think it will have much of an impact on PV prices.

China produces roughly 45 percent of the world’s polysilicon. And now the country’s silicon manufacturers have reduced their production of polysilicon, the most important part of PV cells, by nearly one-third. And both Baoding Tianwei Baobian Electric Co. and Dongfang Electric Corp. have halted plants, according to Bloomberg.

At present PV-quality silicon is expected to cost about $30 per kilogram in 2012, down significantly from levels closer to $80 per kilogram in late March 2011, according to GTM Research. The price drop, which is attributable to increased production over the past few years, helped reduce the cost of PV significantly, since most PV uses silicon-based wafers.

But whether it will have a bigger impact on PV prices remains to be seen.

At least one industry analyst, Alex Morris, a senior research associate with Raymond James & Associates, doesn’t expect it will have such an impact.

“I would be surprised,” he said. “We’ve already seen silicon prices stabilize, and even rise mildly from recent lows, and I think that producers will turn back on production just as soon as they see the demand. I find it highly unlikely that wafer/cell producers will have trouble supplying silicon.”

That’s in line with what Xie Chen, an analyst with the China Nonferrous Metals Industrial Association, told Bloomberg. He predicted that when silicon prices rise back to about $47 per kilogram that most manufacturers in China would resume production.

The reduction in production also isn’t likely to impact the overall cost of PV modules in near term either, according to Morris.

“If a significant portion of silicon plants stay idled for an extended period of time, I suppose we could see silicon—and hence ultimately module and system—prices stabilize in the near term, but I’d be surprised if consumers saw a noticeable difference,” he said.

Since Morris anticipates that the cost of PV won’t be affected much by the lowered polysilicon manufacturing, he doesn’t think it will have an impact in the anti-dumping case ongoing with the Commerce Department and International Trade Commission.