China takes axe to polysilicon producers as solar panels pile up
Demand for solar panels has eased since the global financial crisis, leaving the industry sitting on idle capacity and mounting losses
Three quarters of China’s solar-grade polysilicon producers face closure as Beijing looks to overhaul a bloated and inefficient industry, resulting in fewer but better companies to compete against Germany’s Wacker Chemie and South Korea’s OCI.
The polysilicon sector, which has around 40 companies employing 30,000 people and has received investment of 100 billion yuan (HK$125.5 billion), suffers from low quality and chronic over-capacity as local governments poured in money to feed a fast-growing solar panel industry, for which polysilicon is a key feedstock.
Demand for solar panels has eased since the global financial crisis, forcing governments worldwide to slash solar power subsidies, and leaving China sitting on idle capacity and mounting losses. To help prop up the solar industry, Beijing plans to more than quadruple solar power generating capacity to 35 gigawatts (GW) by 2015 to use up some of the huge domestic panel glut. It has also said it will accelerate technological upgrades in polysilicon to weed out inefficient producers and “nurture a batch of internationally competitive producers.”
People in the polysilicon industry say the moves will halve China’s production capacity to 100,000 tonnes a year, leaving around 10 relatively strong firms with better technology and cost efficiency.
“Most producers will be eliminated rather than acquired. This may sound cruel, but is the reality as they are technologically uncompetitive,” Lu Jinbiao, a senior official at China’s top polysilicon producer GCL-Poly Energy, told Reuters.
The challenges mirror those faced by much of China’s manufacturing sector, from cement and steel to shipbuilding - local governments chasing jobs and economic growth over-invested in often high-cost, low-tech capacity in the mid-2000s when demand for solar panels was booming. That boom is now over.
“Large amounts of ineffective, high-cost production capacity will exit the market,” said Ma Haitian, deputy secretary general of the Silicon Industry of China Nonferrous Metals Industry Association, a Beijing-based industry lobby.