Solar industry will face surging polysilicon prices through '21, producer says

Daqo New Energy Corp., a leading supplier of polysilicon to the solar industry, expects "strong price momentum" for the raw material through the remainder of 2021 after the Chinese company's average selling price jumped by 75% during the second quarter amid soaring demand.

The rising cost of polysilicon and other materials has pushed up solar panel prices this year, contributing to a nearly 10% increase in the average price of power purchase agreements in the sector.

"The strong increase in downstream demand has led to a shortage of polysilicon and caused our polysilicon [prices] to rise significantly," Daqo CEO Longgen Zhang said on an earnings call Aug. 18. "Despite the rise in solar module prices in the first half of this year, we continue to see stronger-than-expected market demand even at the new market prices."

Approximately 155 GW of new solar capacity is expected to be installed globally in 2021, according to Ulrich Hadding, head of finance at equipment-maker SMA Solar Technology AG, an increase of 22% from last year.

In addition to rising demand for solar power, the fragmentation of China's market for silicon wafers, the building blocks for panels, has led producers to aggressively expand production, pushing polysilicon prices higher, Daqo CFO Ming Yang said earlier this year.

Daqo said its average selling price for polysilicon was $20.81 per kilogram during the second quarter, up from $11.90 per kilogram in the first quarter. Prices have climbed to as high as $28 per kilogram in July in August, Zhang said.

"[Polysilicon] prices have plateaued at levels not experienced for years," adding to "fierce headwinds" that are hitting the solar market from supply chain disruptions and higher raw materials costs, Kai Strohbecke, CFO of panel manufacturer Maxeon Solar Technologies Ltd., said on an earnings call Aug. 12.

Limiting factor

Canadian Solar Inc. recently cut its guidance for solar panel shipments this year as some customers delay projects due to rising costs. The reduction was also influenced by logistics challenges and Canadian Solar's decision to prioritize profitability over sales volume, company Chairman and CEO Shawn Qu said on an earnings call Aug. 12.

Meanwhile, the surge in polysilicon prices has been a boon to Daqo. The company reported second-quarter earnings of $3.15 per American depositary share, or ADS, compared to earnings of 3 cents per ADS in the year-earlier period.

Net income rose to $232.1 million in the second quarter from $2.4 million a year earlier as revenues more than tripled to $441.4 million.

"We expect the constrained polysilicon supply to be the main limiting factor to the size of the global solar market this year," Zhang said. "... On the demand side, more and more countries have set up timetables for peak carbon and carbon neutrality targets that will significantly increase demand for renewable energies, including solar."

While new polysilicon factories are in the works, "we have to find out whether they materialize" on schedule, Christian Hartel, president and CEO of German polysilicon producer Wacker Chemie AG, said on an earnings call Aug. 5.

"It's a strongly growing market. We need solar to solve the ... energy problems of the world," Hartel said. "So that trend is definitely intact and needs more capacity."