Polysilicon price spike puts pressure on solar developers in Australia

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In anticipation of polysilicon shortage, prices have been rising across the entire PV industry supply chain since the middle of July. The troubles in the upstream market segment are now spilling over to solar developers, threatening to impact the pace of installation in the months to come.

Polysilicon supply became volatile following two separate incidents at factories owned by Daqo – a fire at one of its sites on July 1, and GCL-Poly, which suffered a series of flash explosions at one of its plants that has reportedly taken more than 10% of the global supply of the solar power raw material out of production. Most recently, Tongwei has stopped production at a factory in Leshan, in Sichuan province, due to an unspecified flood threat.

As a result, manufacturers have been raising prices for mono-Si wafer orders, causing a ripple effect across the entire supply chain. One of them is Chinese PV giant LONGi, which had itself raised prices most recently by 7%, signaling higher project costs going into 2021. Actually, since June, the manufacturer ramped up its wafer prices two times by 15% and also raised the prices of G1 and M6 cells by around RMB0.90/watt, according to EnergyTrend. 

“The price of LONGi silicon wafers fell sharply in the past year up to May 2020,” said Dennis She, Senior Vice President, LONGi Solar. “The recent price adjustments of silicon wafers are based solely on the principle of digesting the increase in raw silicon material costs. LONGi has not increased prices due to forces of demand and supply.”

In the first half of the year, a similar trend could be seen industry-wide with polysilicon prices heading in the opposite direction. “In May, we saw polysilicon hit an all-time-low and since then the prices have increased by 60%, impacting the whole value chain that flows through from polysilicon – ingot, wafer, solar cell and solar panel,” Solar Juice co-founder and head of supply, Rami Fedda said in a video message on LinkedIn on Thursday. “Just last week, two of our solar panel suppliers have mentioned that any new orders placed would incur a 10% price increase.”

The time is now

Since most large-scale PV projects order modules six months before delivery, the current price volatility is unlikely to affect projects under construction for some time. However, developers around the world looking to secure supply for installations that are scheduled to get off the ground in late 2020 and early 2021 are being forced to reassess their project economics. So, what does this mean for solar developers in Australia?

“My advice is to get your orders in today or as early as possible, definitely there will be a price increase by October,” Fedda said. “We are trying to hold off passing on any increases. Thank God that the Australian dollar has strengthened, this has helped absorb some of the price increase but we are seeing a momentum where the prices will continually go up.”

According to LONGi, the lack of pricing certainty is already forcing some projects to be suspended. In Australia, where the large scale segment of the market is dealing with financing, curtailment and logistical headwinds, the manufacturer says “this news could not come at a worse time”. But Stephan Zhang, Managing Director, LONGi Australia, says that LONGi aims to “moderately adjust prices” within a range that is acceptable to customers.

“LONGi hopes to maintain a stable market and a smooth transition when the market fluctuates sharply due to short-term changes in demand and supply,” Zhang said. While it warns that module supply constraints and short term price volatility may plague developers in Australia over the coming quarter, LONGi, as an integrated manufacturer of modules, says it is able to help cushion price shocks along the supply chain.

The manufacturer says it will give priority to strategic customers “when and if supply is tight” and is actively working with key partners to agree price adjustment mechanisms to give customers security. Its long-term manufacturing goals remain unchanged.

“It is estimated that by the end of 2020, our capacity for monocrystalline modules will reach 25GW or beyond,” says Zhang, “In addition, we produce silicon wafers in-house, and cell manufacturers are our strategic partners, so our timeliness of supply and price advantages will be stronger.”

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