Apparently unrelated initiatives by the Chinese government have combined with a routine seasonal downturn to create scarcity in a key ingredient for solar panel manufacturing, spiking prices and biting into margins for North American companies with production based there.
Bloomberg reports that the price of polysilicon, the electrically active material that is sliced thin and spread across panels to generate power from the sun, has leapt as much as 35% since June.
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The increase has led to “steep declines in profit” for Canadian Solar, Hanwha Q Cells Co., and likely other major panel makers like JA Solar Holdings Co., as well as the biggest publicly-traded panel producer, JinkoSolar Holding Co.
The supply squeeze came after Chinese authorities closed several companies in the polysilicon processing chain for environmental violations during a period when others had scaled back production for seasonal maintenance. Manufacturers have been deterred from replacing the diminished domestic supply with imported raw material, available from South Korea or the United States, by a steep tariff that Beijing imposed four years ago.
As a result, said solar equities analyst Carter Driscoll, “there’s just not enough polysilicon in China.” For manufacturers, he added, “if prices don’t come down, it will crush margins.”
The sudden escalation in an essential raw material will add to jitters already affecting the American solar industry as it waits for the White House to rule on whether to impose a tariff on solar cells and panels imported from China.