Since 2020, the wafer, cell and module segments have grown rapidly, bringing total capacities to 264 GW, 322 GW and 365 GW, respectively, by the end of the first half of 2021. Each segment is expected to reach 365 GW , 439 GW and 463 GW, respectively, by the end of this year. Global polysilicon production is expected to reach 550,000 metric tonnes this year, which can provide around 190 GW of module production.
The business outlook for polysilicon looks good in the short term. However, trade disputes between the United States and China are a source of uncertainty. U.S. Customs and Border Protection (CBP) issued a Withholding Order (WRO) against Xinjiang-based Hashine Silicon Industry restricting imports of silica products related to the company and its subsidiaries. The US Senate also passed the Uyghur Forced Labor Prevention Law prohibiting the importation of all goods produced in Xinjiang. With Xinjiang being a hub for the manufacture of silicon metal and polysilicon, many discussions about the impacts of the restrictions have started.
Although the WRO does not restrict imports of polysilicon, some module manufacturers run the risk of having their products seized because their materials may come from Hoshine, the largest supplier of silicon metal. According to the “Hoshine Frequently Asked Questions” reference published by CBP, importers of solar products entering the United States must provide documentation to trace the supply chain and to show that the silica used in the products is not directly sourced from or indirectly from Hoshine or any of its subsidiaries.
Downstream manufacturers say it is difficult to provide such information due to the complicated nature of polysilicon production. In August, modules from some manufacturers were reportedly seized by CBP agents, with some released soon after. At present, the CBP review standard and specific measures remain unclear.
If the Uyghur Forced Labor Prevention Law is approved by the United States House of Representatives and signed by President Biden, the importation of all goods produced in Xinjiang will be banned. Xinjiang-based polysilicon makers including Daqo New Energy, Xinjiang GCL, TBEA and East Hope, as well as manufacturers that use the region’s silica, will take the first hit.
Supply / demand forecast
Beyond the United States, Canada and Mexico are likely to impose similar sanctions. The EU, with several member states that have recently passed or drafted laws to tackle forced labor in supply chains, could be next. Australia and Japan have also expressed concern over human rights violations in Xinjiang and may soon follow suit with restrictions on goods from the region.
Xinjiang accounts for 35 to 40% of world silicon production. Hoshine, the world’s largest silicon metal maker, takes 20%. PV InfoLink estimates that 20-40% of polysilicon may be restricted in the United States or Europe.
Estimates show that about 20% of the polysilicon will not be able to supply Europe or the United States if the WRO only applies to Hoshine. However, polysilicon production outside Xinjiang can provide 82 GW in the second half of the year and 196 GW and 218 GW, respectively, for 2022 and 2023, which is enough to meet demand from the United States and likely countries. impose import restrictions. That said, manufacturers should be careful about whether CBP officers will seize an individual import unit for investigation. The supply of modules on the American market could be slightly impacted in the short term.
If the Uyghur Forced Labor Prevention Law is passed, polysilicon produced by Daqo, Xinjiang GCL, TBEA, and East Hope in Xinjiang will no longer be usable for modules exported to the United States. In addition, after deducting about 40% of the polysilicon in other regions that use silica from Xinjiang, there will be about 33 GW, 84 GW and 100 GW of polysilicon available in the second half of 2021, 2022 and 2023, respectively – enough to serve the US market.
However, if Europe, the second largest market, bans imports from Xinjiang this year, polysilicon shortages will immediately occur in regions outside of Xinjiang in the near term. If this happens in 2022, the supply of polysilicon outside of Xinjiang will be in a tight balance and will be slightly short in peak season. In a 2023 scenario, the global supply of polysilicon will again be in surplus after the commissioning of large volumes of new capacity.
It appears that the WRO and Uyghur Forced Labor Prevention Law will not markedly affect the US demand. Whether solar demand will cause polysilicon shortages due to the Xinjiang problem over the next two years depends on the actions of European countries. Currently, the adoption by Germany and Norway of laws combating forced labor in supply chains are variables that may impact solar exports to Europe, although Germany has not. no action on import restrictions. Meanwhile, the European Parliament is developing regulation and policy related to Xinjiang, and polysilicon market trends are subject to their progress and decisions.
The impacts of Xinjiang-related issues on the industry will be less severe after 2023, regardless of when specific legislation is passed. Polysilicon manufacturers have made significant profits over the past year amid soaring polysilicon prices. In addition to Tier 1 manufacturers increasing their capacity on a large scale, REC Silicon, CSG Polysilicon and LDK – whose lines have been discontinued – are assessing the feasibility of resuming production. High profitability is attracting new players, such as Xinjiang Jingnuo, Lihao Semiconductor, Baofeng Energy and Runergy, all of which plan to expand their capacities outside of the Xinjiang region to cover political risk. If these new furnaces enter service as planned, the total polysilicon capacity will far exceed demand, leading to fierce price competition. While Tier 1 polysilicon manufacturers who bring capacity online earlier lead to lower prices due to a surplus, new players entering the competition later, or Tier 2 manufacturers planning to reopen capacity. lines, may become cautious about their capacity expansion plans.
About the Author
Corrine Lin is the chief analyst of PV Infolink. PV InfoLink is an information provider in the solar photovoltaic energy market with a focus on the photovoltaic supply chain. The company offers accurate quotes, reliable photovoltaic market information and a global photovoltaic market supply and demand database, as well as market forecast. It also offers professional advice to help companies stay ahead of the competition in the market.