North Coast Solar Stocks

December 9, 2009

Huge Poly Glut Coming In 2010, Soleil Analyst Says

Filed under: none — Tags: , , , , — Jason @ 12:04 pm

By Eric Savitz

The solar industry should brace for a huge glut of polysilicon in 2010, Soleil Securities analyst Paul Lemming warns today, with prices likely to head sharply lower.

Over the next three quarters, he calculates, the amount of polysilicon available to the solar market is going to increase by about 70%. He says it is true that the poly market became “snug” in the third quarter due to a jump in seasonal installations, but adds that conditions will change in the 2010 first half “as every major producer of polysilicon ramps new capacity.”

He thinks the industry is facing the prospect of 60%-80% over supply next year, with no hope of a more balanced market before sometime in 2011 at the earliest.

In Lemming’s view, the spot price of polysilicon is heading to the mid $30s per kg over the next six months – from $50-$55 range – with prices below $30 “not out of the question.” The analyst notes that there is a widespread notion that pricing will hold at current levels over the nest year, but adds that is likely only if things are different this time – “and this time is never different.”

He notes that prices at $55/kg provide “reinvestment level economics for established producers,” and would make polysilicon “the first commodity we are aware of to have pricing – in a grossly over-supplied market – remain at or above reinvestment level pricing.” Lemming notes that “commodity after commodity sees the spot price move to the cash cost of production of the high-cost plant whose output is needed to supply the last kilogram of demand.” He finds that all poly demand can be supplied by plants with cash costs at or below $35/kg. Lemming notes that five years ago, the spot price of poly for the solar market was below $30, and that some business took place at prices below $25. The implication: we could end up at those price levels again in 2010.


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