During early trading on 20 April, domestic futures for polysilicon surged by 9% to hit the daily price limit, currently trading at RMB 42,955 per tonne.
Prior to this, both spot and futures prices for polysilicon had been in a sustained downtrend. In the first quarter, spot prices for polysilicon fell sharply by 17% to 26%, approaching last year’s lows. Relevant data indicates that the average price of N-type polysilicon re-melting material fell by 25% to RMB39.75 per kilogram; N-type granular polysilicon fell by 17% to RMB 41.5 per kilogram; N-type mixed-grade material fell by 26.47% to RMB 37.5 per kilogram; and N-type dense material fell by 24.27% to RMB39 per kilogram. During the same period, the price of the main polysilicon futures contract fell sharply by 38%.
Oversupply is a key factor behind the sustained decline in polysilicon prices. In March, the supply-demand balance showed a trend of oversupply, with the scale of the surplus expanding further, leading to a continuous downward trend in prices. Against a backdrop of weak demand, several companies have still signalled plans to increase production. Although raising operating rates is expected to reduce unit costs, it has also further widened the scope for spot price declines. Entering April, market expectations regarding demand remained pessimistic, whilst production volumes increased further, causing spot prices to come under continued downward pressure. Affected by this, polysilicon futures prices also broke through support levels and fell. On the one hand, falling spot prices against a backdrop of high inventories drove futures prices down in tandem; on the other hand, weak demand combined with expectations of increased production further pushed prices to break through support levels.
This rebound in polysilicon futures prices also indicates that, as prices approach the lowest cash cost range, there is significant upward price elasticity; production cuts by enterprises could help stabilise prices or even trigger a substantial recovery. However, whether prices can rebound to above RMB50,000 per tonne will depend on whether further ‘anti-overcapacity’ measures are implemented, the progress of production cuts, the recovery of demand, and the pace of inventory drawdown. If inventories remain high, the extent of any price recovery is expected to be limited.
In the short term, the oversupply situation in the polysilicon industry remains unchanged, and the pressure caused by high inventory levels has not been effectively alleviated. Whether prices can sustain a rebound depends on two key factors: firstly, whether measures taken by companies to reduce output and phase out outdated capacity can be effectively implemented, thereby achieving a substantial contraction on the supply side; and secondly, whether downstream demand can grow further, driving effective inventory drawdown within the industry.
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