Bloomberg News

GCL-Poly Plans to Boost Polysilicon Capacity Amid Oversupply

November 15, 2011

(Updates with analyst’s comments in third paragraph, MEMC gross margins in sixth paragraph.)

Nov. 15 (Bloomberg) -- GCL-Poly Energy Holdings Ltd., China’s biggest polysilicon maker, plans to sell 1.5 billion yuan ($236 million) of 7.05 percent notes due in 2018 to increase production capacity amid a global surplus.

The company will sell the bonds today to institutional investors through its Jiangsu Zhongneng unit and will list the issue on Shanghai’s stock exchange, according to a Hong Kong stock exchange filing yesterday. The interest rate can be reset higher after five years, GCL-Poly said.

Polysilicon is plunging in value from oversupply. GCL- Poly’s plan to boost production is part of a long-term strategy to increase its share of the market, said Aaron Chew, an analyst at Maxim Group LLC in New York.

“GCL isn’t planning for 2012, they’re planning for 2020,” he said in an interview. “I would never expect GCL to slow down its expansion plans. Its whole purpose is to dominate this industry.”

Prices for polysilicon, the main raw material in solar cells, have plunged 94 percent to $30.19 a kilogram from $475 three years ago as the top five producers more than doubled output, according to data compiled by Bloomberg. The industry will make about 20 percent more than is needed this year, and the oversupply will increase to 28 percent in 2012, according to Robert Schramm-Fuchs and Shai Hill, analysts at Macquarie Group Ltd.

Prices ‘Sharply Lower’

MEMC Electronic Materials Inc., the second-largest U.S. polysilicon company, said Nov. 3 that prices in the third quarter were “sharply lower” and gross margins, a measure of profitability after production costs, dropped to 11.4 percent, from 24.3 percent in the prior quarter.

The Hemlock Semiconductor Group, the world’s biggest polysilicon maker, is putting off plans to expand a plant in Tennessee, citing a lack of demand.

It will complete next year the first phase of a Clarksville, Tennessee, facility with annual production capacity of 10,000 tons and has put on hold any subsequent phases, the Hemlock, Michigan-based company said Nov. 10.

--Editors: Will Wade, Charles Siler

To contact the reporters on this story: Joshua Fellman in Shanghai at jfellman@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Joshua Fellman at jfellman@bloomberg.net


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