The oversupply of polysilicon on world markets may last until at least 2014, pushing more high- cost producers of the raw material used for solar panels into bankruptcy, Hanwha Chemical Corp. (009830) said.
The unit of Hanwha Group, which has built a supply chain of solar businesses through acquisitions since 2010, is “skeptical for the moment” about acquisitions as many of the polysilicon assets put up for sale are inefficient, Senior Vice President J.C. Song said in an interview in Seoul.
“The polysilicon prices are now covering cash costs at a handful of top-tier producers, which means they are below production costs for the remaining ones,” Song said yesterday. “While it limits expansion and new entrances, the glut may continue until 2014 or 2015.”
Prices of polysilicon (SSPFPSNO:US) have slumped by two-thirds in the past year, dropping to $22.63 in the week ended June 11, according to Bloomberg New Energy Finance’s survey of spot prices.
Song estimated costs at top producers would range from $25 per kilogram to $30. Separately, he said production costs at companies with an annual capacity of 10,000 tons such as Hanwha’s would be at least 30 percent less than at lines with a 3,000-ton capacity, which most producers have.
Hanwha Chemical, which owns half of the seventh-largest solar panel producer, is spending 1 trillion won ($869 million) building the first polysilicon plant in Yeosu, South Korea.
Once the plant, capable of producing 10,000 tons a year, begins commercial production in 2014, about half of the output will be sold to Hanwha SolarOne Co., the Qidong-based photovoltaic module maker that Hanwha bought half of for 430 billion won in 2010, Song said.
“When we first studied whether to build a plant or buy, the material was in shortage and no one offered a long-term supply,” Song said. The construction plan, meanwhile, “is on track as planned regardless of the glut concern because it’s important to have flexibility in the next negotiations on whether to build or buy.”
Hanwha’s investment plan is taking place at a time when rivals have scaled back expansion or scrapped investments. OCI, South Korea’s biggest polysilicon maker, put on hold construction of a new production line while LG Chem Ltd. (051910), South Korea’s biggest chemical maker, postponed a plan to build its first polysilicon plant in Korea.
Song said he’s confident about cost-efficiencies at the proposed plant, which would produce products at costs that top- tier producers such as Wacker Chemie AG (WCH) and OCI do.
He attributed Hanwha’s confidence to know-how obtained as South Korea’s biggest maker of chlorine-alkali chemicals and to benefits from cutting utility costs by $2-3 per kilograms through gas and other pipelines shared with its petrochemical plant. Hanwha Chemical shares fell 0.5 percent to 21,100 won at 10:35 a.m. in Seoul trading.
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