(Yicai Global) Dec. 30 -- The price of silicon, which is the key raw material used to make solar panels, has been sliding in China in the last few months and is expected to keep tumbling as more capacity comes online, inventories build up and due to price wars further down the industrial chain, industry insiders say.

The average price of polysilicon has plunged around 40 percent to CNY200 (USD28) per kilogram since reaching a peak of CNY330 (USD47) per kilogram in the third quarter, according to new energy industry data platform EnergyTrend. And there is still room for it to come down further as inventories stay high, it added.

Prices could drop to CNY100 per kg, after which the price reductions will slow significantly, Shi Zhenwei, photovoltage analyst at SMM Information & Technology, told Yicai Global.

The main reason for the slump in silicon prices is oversupply, especially of solar wafers, Shi said. Fierce competition has led to a sharp decline in wafer prices, which has had a knock-on effect along the industrial chain. Longi Green Technology, for instance, slashed the price of its wafers by 27.3 percent on Dec. 23 and TCL Zhonghuan has also reduced prices by more than 23 percent.

There has also been a huge amount of hoarding of silicon materials to hedge against the previous surge in prices. There is now 70,000 tons of silicon stocked by companies and some leading firms have stores of around 15,000 tons, Yicai Global has learned.

Yet the current price of silicon is still far above the bottom line of large suppliers whose production costs are around CNY50 (USD7.18) per kg, it is just that they are not making as much profit, SMM said. So silicon supply will keep growing.

Editors: Shi Yi, Kim Taylor