(Yicai Global) Aug. 24 -- China’s industry ministry issued a notice to promote and optimize development of the country’s photovoltaic industry and warned against monopolies, as silicon prices rose for a 28th time this year to a new high today.

The notice, jointly published with the State Administration for Market Regulation and the National Energy Administration, also said China seeks to regulate the market order and reasonably guide all capital to the industry, adding that system docking should be strengthened and full-chain cooperation should be deepened.

A long-term cooperative system should also be set up by signing long-term orders and clarifying volume-price relationship upstream and downstream, it added.

The price of monocrystalline compound feeding exceeded CNY310,000 (USD45,167) a ton today, up over 253 percent since the start of 2021, according to data from the Silicon Industry of China Nonferrous Metals Industry Association.

Due to a supply and demand mismatch in the PV industry and the different rhythms of upstream and downstream expansion, soaring silicon prices have also directly led to the uneven distribution of profits in the industry: upstream is lucrative, while downstream gains are meager.

In the first half of the year, silicon suppliers Tongwei [SHA: 600438] and Daqo New Energy [SHA: 688303] reported three-fold gains in net profit from a year earlier. But downstream, Topray Solar [SHE: 002218] said net profit likely fell by 50 percent to 65 percent.

Sales at Wuxi Sunket New Energy Technology have doubled, but the profit margin has halved, according to Vice President Xia Jiaxi. If the gross profit margin is too low, many firms will be reluctant to continue in production.

A senior industry insider said the government notice is a warning to cross-border capital frantically pouring into the photovoltaic field, which can avoid repeated investments and direct funds into other real industries to promote economic development.

In addition, the notice sends a warning to all PV companies that while attaching importance to corporate profits, it is more important to pay attention to the win-win situation of the entire industry.

Due to a lack of production, hoarding and speculation, raw material prices have been surging since Covid-19 resurfaced, according to Dr. Hu Qimu, chief researcher at the China Iron and Steel Research Institute.

Hu noted that it is necessary to optimize the layout of the PV industry, establish a unified domestic market, break market segmentation and local protectionism, allow resource elements to flow fully, and achieve efficient allocation of resources.

Editors: Shi Yi, Peter Thomas