(Yicai Global) July 11 -- The price of high-purity polysilicon, a key raw material needed to make solar panels, has surged to a record high this year, putting huge pressure on photovoltaic module makers and earning raw material producers a small fortune. Prices should start to fall from next year as more capacity comes online, industry insiders told Yicai Global.

The current high prices are due to a surge in demand and also because of unscheduled halts for maintenance by many polycrystalline silicon makers, the experts said. From August, though, the situation should improve as more raw material producers get back to work and additional capacity comes into production, driving prices down.

A surge in demand has kept silicon materials in short supply which pushed the average price to an all-time high of CNY300,000 (USD44,748) a ton on July 9, more than double the price a year ago and 25 percent higher than at the start of the year, according to data from the Silicon Industry of China Nonferrous Metals Industry Association. In the first six months, although there were as much as 382,000 tons of silicon materials available for sale, it was still 20,000 tons below demand.

On top of this, some polysilicon producers’ unplanned halts in production for maintenance in the first half, as well as other larger-than-expected shutdowns scheduled for the third quarter, have aggravated the problem further and prices will continue to rise this month, an industry insider said.

In July, China will produce around 58,000 tons of polysilicon, 3,200 tons less than in June, the association said. Including imports, there is likely to be only 65,000 tons available this month, and there will be a huge gap between supply and demand.

“However, by the end of the year there should be enough silicon materials to manufacture 500 gigawatts of PV panels,” a PV company executive told Yicai Global. So it will be the end of the days of ultrahigh profit for raw material suppliers.

Fat Profits

“Around 70 percent of profit generated in the solar industry chain in the first half went to the raw material suppliers and the PV wafer manufacturers,” a new energy industry analyst said. Also, heated capacity expansion in the two areas has driven up demand for equipment and devices, such as crystal growth furnaces, silicon wafer cutters and diamond wire.

Polysilicon giants, such as Xinjiang Daqo New Energy, Tongwei and Xinte Energy, are predicting net profit in the six months ended June 30 to more than triple from a year earlier.

Yet those at the end of the industrial chain, the solar panel makers, are unable to fully pass on the extra costs as their clients, the developers of solar power projects, are unlikely to accept a big hike in prices. PV module makers must trim capacity in the short term to deal with the rising costs, Southwest Securities said in a research report.

Editors: Tang Shihua, Kim Taylor