Solar Silicon Falling 9% Widens Slump That Hit Solyndra

Solar Silicon Falling 9% Widens Slump That Hit Solyndra Polysilicon, the raw material used to make most solar panels, is forecasted to fall another 9 percent from its lowest in a decade as a supply glut narrows margins throughout the industry. "The latest price drops will be the trend over the rest of the year as companies sell at cash cost just to stay in the market," Chase said. "The marginal cost to manufacture polysilicon will remain pretty much the same," Jerry Stokes, president of the European unit for Suntech, which buys the material to make into solar cells, said in an interview. Polysilicon accounts for a quarter of the cost of solar panels. Most of the larger companies have lower costs and long-term contracts. GCL-Poly, China's largest producer of the material, expects a supply glut to last at least two more years. Each $3 per kilo drop in polysilicon prices cuts solar prices about 2 percent, according to New Energy Finance. "All long-term contracts have now been broken or renegotiated to reflect the new spot prices," said McLoughlin, the HSBC analyst. Fewer than 10 Chinese makers are still producing, and only the two biggest would be close to covering cash costs at such a level, Chase said without naming the smaller companies that are most vulnerable. The spot price of polysilicon will fall to as low as $18 per kilogram as inventories pile up and distressed companies sell their stocks, according to the Bloomberg survey, which projects a recovery at the end of the year. Prices for polysilicon sold under long-term contracts averaged $51 a kilogram last year, New Energy Finance data shows. A drop to about $22 puts stress on even the biggest companies, which have production costs from $15 to $25 a kilogram, Chase said. Wacker declined to comment, noting it's in a quiet period before earnings due May 4. Dozens of smaller producers entered the market in the last three years, mainly in China, seeking to gain an advantage from a boom. "We have seen industries in which players make losses for quite a long period of time," said Cholewa of WestLB AG. Solar Silicon Falling 9% Widens Slump That Hit Solyndra Trade News selected by Local Linkup on 27/04/2012