Solar Industry Struggles With Wild Price Fluctuations

• The solar industry is facing unprecedented volatility as polysilicon prices have plunged and rebounded over a short period. Manufacturers have been forced to rapidly adjust pricing strategies, affecting their profits and the world's clean energy supply.

What happened?

The solar industry has been rocked by wild price fluctuations in polysilicon, the key material used in solar panels. Prices fell by over 40% within a few weeks starting in December, before rebounding more than 50% in less than a month. This volatility has put pressure on manufacturers, forcing them to rapidly adjust their pricing strategies. According to BOCI Research Ltd. analyst Tony Fei, the cause of this volatility is "extreme inter-segment competition for profits".

Why does it matter?

This volatility has had an impact on the entire solar supply chain, from polysilicon producers to wafer, cell and module manufacturers. Major polysilicon producers have attempted to support prices by reducing sales and building up inventories, while wafer and cell makers have raised their prices in response to the rebounding cost of polysilicon. Solar demand has continued to grow, but the roller-coaster ride in polysilicon prices has caused multibillion-dollar solar giants to rapidly adjust their pricing strategies in order to protect their profit margins and market share. 

What's next?

Polysilicon prices are expected to eventually stabilize and begin sliding again as new production facilities come online. The China Silicon Industry Association reports that costs have remained unchanged this week, but volatility is expected to continue in the coming months. Analysts predict that the competition between polysilicon producers and their clients will continue to drive prices down in a declining price environment.