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China’s $7 billion consolidation plan may be reflected in prices in short time

Source：pv magazine

China’s six largest polysilicon producers are reportedly developing a $7 billion plan to reduce oversupply and stabilize prices. If implemented, the move could lift prices across the supply chain in a short period, according to Xin You, senior market analyst at S&P Global, who said current market trends of anti-involution and efforts to curb disorderly competition may prevail.

“We are currently uncertain about the authenticity of this plan,” she told pv magazine. “However, industrial-level consolidation in polysilicon is technically feasible. And polysilicon is the best node to implement consolidation due to higher market concentration, more rigid capacity and a greater impact towards the entire supply chain.”

She said the biggest hurdle may be the lack of consensus, as worsening debt and cash positions at most top-tier companies make it difficult to support large-scale acquisitions after a long stretch of net losses.

“They may need extra financial support from policy banks and state-owned enterprises (SOEs),” she said. “It will be difficult for top suppliers to raise $7 billion on their own. Banks, SOEs and other investors might get involved. Additionally, there could be more buyers than just the original top six companies.”

She noted that as polysilicon prices have risen in recent weeks, tier-two companies may now be less willing to sell, with some mid-sized firms seeking to avoid being acquired and instead positioning themselves as buyers. Other sellers may try to raise their valuations and demand higher compensation.

“The plan involves a complex negotiation of interests among multiple parties,” You said, adding that the ideal outcome would remove about 1 million metric tons of capacity, with valuations in the range of CNY 50,000 ($6,970) to CNY 70,000 per metric ton, bringing total funding to $7 billion to $10 billion. “But the final consensus remains uncertain. It’s possible to implement it in multiple phases with less capacity to be acquired at the beginning.”

If successful, the market would retain about 2 million metric tons of capacity, with utilization rates controlled at 60–70% to meet demand.

“In my view, if the plan is implemented and the results meet expectations, it will be reflected in prices in a short time, as wafer manufacturers will stockpile cheaper polysilicon and drive up prices, while cell and module suppliers will be more accepting of price increases compared to now,” she said. “However, it won't lead to a significant price increase, especially after the recent rise, and stable prices may stay just above production costs, as the remaining capacities still exceed global demand.”

“Stricter power consumption requirements may also be implemented in the near future to accelerate the acquisition process, as many outdated facilities with level-three power consumption will be forced to shut down, reducing the difficulty of negotiations,” she said, referring to a recent government measure to review the energy-saving situation of polysilicon plants.