China's polysilicon industry is undergoing a significant transformation as major players unite to combat destructive price competition. The signing of an industry initiative by eight leading polysilicon producers marks a pivotal moment in the sector's history, signaling a shift towards a more sustainable and disciplined approach to pricing and production.
This initiative, which was signed in Shanghai on August 6, involves a pledge to not sell photovoltaic products below their full production cost. The participating companies, including Tongwei, GCL Technology, Daqo New Energy, and others, control over 90% of China's effective polysilicon production capacity. By setting a minimum sales price based on China's General Rules for the Cost Accounting Model of the Photovoltaic Industry, the agreement aims to prevent the erosion of profit margins due to undercutting.
The timing of this initiative is crucial. It comes in the wake of a cost-accounting standard released on July 27, which standardized cost boundaries, coefficients, and calculation methods across the polysilicon supply chain. This standard, developed by the China Photovoltaic Industry Association (CPIA) under the guidance of the State Administration for Market Regulation (SAMR) and the Ministry of Industry and Information Technology (MIIT), provides a clear framework for companies to adhere to.
The regulatory pressure on the industry intensified further on July 31 when market regulators held a price-compliance meeting with major PV manufacturers. The companies were instructed to strengthen cost accounting and conduct internal compliance reviews, moving away from low-price competition towards a focus on quality and technology. This shift is further supported by China's new mandatory energy-consumption standard for polysilicon and germanium production, which will take effect in 2027, forcing higher-energy plants to upgrade or exit.
The polysilicon industry has been grappling with severe oversupply for over two years, leading to prices falling below production costs and substantial losses for even leading manufacturers. The repeated attempts to coordinate production discipline have finally borne fruit, with markets responding positively to the latest development. Shares of Tongwei, GCL Technology, and Xinte Energy rose significantly, reflecting the expectation that tighter pricing discipline and faster capacity closures will improve profitability.
The agreement's significance lies in its comprehensive approach. By combining a standardized cost-accounting framework with mandatory energy-efficiency rules and active regulatory oversight, it creates a challenging environment for producers operating below the new thresholds. This combination could make continued production increasingly difficult unless plants are upgraded or permanently withdrawn, marking a substantial step towards a more sustainable and competitive polysilicon industry in China.
