Afghan Energy, Chemical & Mining Industries resource for Renewable Energies, Irrigation & Sustainable Industries. |
Not lucky enough to have a long-term contract? Spot-market prices for polysilicon are daunting: Expect to pay $200 per kilogram on the spot market, compared with the $150 paid in 2006, according to industry watchers.The supply crunch has thrust the polysilicon business -- once the all but exclusive territory of semiconductor makers -- into high gear. Novel financing deals and new partnerships are afoot, with solar-module makers scrambling to secure long-term deals and chemical manufacturers scrambling to boost factory output by 2008 and beyond.To ensure a steady supply of polysilicon, JA Solar Holdings, SunTech Power Holdings, Canadian Solar Inc.and others have dedicated much of their IPO proceeds to purchases of the raw material.The deals, called "pre-payments," are being used by polysilicon makers to boost production.The situation is more acute for some solar companies than others.Faced with escalating prices and tight supplies, two companies have swapped equity for polysilicon in pacts to help future sales. Those deals have raised eyebrows.South Korea-based DC Chemical Co. acquired a 15% stake in Massachusetts-based Evergreen Solar Inc. in a supply pact that runs through 2014. In another deal, China-based SunTech Power inked a 10-year supply pact with MEMC Electronics Materials Inc., which received a warrant equal to a 4.9% stake in SunTech.The Evergreen-DC Chemical deal, in particular, carried a "steep price to pay for polysilicon supply," said Jeff Osborne, an analyst at CIBC World Markets, which has helped take a number of solar companies public.In mid-April, Evergreen agreed to issue 4.5 million shares of restricted common stock and 625 shares of restricted preferred stock to DC Chemical, which bought 3 million shares of Evergreen at $12.07 each. Under the supply deal, Evergreen is to receive enough polysilicon to make roughly one gigawatt of photovoltaic solar panels through 2014. Supply crunchThe supply crunch is exerting collatetal pressure on the semiconductor industry, which has long been the primary buyer of polysilicon, the chief material used to make the wafers onto which microchips are stamped."Global warming is not good for the semiconductor industry. The solar industry is growing very rapidly. ... It's really created demand in past several years that wasn't there before," said Tom Linton, who negotiates polysilicon deals for Freescale Semiconductor, one of the world's larger chip manufacturers.This has changed the chip-making business's mindset
Alternatives in
alternative energy MEMC,
Hemlock Semiconductor, Renewable Energy Corp. and DC Chemical are all building
or expanding manufacturing sites in a bid to relieve supply pressure. Meanwhile,
new entrants are also moving into the market, as 88% of the polysilicon supply
is currently controlled by five players.It takes at
least two years to construct a polysilicon factory, which cost between $500
million and $1 billion. "The reality is [that] some of these plants may be
significantly delayed, and some of the polysilicon makers maybe overstating
their plans," Pichel said.By 2010,
global polysilicon available for sale is expected to reach 99,500 metric tons,
up from 35,400 metric tons in 2006, according to CIBC's latest forecast, issued
in late April, which estimates 25% more polysilicon will be available in 2010
than its prior projection.CIBC
estimated an "acute shortage" through 2008. Relief could come in 2009 at the
earliest, in CIBC's view.But the
supply shortage has inspired exploration of alternative solar technologies that
don't rely on polysilicon, such as thin-film panels. Whether such alternatives
demonstrate efficacy and whether the most ambitious polysilicon-capacity
buildouts come to fruition will ultimately have a great deal to do with whether
the polysilicon crunch tightens or turns into a glut.
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