China's polysilicon giants take a stand against price wars
In a significant move towards stabilizing the solar energy sector, China's top eight polysilicon producers have united to pledge an end to loss-making sales. This initiative, signed by industry leaders such as Tongwei, GCL Technology, and Daqo New Energy, marks a pivotal moment in the industry's struggle against destructive price competition. With a combined capacity that dwarfs the rest of the market, these companies are sending a clear message: enough is enough.
A Costly Battle
The polysilicon market has been in a state of flux for over two years, characterized by oversupply and plummeting prices. This has led to substantial losses for even the most established manufacturers, prompting repeated attempts at production coordination. The new initiative aims to address this by ensuring sales prices, including tender bids, do not fall below the cost of production, as defined by China's General Rules for the Cost Accounting Model of the Photovoltaic Industry.
Regulatory Reinforcement
The agreement is bolstered by a comprehensive regulatory framework. The China Photovoltaic Industry Association (CPIA) has developed a cost-accounting standard, in collaboration with the State Administration for Market Regulation (SAMR) and the Ministry of Industry and Information Technology (MIIT). This standard not only standardizes cost boundaries and calculation methods but also emphasizes the importance of quality and technology over low-price competition. The regulatory pressure was further intensified on July 31 with a price-compliance meeting in Yancheng, Jiangsu province, where companies were instructed to strengthen cost accounting and conduct internal reviews.
Energy Efficiency and Capacity Reduction
The initiative also includes a commitment to reduce capacity that fails to meet efficiency and technology requirements. This is supported by China's new mandatory energy-consumption standard for polysilicon and germanium production, GB 29447-2026, which will take effect in 2027. This standard could force higher-energy plants to upgrade or exit, further tightening the industry's focus on efficiency.
Market Response
The market's response to this development has been positive. Shares of Tongwei, GCL Technology, and Xinte Energy rose significantly, reflecting the expectation that tighter pricing discipline and capacity closures will improve profitability. Polysilicon futures also strengthened, indicating that traders are increasingly confident in the prospect of policy-supported supply discipline and a recovery in spot prices.
A Turning Point?
What sets this agreement apart is the combination of a standardized cost-accounting framework with mandatory energy-efficiency rules and active regulatory oversight. For producers operating below the new thresholds, this could make continued production increasingly difficult, unless they upgrade or permanently withdraw. This multi-pronged approach may prove to be a turning point in the industry, moving away from the destructive price wars that have plagued it for years.
As the solar energy sector continues to evolve, this initiative represents a significant step towards a more sustainable and profitable future for China's polysilicon giants.
