Abstract In recent years, as polysilicon prices surged, many downstream companies attempted to mitigate rising costs by entering into long-term supply agreements. However, with the sharp decline in polysilicon prices, these previously signed long-term contracts now carry significantly higher prices than the current market rate. Industry experts believe that if China proceeds with a “double anti-dumping†policy on imported polysilicon, it could potentially allow companies to renegotiate or cancel these high-cost long-term contracts. The feasibility of such actions, however, depends largely on how the original contracts were structured and what clauses they included.
Stable but Low Price Trend
Over the past few years, the price of polysilicon has experienced a significant downward trend, forcing many producers to halt operations. According to Wind Info data, as of May 22, the average weekly price of photovoltaic-grade polysilicon was $16.25 per kilogram. Although there have been minor fluctuations, the overall trend remains at a historically low level.
Since last year, the aggressive dumping of foreign polysilicon suppliers has led to an oversupply in the market, driving prices down further. Compared to the average weekly price of around $30/kg in early 2012, the current price is less than half. Even more dramatic is the drop from about $60/kg in the first half of 2011, which represents a nearly 75% decline. This sharp fall has had a major impact on the industry.
Looking ahead, technological advancements are expected to further reduce production costs. A representative from GCL-Poly previously stated that new production methods could bring the cost of polysilicon down from the current $17/kg to under $9/kg by 2014. As a result, the future price of polysilicon is likely to continue its downward trajectory.
Long-Term Contracts Remain a Hot Topic
During the period when polysilicon prices skyrocketed—reaching hundreds of dollars per kilogram—downstream industries such as wafers, solar cells, and modules faced immense pressure. To manage costs, many companies turned to long-term supply contracts. These agreements typically span several years or even a decade, specifying the quantity, price, and payment terms for polysilicon purchases. At the time, these prices were much lower than the prevailing market rate, helping companies reduce their material costs effectively.
However, unexpected market shifts have made these long-term contracts a burden. With the current market price significantly lower than the contract price, many companies are now stuck paying higher rates. Most of the long-term contracts from that period were priced above $40/kg, now more than half the current market price. Some domestic firms still have these contracts to fulfill, leading to increased cost pressures and reduced competitiveness.
It is reported that many of these long-term contracts between downstream companies and domestic polysilicon manufacturers have already been terminated. Despite being at different stages of the supply chain, all parties share common interests. Some Chinese polysilicon producers and their downstream partners have successfully renegotiated or canceled these contracts, allowing them to purchase at market rates. This not only benefits the downstream companies but also supports the broader industry's development.
On the other hand, long-term contracts with foreign suppliers may be harder to cancel, and some companies may face penalties. For instance, Suntech reportedly paid a heavy price to terminate a long-term contract, while a European company reportedly incurred hundreds of millions in breach-of-contract fees. Similar cases have also involved Chinese firms.
Challenges for Downstream Companies
Some downstream companies are still bound by their original long-term contracts, facing intense pressure as end prices remain low. While a potential “double anti-dumping†policy in China might help raise polysilicon prices, it won’t necessarily increase the value of existing long-term contracts. Therefore, the best approach for affected companies is to negotiate with upstream suppliers to either cancel or revise these contracts.
Industry insiders suggest that many long-term contracts include force majeure clauses, allowing for termination under unforeseen circumstances. If China’s final decision involves a “double anti-dumping†policy, it could be interpreted as a force majeure event, potentially enabling companies to break their contracts. However, this would depend on the specific wording of each contract, including whether “double anti-dumping†is explicitly excluded from force majeure provisions.
For companies still holding high-priced long-term contracts, using the “double anti-dumping†policy to renegotiate or cancel them could provide a significant advantage, reducing costs and improving competitiveness. At the same time, businesses should take lessons from this experience and be more cautious when signing long-term contracts, especially regarding pricing terms and flexibility.
Stable but Low Price Trend
Over the past few years, the price of polysilicon has experienced a significant downward trend, forcing many producers to halt operations. According to Wind Info data, as of May 22, the average weekly price of photovoltaic-grade polysilicon was $16.25 per kilogram. Although there have been minor fluctuations, the overall trend remains at a historically low level.
Since last year, the aggressive dumping of foreign polysilicon suppliers has led to an oversupply in the market, driving prices down further. Compared to the average weekly price of around $30/kg in early 2012, the current price is less than half. Even more dramatic is the drop from about $60/kg in the first half of 2011, which represents a nearly 75% decline. This sharp fall has had a major impact on the industry.
Looking ahead, technological advancements are expected to further reduce production costs. A representative from GCL-Poly previously stated that new production methods could bring the cost of polysilicon down from the current $17/kg to under $9/kg by 2014. As a result, the future price of polysilicon is likely to continue its downward trajectory.
Long-Term Contracts Remain a Hot Topic
During the period when polysilicon prices skyrocketed—reaching hundreds of dollars per kilogram—downstream industries such as wafers, solar cells, and modules faced immense pressure. To manage costs, many companies turned to long-term supply contracts. These agreements typically span several years or even a decade, specifying the quantity, price, and payment terms for polysilicon purchases. At the time, these prices were much lower than the prevailing market rate, helping companies reduce their material costs effectively.
However, unexpected market shifts have made these long-term contracts a burden. With the current market price significantly lower than the contract price, many companies are now stuck paying higher rates. Most of the long-term contracts from that period were priced above $40/kg, now more than half the current market price. Some domestic firms still have these contracts to fulfill, leading to increased cost pressures and reduced competitiveness.
It is reported that many of these long-term contracts between downstream companies and domestic polysilicon manufacturers have already been terminated. Despite being at different stages of the supply chain, all parties share common interests. Some Chinese polysilicon producers and their downstream partners have successfully renegotiated or canceled these contracts, allowing them to purchase at market rates. This not only benefits the downstream companies but also supports the broader industry's development.
On the other hand, long-term contracts with foreign suppliers may be harder to cancel, and some companies may face penalties. For instance, Suntech reportedly paid a heavy price to terminate a long-term contract, while a European company reportedly incurred hundreds of millions in breach-of-contract fees. Similar cases have also involved Chinese firms.
Challenges for Downstream Companies
Some downstream companies are still bound by their original long-term contracts, facing intense pressure as end prices remain low. While a potential “double anti-dumping†policy in China might help raise polysilicon prices, it won’t necessarily increase the value of existing long-term contracts. Therefore, the best approach for affected companies is to negotiate with upstream suppliers to either cancel or revise these contracts.
Industry insiders suggest that many long-term contracts include force majeure clauses, allowing for termination under unforeseen circumstances. If China’s final decision involves a “double anti-dumping†policy, it could be interpreted as a force majeure event, potentially enabling companies to break their contracts. However, this would depend on the specific wording of each contract, including whether “double anti-dumping†is explicitly excluded from force majeure provisions.
For companies still holding high-priced long-term contracts, using the “double anti-dumping†policy to renegotiate or cancel them could provide a significant advantage, reducing costs and improving competitiveness. At the same time, businesses should take lessons from this experience and be more cautious when signing long-term contracts, especially regarding pricing terms and flexibility.
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