Chinese polysilicon producers are increasingly suspending production due to weaker solar panel exports.
"About 90 percent of polysilicon producers have suspended production. Only a few are still working, for example, Jiangsu Zhongneng, Daqo and Asia Silicon, but at about half of their output capacity,"Wang Bohua, secretary-general of the China Photovoltaic Industry Alliance (CPIA), was quoted Wednesday by Economic Information Daily as saying.
"Our company ran at about 60 percent of our total output capacity in November," said Lu Jinbiao, deputy general manager of Jiangsu Zhongneng.
Prices for polysilicon have gone down by more than half this year, from 230 yuan per kg in early January to 110 yuan per kg at the beginning of December.
Polysilicon, or polycrystalline silicon, is a key component in solar panel construction. The majority of the world's supply is used for the production of solar panels.
Wang said he believes local solar product plants have been importing more polysilicon, adding to the burden for local suppliers.
China imported 70,210 tonnes of polysilicon from January to October, up 26.16 percent year on year, while import prices averaged 26.16 U.S. dollars per kg, down 61.10 percent year on year, according to customs figures.
Besides increasing imports, overseas markets have turned hostile toward solar energy panels, the main end product of polysilicon.
The U.S. International Trade Commission backed Washington's plan in early November to issue anti-dumping and countervailing duties on imports of crystalline silicon photovoltaic cells and modules from China.
The EU in November announced that it would investigate alleged state subsidies for Chinese solar panel manufacturers. This came amid an existing probe into allegations of dumping such products in European markets.
Anticipating shrinking exports, the central government has been considering policies to boost the domestic solar energy market and digest the products.
The central government has allocated another 7 billion yuan (1.11 billion U.S. dollars) to subsidize domestic solar photovoltaic demonstration projects, the Ministry of Finance announced on Tuesday.
Together with the 6 billion yuan earmarked in the first half of 2012, China has in total allocated 13 billion yuan to boost its domestic photovoltaic market this year.
Despite such efforts, polysilicon producers will go through hard times in the coming half year, as the domestic market, even if expanded, will only account for a very small share of the global market, said Wang Haisheng, a new energy analyst at Minsheng Securities.