RENESOLA - Moderated Discussion & Debate

Polysilicon Shortages till 2010:


mbadfvn05 - 31 Dec'06 - 05:12 - 18338 of 18355

Post No. 18322 & Posts Nos. 18332 to 18337

The above are a great series of posts by OC, krupatel and htrocka showing that the booming PV solar industry is creating huge demand for polysilicon which has resulted in serious shortage and bottleneck of supply of polysilicon – all very good news for SOLA, which is operating in a SELLERS MARKET to meet the insatiable demand for its products.

However, more recent research shows that the SHORTAGE OF POLYSILICON will PERSIST MUCH LONGER THAN PREVIOUSLY EXPECTED and the SHORTAGE IS NOW EXPECTED TO LAST UNTIL 2010 and BEYOND, which will be very good indeed for SOLA.

Research by Daiwa, Merril Lynch and Evolution HAS ALL COME TO THIS CONCLUSION

OC’s post No. 18004 shows that yet more commentators and analysts have come to the SAME CONCLUSION:



"The polysilicon shortage that has plagued the solar-cell industry for two years is worse than once thought, may persist through the end of the decade, and could affect the silicon wafer industry starting next year, analysts warn.

"The tight polysilicon market could last two years longer than previously expected," possibly continuing to 2010 or 2011, said Bruce Diesen, an analyst with Terra Securities ASA. The material is the key ingredient of both solar cells and silicon wafers and could affect costs in both markets in 2007.

Polysilicon manufacturers produce different grades of the material for the wafer and solar industries. Whereas supplies of wafer-grade polysilicon have remained sufficient thus far, solar-grade polysilicon has been in short supply for roughly two years as the solar industry has seen skyrocketing demand.

The wisdom had been that the shortage of supplies would last until 2009, when additional capacity brought online by such polysilicon vendors as Hemlock, MEMC, Mitsubishi Materials, REC and Wacker would bring sufficient material volumes into the supply chain. But solar's runaway growth has forced a reassessment of that timetable. "




Excerpts from DAIWA’s 98 page report into the global solar industry published 25 Sep. 2006:


“We expect the PV-system industry’s remarkable growth to continue, due to ecological considerations, the need to diversify energy sources, cost reductions
for PV-systems and financial incentives from governments. We forecast
revenue CAGRs of 27% for PV-systems makers, 28% for the module industry,
29% for the PV-cell industry, and 30% for the solar grade silicon industry
between 2005 and 2010. We believe the industry has ample growth potential
beyond 2010, as solar power will still account for only about 0.25% global
electricity by then.”

“In 2005, silicon-based products accounted for about 91% of total PV market, while
thin-film based products accounted for just 9%. Contributions from other emerging
technologies were minimal.”


“Although silicon accounts for only 15% of the final system cost, the product has been in short supply since 2005. Silicon production was not able to keep in pace with PV cell productions due to: 1) the high process entry barrier to the industry, 2) longer production ramp-up times, and 3) the high capital requirement.”



“Based on the major players’ capacity-expansion plans, polysilicon production capacity nis set to grow at a CAGR of 29% from the end of 2005 to the end of 2008. We expect solar grade silicon production to increase at CAGR of 45% over the same period. Due to the decline in silicon content of around 10% annually over the same period, we estimate the current silicon production ramp-up will be able to support a 60% CAGR for PV-cell output in peak watts. The rate of growth in the PV-cell industry in volume terms, based on our forecasts up to 2010, will average 41% annually.”


Note: DAIWA have a chart of Solar Grade Silicon Supply & Demand from 2003 to 2010 which shows demand still exceeding supply in 2010.




Excerpts from Evolution Securities China 17 Page Report on SOLA dated 20 Nov. 2006


“At the heart of the value chain. Expansion of the solar energy industry
faces a key bottleneck owing to the shortage of silicon. In contrast to
most competitors which use raw silicon, ReneSola processes scrap silicon
to produce polyvoltaic (PV) wafers. While placing ReneSola at the
high‐margin end of the value chain, it also means competition to secure
an adequate silicon supply is less keen than for raw silicon.”

“The shortage of solar‐grade polysilicon is currently driving the shortage of
solar‐grade wafers. However, the introduction of new polysilicon production
capacity through 2009 should see the demand‐supply gap contract.
While polysilicon supply will increase, we expect that polysilicon prices,
now hovering near US$200 per kg, will decline only gradually over this period
as demand remains strong.”


“According to the International Energy Agency (IEA), cumulative installed
PV systems in developed countries expanded 42% yoy to 3.7GW. In 2005
alone, over 1GW of PV systems – both off‐ and on‐grid – were installed in
these countries with 85% of this total installed in Germany and Japan alone.
Strengthening demand for solar power appears secure on higher hydrocarbon
prices, subsidies as well as preferential on‐grid power tariffs. Longerterm,
we anticipate that a gradual reduction in per watt PV module prices
on technological advances and process improvements will increase the
competitiveness of solar power vis‐à‐vis other energy sources leading to
expanding PV module demand.”

“Supply to remain tight …..
Tight polysilicon supply is proving the main constraint on growth in the
solar power industry. According to Solarbuzz, the shortage of polysilicon
saw utilisation rates among global solar cell manufacturing plants decline to
78% in 2005 from 91% in 2004. The constraint on polysilicon supply should
continue to cap what would, in our view, otherwise be robust expansion in
the industry.”

“…but it can’t come fast enough
New capacity is planned, but owing to the technical sophistication of the
production process the lead time for the commissioning of a new plant is
approximately two years.”





Excerpts from Merril Lynch’s 29 Page Report on SOLA dated 6 Dec. 2006


“Initiating coverage with a Buy and PO of 800p
We are initiating coverage of ReneSola – one of China’s leading solar ingot and
wafer makers – with a Buy rating and 12 month PO of 800p. This is based on 20x
FY07E EPS of US$0.78 and 13x FY08E EPS of US$1.22. Notwithstanding strong
share price performance since its IPO earlier this year, SOLA is currently trading
at only 10.1x FY07E and 6.5x FY08E, a deep discount to industry peers.

Solid risk reward profile – good customers and presales
SOLA has a strong customer base of leading regional solar cell manufacturers,
like Suntech Power and Motech. Its strong revenue outlook for FY07 and FY08 is
anchored by supply contracts with these customers. While pricing has not been
fixed, SOLA has orders for 77% and 59% of forecast output for FY07 and FY08.

Opportunities lie upstream in China’s solar supply chain
China is already the world’s third largest global solar cell and module producer,
but is conspicuously light in polysilicon production and relatively light in ingot and
wafer production as well. This presents a unique growth opportunity for ReneSola,
who is focused exclusively on solar ingot and wafer production in China.

Solar: High industry growth is more than just a concept
The global solar energy industry has enjoyed a 37% CAGR in the last decade. if
solar can grow to 3% of the global generation mix, output CAGR can stay above
30% through 2020 as governments extend subsidies to develop alternative /
renewable energy sources and reduce greenhouse gas emissions.”



“Material procurement – no real risks in 2006/07
We estimate that ReneSola will require approximately 1,170 tons of polysilicon to
fill its production capacity in 2007. Management indicates that it has already
secured 1,350 tons of polysilicon. ReneSola’s procurement program for 2007 is
anchored by several sources, including the following:

* Approximately 270 tons of polysilicon in inventory.

* Rolling supply contracts with domestic and international suppliers account for
360 and 400 tons, respectively.

* Approximately 350 tons of polysilicon in 2007 will be supplied by customers
of the recently announced monocrystalline capacity expansion as part of a
tolling arrangement whereby the customer supplies polysilicon to be
processed by Renesola into ingots and wafers which are returned to the
customer for a fee.”



“The following chart suggests that the global supply shortage of polysilicon will be
in the order of ~7-9k tons per year in 2007-2009. This supply shortfall is expected
to substantially made up for with recycled polysilicon for the solar industry.”


Note: The above chart shows Aggregate Semiconductor and PV Polysilicon Demand vs Supply from 2000 to 2009E. It shows Demand exceeding Supply from 2004 to 2009.