(Yicai Global) Feb. 10 -- The price of solar wafers in China has surged this year, after falling sharply in the fourth quarter last year, as demand temporarily outstripped supply but manufacturers remain cautious about increasing output due to overcapacity concerns, Yicai Global has learned from industry sources.

Wafer makers are hiking their prices to match a rise in the price of silicon, an essential raw material, the head of a major wafer firm told Yicai Global yesterday. There is no change in capacity and market competition remains the same.

In the past week, the average price of 182-millimeter monocrystalline wafers has soared 26.4 percent to CNY6.22 (USD0.92) apiece and that of 210-mm wafers has jumped 34.4 percent to CNY8.20 each, according to data released by the Silicon Industry of China Nonferrous Metals Industry Association yesterday.

Prices have surged 67 percent since hitting a low during the week of Jan. 5 when a single 182-mm wafer cost around CNY3.74 (USD0.55) and a 210-mm one CNY4.90.

Yet wafer makers were only operating at between 70 percent and 80 percent capacity over the past week, according to The Silicon Industry’s weekly report.

In the fourth quarter last year, knowing that more capacity was due to come online, wafer makers slashed their prices and their output in order to reduce their inventories as much as possible.

However, as demand remained strong at the beginning of the year, the backlog in wafer inventories was used up, resulting in the shortage that drove up prices.

But wafer makers are reluctant to hike output to avoid driving up stock which could bring prices down again, as growth in raw materials supply continues to outstrip the uptick in demand.

“The entire photovoltaic industrial chain is likely to show signs of overcapacity this year,” a senior PV industry analyst said. “Although installation demand is strong worldwide, raw material supply has grown even faster.”

The increased output of large-size wafers over the past two years has led to structural overcapacity in the wafer segment, according to a report by China Merchants Bank Research Institute. As large-size wafers replace the older, smaller ones, the constant increase in capacity will saturate the market and competition will become stiffer.

Editors: Tang Shihua, Kim Taylor