(Yicai) April 25 -- Prices across China’s photovoltaic industry chain, from polysilicon to wafers, cells and panels, continued to tumble last week due as weak demand takes its toll, according to a recent study.

“The polysilicon market is in the doldrums, with plenty of bargaining going on,” according to a report released by the Silicon Industry Branch of the China Nonferrous Metals Industry Association. “There have been few transactions in the spot market and buyers and sellers have not been able to agree on a price. The main reason why polysilicon prices keep sliding is because the output of silicon wafers in the second quarter is lower than anticipated."

"The number of polysilicon orders signed in April was less than in March, and silicon wafer production in May is expected to drop,” the report said. "Whether businesses will want to replenish their stocks after the upcoming five-day Labor Day holiday is not clear."

Due to a serious mismatch between supply and demand, prices have significantly dropped across all four main sectors of the solar industry chain, namely silicon materials, silicon wafers, cells and modules.

On the upstream end, polysilicon producer Hoshine Silicon Industry’s profit halved in the first quarter from a year ago to CNY260 million (USD35.7 million) as excess capacity led to a drop in prices, while revenue dipped 3.5 percent to CNY5.2 billion (USD718 million). 

In fact, since the end of last year, major polysilicon manufacturers, including Tongwei and Daqo Energy, have cut production to respond to the "anti-over-competition" initiative put forward by the China Photovoltaic Industry Association. As of now, all polysilicon producers in China are running at reduced capacity.

“There has been no significant change in the supply of silicon wafers,” according to the report. “In the past week, the overall operating rate of the industry was between 55 percent and 60 percent. As demand for modules slumps, cell production has been cut which has resulted in weaker demand for silicon wafers."

Last week, prices for solar cells and panels continued to tumble, especially that of solar modules. Some panel prices dropped below the CNY0.70 (USD0.10) per watt mark to CNY0.68 per watt. Cell prices dipped by between CNY0.02 per watt and CNY0.03 per watt to range from CNY0.26 (USD0.04) per watt to CNY0.28 per watt.

"Right now, the solar industry is on the verge of clearing excess capacity, or it has slowly started to do so," said Zhu Daocheng, president of JA Solar's photovoltaic and energy storage business group. In the process, manufacturers along the industrial chain are unwilling to spend too much. Raw material producers want to maintain a strong cash position, while panel manufacturers are also taking a more cautious approach.

Editor: Kim Taylor