(Yicai Global) Aug. 18 -- Shares in Tongwei advanced today after the Chinese silicon giant said that it will spend CNY28 billion (USD4.1 billion) to build two new production lines for high-purity crystalline silicon in southwestern Yunnan province and northern Inner Mongolia Autonomous Region as demand for the raw material used to make solar panels surges.

Tongwei’s share price [SHA:600438] was trading up 3.4 percent at CNY56.67 (USD8.34) as of 11:30 a.m. China time.

Tongwei will build two high-purity crystalline silicon plants and ancillary facilities, one in Baotou, Inner Mongolia and the other in Baoshan, Yunnan province, the Chengdu, southwestern Sichuan province-based company said yesterday. Each will cost around CNY14 billion and have an annual output of 200,000 tons. The Baotou project is expected to come online in 2024.

It is very likely that this latest capacity expansion has to do with the CNY100 billion (USD14.7 billion) of long-term orders for polysilicon that Tongwei has signed this year so far.

The price of silicon is rocketing as supply fails to meet surging demand for solar power installations. As a result, PV wafer and cell makers are placing long-term orders with raw materials producers to ensure supply. The contracts often fix procurement amounts, but prices remain flexible.

The average price of monocrystalline silicon was CNY303,200 (USD44,701) per ton yesterday, up from CNY134,000 per ton in June last year and a big jump from nearly CNY70,000 a ton at the start of 2021, according to data from the China Nonferrous Metals Industry Association published yesterday.

Unsurprisingly, Tongwei, which commands almost a third of the Chinese market, has been raking it in. Profit more than quadrupled in the first half from the same period last year to CNY12.2 billion (USD1.8 billion), almost half the profit generated in the 30 months from 2020 to June this year, according to its latest financial report released yesterday. Revenue more than doubled to CNY60.3 billion (USD8.8 billion).

The firm’s output more than doubled in the first half year on year to 107,300 tons, the report said. As of June 30, the company had CNY9.6 billion (USD141.7 billion) in the bank.

Silicon prices are expected to remain high in the third quarter, and may drop slightly in the fourth quarter, but not by much, a new energy analyst told Yicai Global.

Production, however, could be affected by recent power rationing in southwestern Sichuan province where Tongwei and other solar giants, such as Trina Solar and Jinko Solar Holding, have plants.

Editors: Shi Yi, Kim Taylor