BEIJING (Reuters) – Chinese polysilicon producers are in discussions to establish a 50 billion yuan ($7 billion) fund aimed at acquiring and decommissioning around one-third of the production capacity of the industry, with the objective of restructuring part of the unprofitable sector. GCL Technology Holdings revealed that plans are underway to procure and shut down at least 1 million metric tons of lower-grade polysilicon capacity. The proposal appears similar to an OPEC-style arrangement in the polysilicon sector, where the central committee would decide on the total supply for a specific period and allocate production quotas accordingly, as stated by Gary Jun Zhu, GCL’s investor relations director.
This move signifies one of the clearest indications yet that the Chinese government’s recent tough stance against overcapacity is now translating into concrete actions. Various sectors in China, such as solar and electric vehicles, have been grappling with excessive capacity and intense price competition that has eroded profits significantly. Although Beijing had previously restructured sectors like polysilicon, steel, and cement over a decade ago, the current reform wave is anticipated to face more challenges, given that many troubled sectors are now dominated by private enterprises, and there are fewer growing industries to cushion the impact.
Zhu revealed that the polysilicon acquisition entity is set to kick off in the latter part of the third quarter of this year, with the commencement of capacity and inventory purchases scheduled for the fourth quarter. Once the proposed closures take place, an estimated 2 million tons of capacity will still remain in the market. Data from Bernreuter, an industry research firm, indicates that China had a production capacity of 3.25 million tons by the end of 2024.
During an industry conference in June, GCL Chairman Zhu Gongshan highlighted that major players were actively involved in the sector’s restructuring. Meanwhile, local media reports have suggested that producers are in talks to create a fund for capacity acquisition. This marks the first time specifics regarding the size, scope, and timeline of the plan have been disclosed. While China has a virtual monopoly in the production of solar-grade polysilicon, accounting for 95% of the global total in 2024, the country’s share in other solar supply chain segments, including cells, modules, and wafers, has surged past 80% in recent years. Recent reports indicate that polysilicon prices have surged nearly 70% this month, in alignment with the price increases of various industrial commodities, triggered by Beijing’s verbal warnings and smaller-scale initiatives suggesting upcoming supply-side reforms.
The origin of the funding for the acquisition entity remains uncertain, especially given the financial struggles faced by key players like GCL and Tongwei. Yishu Yan, an analyst at UBS, pointed out the debt burden of most companies in the sector and the lack of precedents for capacity acquisitions, indicating a high level of ambiguity regarding the implementation of such plans. The level of involvement by provincial and central authorities in the acquisition entity’s operations and the planned facility closures is also unclear. Jun Zhu stated that the central committee of the entity would comprise producers, lenders, and potentially regulators, without specifying their identities. As per Yan, any efforts to decommission capacity may encounter resistance from local governments, where officials are evaluated based on employment and economic growth, with many of these governments having stakes in local private solar enterprises. The potential bankruptcy or acquisition of solar companies could lead to pushback from local authorities, she noted.
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