INDUSTRY BRIEF: Polysilicon makers launch new joint venture to tackle oversupply

Several leading Chinese polysilicon makers have launched a new company that could help to address overcapacity plaguing the sector, Caixin reported on Wednesday. The move marks the latest step in the government’s effort to engineer a rescue for an industry whose prices have plunged due to the addition of massive new capacity over the last two years.

The new joint venture, Beijing Guanghe Qiancheng Technology Co. Ltd., was officially established on Tuesday with a registered capital of 3 billion yuan ($425 million), Caixin reported. Its shareholders include nine of China’s top makers of polysilicon, a key ingredient used to make solar panels, as well as the China Photovoltaic Industry Association.

The new company’s largest shareholder is a subsidiary of Tongwei Co. Ltd. (600438.SH), the world’s largest polysilicon maker, which holds a 30.35% stake. Its management includes several industry veterans, and it aims to explore partnerships, promote technology upgrades and improve current production capacity, according to an executive at the new company.

After a massive buildup over the last two years, China’s polysilicon industry, which accounts for most of the world’s output, reached an annual capacity of 3.2 million tons at the end of last year – roughly double market demand. To support plunging prices, many manufacturers have scaled back their output and are now operating at 50% of capacity or less.

Shares of many producers have rallied as polysilicon prices began to stabilize and started to recover in late June. Tongwei’s stock is up more than 40% from its late-June low, while U.S.-listed shares of Daqo (DQ.US; 688303.SH) have more than doubled.

By Doug Young

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