A Chinese ban on imports of a waste material used for solar wafers may be bad news for foreign competitors but it is a big boost to China's solar sector.
Scrap polysilicon, which can be reused to make solar wafers, is low-grade silicon that fails to meet the grade for chips found in most electronics.
Beginning this month, China stopped accepting scrap polysilicon to comply with environmental regulations.
The ban threatens the income of Chinese scrap polysilicon traders and limits the market for companies that sell to them, such as top contract chipmaker TSMC. It is particularly harsh for small and new domestic solar players who rely on the cheap material to make wafers and panels.
For China's polysilicon companies, including GCL-Poly Energy Holdings and LDK Solar, the ban is an opportunity to expand business. For foreign rivals South Korean OCI Co Ltd, MEMC Electronic Materials Inc or Japan's Tokuyama Corp the ban is a potential threat.
China produces over 60 percent of the world's solar panels, and is among the heaviest users of pure polysilicon and the scrap variety. Scrap polysilicon accounts for up to 30 percent of silicon fed into some of the solar wafers and panels in China.
"In a way, the ruling was designed to protect (China's) very young polysilicon industry," said KK Chan, chief executive of private equity firm Nature Elements Capital. "The sector needs all the help it can get given a supply glut of the material."
The ban comes at a time when Chinese polysilicon companies are ramping up production, despite an oversupply of the key solar component.
GCL-Poly, which acquired $3.4 billion worth of solar assets in June, is on track to produce about 3,000 tons of polysilicon by year end. LDK Solar aims to produce 5,000 tons by 2010.
Yingli Green Energy Holding Co, ReneSola and Tongwei Co should benefit.
After the credit crunch dried up funding for solar projects, the sector was hit by a massive oversupply of polysilicon. Prices fell to $69 per kilogram from its peak of $400 in 2008....MORE