(Yicai Global) Aug. 26 -- China is planning to bring out silicon futures as a financial instrument to help businesses in the photovoltaic sector protect themselves from market risks as the price of the raw material used to make solar panels soars to new heights amid strong demand, Shanghai Securities News reported today.
Preparations to take silicon futures to market are underway, said Duan Debing, vice president of the China Nonferrous Metals Industry Association at the annual China Polysilicon Industry Development Forum held earlier this week.
Photovoltaic enterprises can use silicon futures as a tool to hedge against risks in production and operations, Duan said, without mentioning a timeline, nor which market will issue them.
The price of silicon is rocketing as supply fails to meet surging demand for solar power installations. The average price of monocrystalline silicon, which is the raw material to make solar wafers, soared to another record high this week at CNY310,000 (USD45,182) per ton, according to the association's data. This is a gain of 35 percent from the beginning of the year, and nearly quadruple what it cost at the beginning of last year.
Earlier this week, Chinese government ministries stepped in to regulate market order, saying that a long-term cooperative system should be set up by signing long-term orders and clarifying volume-price relationships at both ends of the industrial chain.
Many silicon suppliers are hiking capacity as profits swell. By the end of this year, China’s annual polysilicon production capacity should rise to 1.19 million tons, accounting for 88.3 percent of global capacity, said Lin Ruhai, executive vice president of the association’s silicon industry branch.
The country is expected to produce 81 tons of polysilicon in 2022, accounting for 85.3 percent of the world's total output, added Lin.
The potential for overcapacity is real, Lin said, as China’s annual polysilicon production could exceed five million tons by 2025, based on the expansion plans reported by member companies. But global solar panel installation demand in 2025 is only expected to be 5.5 gigawatts, which requires just 1.9 million tons of polysilicon.