OCI Holdings benefits from U.S. sanctions on Chinese polysilicon

Polysilicon [Courtesy of OCI]

South Korea’s green and energy company OCI Holdings Co., which produces polysilicon in Malaysia, is benefiting from U.S. sanctions on Chinese polysilicon that are driving up the price of non-Chinese polysilicon.

According to market research company PVinsights on Monday, the average price of polysilicon produced outside of China was $22.7 per kilogram at the end of October 2023, which is 147 percent more expensive than Chinese products. The price gap has widened since early January this year, when non-Chinese products were priced at $30.2 per kilogram, 72 percent higher than Chinese products at $17.5.

Chinese solar companies paid more for polysilicon from Malaysia than from China, according to the market research company. The average import price of Malaysian polysilicon for Chinese companies in the third quarter of this year was $19.2 per kilogram, more than double the average polysilicon price of $8.7. The average price gap between Malaysian polysilicon and polysilicon from the rest of the world widened to more than $10 in the third quarter from $6 in the second quarter.

This is attributable to the increased bargaining power of companies producing polysilicon outside China since the United States effectively banned the import of solar modules made with Chinese polysilicon. Currently, only two companies produce polysilicon for solar energy outside of China: Korea’s OCI Holdings and Germany’s Wacker Chemie AG. OCI Holdings produces polysilicon in Malaysia, where industrial electricity is cheaper than in Korea.

In July, the U.S. Customs and Border Protection restricted the import of solar modules made of raised silicon material from China’s Tongwei Solar Co. under the Uyghur Forced Labor Prevention Act (UFLPA). The sanctions on Tongwei Solar, which has no operations in the Xinjiang Uyghur Autonomous Region, led some to believe that the U.S. administration had effectively banned Chinese polysilicon.

On the other hand, solar modules produced using polysilicon from OCI Holdings cleared U.S. customs in the third quarter of 2023. OCI Holdings said that its products had been verified by the U.S. UFLPA.

In a recent third-quarter conference call, OCI Holdings said it secured a premium for non-Chinese polysilicon and is discussing contracts with non-Chinese customers, including existing customers.

The company also noted the European Parliament’s recent approval of a draft of regulations such as the U.S. UFLPA and vowed to emerge as a key non-Chinese value chain player for the U.S. and European markets in the medium to long term.

OCI Holdings has also secured a supply chain that excludes China by sourcing raw materials like silica and metallic silicon from countries including Brazil, France, Malaysia, and South Africa instead, using only non-Chinese products.

As demand for non-Chinese polysilicon continues to grow, OCI Holdings’ price bargaining power is expected to increase further.

According to the U.S. Solar Energy Industries Association (SEIA) and market research company PV InfoLink, global non-Chinese wafer production capacity is projected to increase from 43 gigawatts (GW) this year to 150 GW by 2027. The demand for non-Chinese polysilicon during the same period is expected to increase from 112 kilometric tons (kMT) to 390 kMT.