Polycrystalline Silicon Market Faces Dual Pressures: Slow Reserve Policy And Accumulating Inventory

The anticipated industrial reserve policy-aimed at consolidating capacity and stabilizing prices-has progressed slower than market expectations. Although discussions about a potential reserve platform (e.g., "China Silicon Capacity Integration Co.") emerged in early 2025, no concrete measures have materialized. This delay has exacerbated market anxiety, as the proposed reserve would require ~100 billion RMB in funding to absorb ~1 million tons of excess silicon capacity.

Concurrently, the "anti-internal competition" initiative, which encourages producers to avoid below-cost sales and自律减产 (self-discipline production cuts), has failed to meaningfully reduce supply. While major players like Tongwei and GCL briefly curtailed output, their reductions were offset by stable or increased production in Xinjiang and Inner Mongolia, where cheaper coal-powered electricity keeps costs low.

Polycrystalline silicon inventories have surged to ~26.7 million tons, a 3.09% weekly increase, while silicon wafer stocks rose to 18.42GW (up 5.14%). This oversupply reflects two key issues:

• Weak Downstream Demand: PV installations slowed after the Q2 "rush-installation" peak, with silicon wafer producers operating at 55-60% capacity and delaying raw material purchases.

• Insufficient Supply Adjustments: Despite the dry season in Southwest China (e.g., Yunnan, Sichuan), where hydropower costs typically force output cuts, actual shutdowns have been slower than planned.

• Xinjiang/Inner Mongolia: Contributions from these regions-where energy costs are lower and production remains stable-have counterbalanced Southwest China's seasonal reductions.

• High-Cost Regions: Sichuan and Yunnan face electricity price hikes during the dry season, but their impact on global supply remains limited due to their dwindling share of total output.

As the primary downstream consumer of silicon metal, polycrystalline silicon's weakness directly suppresses demand for metallurgical-grade silicon. With PV accounting for ~39% of silicon metal consumption, the inventory backlog and policy delays have intensified price pressures across the silicon value chain.