Polysilicon, known as a cornerstone for the growth of the new energy and information industries, serves as the primary material for manufacturing solar cell wafers and silicon substrates for integrated circuitsRecently, the Guangzhou Futures Exchange has approved the registration of polysilicon futures and options, with futures set to be available for trading on December 26, 2024, and options following on December 27. This development marks the third addition of a new energy metal product on the Guangzhou Exchange, following the listings of industrial silicon and lithium carbonate, thereby enhancing China’s dynamic landscape within the new energy metal futures sector.

The polysilicon industry has experienced rapid growth, capturing significant attention on a global scaleCommonly referred to as high-purity polysilicon material, polysilicon is produced using industrial silicon with a purity of approximately 99%, which is then further refined through physical or chemical methods to achieve a purity level of 99.9999% and above

This high-purity silicon is integral to the production of silicon wafers, which find their ultimate application in photovoltaic (PV) energy and semiconductor chips.

In the realm of photovoltaics, polysilicon stands as the major raw material, as crystalline silicon solar cells dominate the industryA significant market share is held by solar panels manufactured using both polysilicon and monocrystalline silicon wafersThe International Energy Agency (IEA) reports that in 2023, over 560 gigawatts (GW) of new renewable energy installations were accounted for globally, with photovoltaics contributing 75% of this totalProjections indicate that the global installation capacity for new renewable energy from 2024 to 2030 could exceed 5,500 GW, with photovoltaics being the driving force, indicating vast potential for future expansionGiven its pivotal position in the photovoltaic supply chain, polysilicon carries immense significance in the advancement of the new energy sector.

Within the semiconductor field, polysilicon’s contribution is equally vital, forming part of a comprehensive industry chain that encompasses upstream polysilicon (both multi and monocrystalline), midstream silicon wafer production (including polished and epitaxial wafers), and downstream manufacturing of discrete devices and integrated circuits, ultimately feeding into terminal application industries.

China currently spearheads global production, consumption, and import of polysilicon

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According to data from the China Nonferrous Metals Industry Association's Silicon branch, global polysilicon output surged from 300,000 tons in 2014 to 1,597,000 tons in 2023, reflecting a compound annual growth rate of 20.42%. In 2023, China's share of global polysilicon production reached a staggering 92.08%, solidifying its dominance in the market.

For the past decade, the global polysilicon capacity and output have predominantly trended upward, with growth largely fueled by Chinese productionIn 2023, global polysilicon capacity hit 2,256,000 tons, with an overwhelming 2,100,000 tons produced in China, representing 93% of reported capacityMeanwhile, additional production occurred in countries like South Korea, the United States, and Japan.

China's meteoric rise in the polysilicon industry can be attributed primarily to two factors: the explosive increase in domestic photovoltaic installation demand leading to significant price hikes and the evident production cost advantages enjoyed by Chinese manufacturers

The rapid price escalation has encouraged local companies to expand capacities aggressively, while downstream photovoltaic firms are now strategically extending their production integration upstream.

Amidst the rapid development of the polysilicon sector, the industry is susceptible to cyclical fluctuations, demanding proactive risk management strategies to stabilize the supply-demand equationIn 2018, following a swift reduction in photovoltaic subsidies, the demand for installation plummeted, causing the price of polysilicon (specifically high-purity monocrystalline material) to decline from ¥156,200 per ton to ¥58,400 per ton by May 2020, marking a staggering 62.6% drop.

In contrast, the latter half of 2020 marked a turning point; as photovoltaic electricity generation costs continued to fall, governmental policies supporting the dual-carbon objectives spurred a dramatic increase in installation demand

This led to a misalignment between supply and demand, causing polysilicon prices to skyrocket from ¥58,400 per ton to a peak of ¥306,000 per ton in 2022, representing a staggering 424% increase.

Data reveals that from 2021 to 2023, polysilicon prices saw annual fluctuation rates of 226.63%, 63.49%, and 280.17%, respectivelyGiven its status as a crucial upstream material in the photovoltaic supply chain, effective management of price volatility is necessary for the sustainable development of the industry.

Furthermore, the lack of objective, continuous price signals complicates the polysilicon sector, often resulting in concentrated investments and periodic supply-demand mismatches, which are detrimental to industry stabilityThus, an increasing call has emerged among companies in the photovoltaic supply chain for the introduction of polysilicon futures and for utilizing such financial instruments for price setting and risk management

“The listing of polysilicon futures provides businesses with essential risk management tools, allowing various sectors within the supply chain to lock in production costs and profits, thus stabilizing operationsIt will also provide the market with reasonable long-term price signals, helping to avoid overcapacity and promoting balanced development across upstream and downstream sectors," remarked an industry representative from CITIC Construction Investment Futures.

Moreover, the launch of polysilicon futures is expected to establish a “Chinese” price reflecting the scale of China’s polysilicon industry in international tradeAccording to the Ministry of Industry and Information Technology, 2023 saw production in every segment of the photovoltaic supply chain reach historical highs, with polysilicon, silicon wafers, cells, and modules contributing 92%, 97%, 91%, and 84% to global output, respectively

However, pricing for polysilicon in international trade often references overseas quotationsBy leveraging China’s polysilicon industry scale, the introduction of futures can help establish a domestic price point that influences international pricing structures.

Jing Chuan, Chief Economist at Shanghai Dongya Futures, highlighted that the Guangzhou Exchange has seen stable operation of the industrial silicon futures market for nearly two years, and the launch of polysilicon contracts will further enhance the futures services available to the crystalline silicon industry chainThis will provide accurate tools for the polysilicon and downstream photovoltaic sectors and solidify China's competitive edge globally.

Regions in China’s western areas are emerging as significant players in polysilicon productionAs of 2023, the top four regions for polysilicon output were Xinjiang, Sichuan, Inner Mongolia, and Qinghai, accounting for 27.9%, 26.5%, 16.7%, and 11.8% of production, respectively, totaling around 83%. This demonstrates a distinct production advantage in the western regions of China, paving the way for futures trading to enhance the sector's strength.

The introduction of polysilicon futures is poised to effectively promote the integration of finance and production, strengthening regions such as China's western photovoltaic industrial clusters

"The launch of polysilicon futures and options will guide more financial elements into polysilicon production, silicon wafer processing, and solar cell manufacturing, thereby boosting the funding capacity of enterprises and securing the stable development of the industry," commented Wang Jun, Deputy General Manager of Green Finance Futures.

According to information obtained by reporters, the benchmark delivery for polysilicon futures at the Guangzhou Exchange is positioned around N-type polysilicon with a trading unit set at 3 tons per handTo mitigate excessive speculation while ensuring efficient pricing, a minimum price fluctuation of ¥5 per ton has been established, with delivery units set at 30 tons per hand, and the validity of a warehouse receipt marked at six monthsThe trading code PS stands for Polysilicon, capitalizing on effective communication within the financial sector.

As for the areas designated for delivery, the Guangzhou Exchange has prioritized stable delivery resources, setting the delivery regions to include eight key production and consumption areas: Inner Mongolia, Sichuan, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang