Confusion Reigns Over China's Polysilicon Import Policy

The solar industry has been left in confusion over whether China has started restricting imports of the solar-module material polysilicon, with some manufacturers reporting that shipments have been held up by customs officials and that buyers are delaying orders.

Those companies say that China has added waste silicon to a list of restricted imports, either as part of a deliberate move to protect its domestic polysilicon industry or for environmental reasons. However, other sources, including one major polysilicon distributor, said they weren't aware of any change in Chinese policy.

Calls to the Chinese embassy in Washington were not returned Wednesday.

Rick Doornbos, president and chief executive of Hemlock, Mich.-based Hemlock Semiconductor, one of the world's largest polysilicon producers, wrote in an email to Clean Technology Insight that "Yes, China has recently added 'waste' silicon to its list of restricted imports." He said that the restriction applies to "tops and tails from silicon ingot production, broken silicon wafers, and the small fraction of polysilicon production that does not meet quality specifications."

"We believe the driver for this was environmental concerns with some of the procedures used by local recyclers who convert this material into usable silicon," he said.

Doornbos said that the scrap polysilicon that is affected by the restriction is used in about 10% of Chinese solar cell manufacture, a relatively small and declining portion of overall production.

"We do not believe this restriction will have a significant impact on local polysilicon prices in China (or on global prices)," said Doornbos. He added that it won't have a material impact on Hemlock Semiconductor.

However, Targray Technology International, a Montreal-based supplier of pure and scrap polysilicon to solar customers in China, started getting calls last week from customers reporting that both scrap and virgin polysilicon shipments were being held up at Chinese customs, said Howard Alter, director of strategic materials at Targray, in an interview.

While the restriction doesn't include pure or virgin polysilicon, customs officials have been holding up shipments to sort the waste material away from the allowed material, according to Alter.

"This is not just us," said Alter, "many Chinese customers who are purchasing silicon have had materials stuck in customs."

Roger Wu, president of East Bright Inc., of San Jose, Calif., another exporter of polysilicon into China, said that his customers based in the U.S. received notice from their China-based headquarters to "to stop looking for the material" until the situation clarifies.

Wu said that he heard from customers that Chinese buyers of polysilicon scrap would now have to get a special permit to receive deliveries.

But Targray's Alter said that his company will now have to apply for a license with the Chinese authorities to receive an exemption to the restriction. However, he said, the agency that issues such licenses to all kinds of waste material importers stopped taking in new applications in December 2008. He didn't have the name of the agency.

Others said they weren't aware of any change or denied that any change of policy had occurred.

Terry Kunimune, head of Burbank, Calif.-based Kunical International, which distributes polysilicon globally, said in an interview that he hadn't heard of any delays or of new restrictions.

Analysts at Deutsche Bank wrote in a note on Tuesday that no new restrictions have been applied to polysilicon scrap.

They were responding to a note from analysts at Eurasia Group, a global political risk research and consulting firm with polysilicon clients. Eurasia pointed to a list of restricted imports on the Web site of The Chinese Ministry of Commerce, dated Aug. 4, which it said included polysilicon scrap for the first time. The Deutsche analysts said the list included only scrap silicon from integrated circuit manufacturing, which they said has been a restricted category for a while.

Two solar companies, Suntech Power Holdings Co. (STP) and Yingli Green Energy Holdings Co. (YGE), said that their imports aren't being affected.

"None of our [polysilicon] is [stuck]," said Robert Petrina, head of Yingli Green's North American business in an email to Clean Technology Insight. "But we have been proactive in engaging officials at all levels to make sure that we understand the process and are in compliance with all the regulations."

Steven Chadima, spokesman for Suntech, said in an email that the situation hasn't affected the Wuxi, China-based company.

However, Eurasia sees a broader trend at work that it warned could spell wider restrictions for clean-technology companies that aim to do business in China.

"This likely portends a broader trend: Beijing will seek to expand protections for domestic suppliers in clean technology industries in the years ahead as these producers become increasingly competitive. But in doing so, the leadership will be wary of igniting a protectionist debate due to the large export markets for many of these technologies," Eurasia analysts wrote in a report to clients Monday.

(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)

-By Yuliya Chernova, Dow Jones Clean Technology Insight; [e-mail]