China's Polysilicon Producers Plan 33% Capacity Cut

China's leading polysilicon producers are in discussions to establish a 500 billion yuan (approximately 70 billion USD) fund aimed at acquiring and shutting down about one-third of the industry's capacity. This move is part of a broader effort to restructure the loss-making sector and address the issue of overcapacity.

The plan involves closing at least 100,000 tons of low-quality polysilicon production capacity. This initiative is seen as a significant step towards stabilizing the industry, which has been plagued by overcapacity and intense price wars, leading to substantial profit erosion. The proposal is reminiscent of the Organization of the Petroleum Exporting Countries (OPEC), where a central committee would determine the total supply and allocate production quotas to individual producers.

This development comes as the Chinese government has intensified its criticism of overcapacity issues across various sectors, including solar energy and electric vehicles. The plan is one of the strongest indications yet that these criticisms are being translated into concrete actions. The government has been vocal about the need to address overcapacity and has taken steps to eliminate outdated production capacities.

In June, the head of a major polysilicon company emphasized the industry's commitment to restructuring. This was followed by reports from domestic media outlets about the establishment of a fund to acquire excess capacity. The latest disclosure provides details on the scale, scope, and timeline of this initiative.

Following the closure of the targeted capacity, the remaining market capacity is expected to be around 200,000 tons. The central committee of the fund, which will include polysilicon producers, platform creditors, and possibly regulatory bodies, will be responsible for ensuring that polysilicon prices fluctuate within a range that benefits all stakeholders.

The platform is scheduled to launch by the end of the third quarter of 2025, with acquisitions beginning in the fourth quarter. These acquisitions will include both excess capacity and market inventory. The goal is to create a more stable and profitable industry by reducing overcapacity and controlling supply.