Credit: iSuppli

Credit: iSuppli

Via Greentech Media, a recent report indicates that there has been a dramatic fall off in the spot market price of polysilicon, a development that may help continue to lower the price of solar panels.

First, it can’t be emphasized enough that spot market pricing is much different than typical production-volume pricing. The spot market is what a company would pay/earn if it had to suddenly and immediately obtain/sell some material. PV panel makers, however, get their materials based on long-range supply and pricing schedules. Some PV manufacturers may even engage in some hedging of polysilicon prices by buying forward and futures contracts, investment products that are largely based on spot prices.

But spot-price trends can be strongly indicative of where supply contracts will be heading.

So, according to market research firm iSuppli, in 2007 spot prices for polysilicon were approximately $100 per kilogram. iSuppli data indicates that the spot price shot up to over $400 per kg in 2008. Greentech Media says the price hit a high of around $500 per kg in 2009.

But since then, spot prices have plummeted, despite growing demand. iSuppli suggest that supplies will be so great that prices may have fallen 50% this year alone, an then will fall to $150 per kg in 2010, to under $100 in 2011 and to under $50 in 2012.

The fall off in pricing is probably linked to an explosion of producers. There were 7 in 2007, and the current number may be closer to 70. The price spike in 2008-2009 is generally considered an artifact caused by a temporary mismatch between supply and demand. Now, demand based on long-term contracts is being met and the excess is being dropped on the spot market.

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