China’s Polysilicon Giants Commit to Full-Cost Pricing in Government-Backed Compliance Drive

Eight major polysilicon manufacturers in China jointly issued an initiative on Friday pledging strict adherence to full-cost sales compliance requirements and enforcement of production energy consumption standards, said the Silicon Branch of the China Nonferrous Metals Industry Association.

The eight manufacturers are Tongwei, GCL Technology, Daqo New Energy, Xinte Energy, Asia Silicon, East Hope, Lihao Clean Energy and Goens Silicon Technology. Industry insiders estimate that their combined capacity accounts for over 90% of China’s total polysilicon production capability.

According to the initiative, the move comes in response to regulatory directives issued recently that are aimed at reining in disorderly price competition and promoting high-quality industrial development.

In late July, the China Photovoltaic Industry Association or CPIA — under the guidance of the State Administration for Market Regulation or SAMR and the Ministry of Industry and Information Technology or MIIT — released the General Principles for the Cost Accounting Model of the Photovoltaic Industry. The standard unifies cost-accounting scopes, coefficients and methodologies across the crystalline silicon value chain, covering from polysilicon to modules, to eliminate accounting discrepancies and establish clear production cost benchmarks.

The joint initiative highlights compliance guidance from the SAMR prohibiting below-cost sales, emphasizing strict adherence to pricing, unfair competition and anti-monopoly laws. Signatories have pledged to calculate cash, production and full costs using the methodology and parameter framework established in the General Principles for the Cost Accounting Model of the Photovoltaic Industry.

The participating companies have pledged that no PV product will be sold below its corresponding full cost as calculated under the new standard, with any below-cost sales to be halted and corrected immediately. Compliance will be enforced through market supervision inspections and mutual industry monitoring, with members encouraged to report violations directly to industry associations and SAMR.

Additionally, the initiative urges complete compliance with the newly enacted mandatory national standard, Norm of Energy Consumption per Unit Product of Polysilicon and Germanium, jointly issued by key central government authorities. Governed by energy saving and clean production laws, signatories pledged to voluntarily phase out inefficient, high-energy-consuming capacity to strengthen self-regulation and prevent redundant, unchecked expansion.

Regulatory Foundations and Policy Context

Industry insiders said that, unlike previous non-binding attempts at self-regulation, the current regulatory drive is anchored in legal authority, quantifiable metrics and legal penalties—moving it well beyond mere symbolic commitments.

Following the release of the CPIA’s general principles in late July, the SAMR convened a high-level price compliance meeting in early August, directing PV manufacturers to strengthen cost accounting, build internal compliance systems and refrain from cut-throat price wars. Leading producers were tasked with establishing pricing benchmarks, while CPIA was instructed to drive standard adoption and curb illegal practices such as below-cost dumping. Market participants view this meeting as a critical step in turning the cost framework into an active regulatory mechanism.

At a joint industry standards briefing in early July hosted by MIIT, key government authorities, standardization bodies and industry stakeholders introduced finalized mandatory national energy consumption and efficiency standards covering polysilicon, wafers, modules and inverters. Featuring a three-tiered efficiency framework, these technical benchmarks serve as a primary policy tool to accelerate the phase-out of inefficient, energy-intensive production capacity.

Market Reactions and Implications

These regulatory developments have had immediate impact on both futures and spot markets, though skepticism remains among industry participants.

As of Aug. 10, settlement prices for Guangzhou Futures Exchange polysilicon contracts with delivery between August 2026 and July 2027 ranged from 36.665 yuan ($5.40)/kg to 40.810 yuan/kg. The 12-contract average settlement price rose 2.72% week over week to 39.063 yuan/kg, up from 38.030 yuan/kg.

A major polysilicon producer source told OPIS that most manufacturers suspended spot quotations following SAMR’s price compliance meeting to re-evaluate market dynamics and pricing strategies. Another market participant noted that despite the time needed to establish cost benchmarks, producers are already signaling price defenses, with newly signed sales orders this week expected to edge slightly higher.

Nevertheless, market sources have questioned the initiative’s operational viability and sustainability. One source highlighted transparent cost disclosure as the critical hurdle, noting that the mutual peer reporting initiated by the joint move is unlikely to take place until market prices rise above full production costs for all manufacturers.

Another source cast doubt on manufacturers achieving full-cost sales in the third or fourth quarters, warning that administratively driven price hikes harm downstream sectors and the broader supply chain. Downstream price acceptance by end-user investors remains the primary constraint on upstream polysilicon prices.

The source further noted that a key supporting argument for this view is that short-term policy focus in China has shifted away from expanding new solar installation capacity due to grid integration limits. “Excessive installed capacity only underscores the shortfall in actual power generation. Last year, solar accounted for over 30% of China’s total installed energy capacity, yet generated less than 14% of national electricity,” the source added, noting that end-user developers have increasingly abandoned investments in solar assets over the past year or two.

Yet another source highlighted the possibility that polysilicon inventory could accumulate once again under the current guidance framework. “Unlike previous interventions, this round does not mention coordinating utilization rates across the industry. Given the current policy backdrop, top manufacturers may actually boost their utilization rates—because higher utilization lowers their overall unit costs, allowing them to offer lower prices than competitors and secure greater shipment volumes and market eligibility,” the source added.

—Reporting by Summer Zhang, szhang@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com