China’s Polysilicon Market Recovery Gains Momentum in Q3
China’s polysilicon market entered a new phase in the third quarter, falling to its lowest level for the year in July before gradually recovering in August and reaching its highest since the second quarter in September. Market participants attributed the rebound largely to new cost-accounting and energy-efficiency rules, industry initiatives to strengthen price discipline, and expectations of production cuts.
However, the recovery remains constrained by substantial oversupply, bloated inventories and weak end-user demand. With some manufacturers resuming production, the extent to which planned Q4 cuts will tighten the market remains uncertain.
Prices Bottom as Supply Rises; Regulatory Impact Uncertain
The China Mono Premium — OPIS’s assessment for mono-grade polysilicon used in N-type ingot production — fell to a year-to-date low of 31.886 yuan ($4.73)/kg in late July, down 40.2% from its year-to-date peak in early January.
The decline was driven by persistent oversupply and weak downstream demand, with prices facing further pressure as production ramped up in July. Southwestern China’s seasonal high-water period provided abundant, low-cost hydropower, allowing major polysilicon production bases to maintain high output despite already elevated inventory levels.
Expectations that China’s newly introduced energy-consumption standards will accelerate capacity rationalization provided limited immediate support. Released at the end of June and effective Jan. 1, 2027, the three mandatory national standards cover energy consumption and efficiency across polysilicon, wafers, modules and inverters.
Market participants generally expect the standards to accelerate the exit of inefficient capacity, with some estimates suggesting that up to 30% of existing polysilicon capacity could eventually be affected. However, one source noted that the standards largely formalize a market-driven process already underway, as inefficient producers are already under significant financial pressure.
Another source said that even if one-third of existing capacity is eliminated, China would still retain around 2 million metric tons per year of capacity, theoretically enough to support roughly 900 gigawatts of annual module production. Structural oversupply would therefore remain.
The regulatory framework became more concrete in late July. On July 27, the China Photovoltaic Industry Association or CPIA, under the guidance of the State Administration for Market Regulation and the Ministry of Industry and Information Technology, released the General Principles for the Cost Accounting Model of the Photovoltaic Industry.
The framework establishes unified cost scopes, coefficients and methodologies across polysilicon, wafers, cells and modules, providing a common basis for cost analysis and price benchmarking.
A high-level price compliance meeting on July 31 — attended by various regulators, CPIA and 27 major PV manufacturers —signaled a transition from voluntary industry self-discipline toward stricter oversight and clearer compliance standards regarding cost accounting and price practices. Although the session introduced no explicit price controls, market participants viewed it as an initial step toward stronger enforcement.
The meeting did not trigger an immediate price increase. Instead, market sources indicated that many polysilicon producers suspended quotations to recalculate costs under the new guidelines, while downstream buyers resisted higher prices due to weak end-market demand. Consequently, market prices stayed largely flat for roughly two weeks.
Prices Recover; Downstream Resistance Remains
On Aug. 7, eight major polysilicon producers representing more than 90% of China’s capacity issued a joint initiative pledging to calculate cash, production and full costs based on the CPIA framework and stop selling below full cost. Compliance was to be supported by supervisory inspections and peer reporting to industry bodies, while signatories committed to phasing out inefficient and energy-intensive capacity under the new national standards.
The meeting led to an immediate upward adjustment in prices. The following week, the China Mono Premium recorded its first increase of 2026, rising 0.7% week on week to 32.100 yuan/kg, according to the OPIS Global Solar Markets Report released Aug. 11. However, industry sources said the modest increase largely reflected expectations surrounding new orders and market sentiment rather than a broad-based recovery in underlying demand.
The recovery became more sustained through September. A meeting early that month involving CPIA and major polysilicon producers generated expectations that the industry could target 2026 output of around 1.0 million mt to 1.1 million mt, with a similar level considered for 2027. Market sources also reported plans to reduce or suspend around 500,000 mt of capacity across Sichuan, Yunnan and Qinghai during Q4.
Separate discussions reportedly involved 10 major producers and a proposed framework limiting individual output to around 35% of nominal capacity, equivalent to combined annual capacity of about 1.028 million mt, or roughly 85,700 mt/month. The framework reportedly includes regular monitoring of production, sales and prices, potentially with third-party verification.
Neither CPIA nor relevant regulators has publicly confirmed the reported targets or their legal status, though most sources contacted by OPIS confirmed the existence of the meetings and broadly similar discussions. Market participants also cautioned that some planned cuts are seasonal or were already scheduled, making it difficult to isolate the additional impact of the reported production-control initiative.
By Sept. 29, the China Mono Premium had reached 38.786 yuan/kg, or 0.081 yuan per watt peak, its highest level since Q2 and 21.6% above the July low.
Nevertheless, market sources said that downstream buyers have yet to broadly accept producer offers around 43 yuan/kg, which manufacturers view as closer to full production costs. Transactions above 40 yuan/kg have remained limited and have mainly involved downstream production tied to export orders and other special arrangements, such as producers selling polysilicon to long-term customers and subsequently purchasing wafers from those customers.
One source said establishing a new price equilibrium could take considerable time because full-cost polysilicon prices would require corresponding increases in downstream product values. With limited room for further increases in wafer, cell and module prices, the gap between producer offers above 40 yuan/kg and actual transactions below 40 yuan/kg could persist.
Mixed Q4 Outlook
Although China’s polysilicon market enters Q4 with stronger policy support, greater producer price discipline and expectations of production cuts, market participants remain cautious about whether prices can return to full-cost levels and whether excess capacity can be effectively cleared.
“Although regulators and industry stakeholders have continued to work toward capacity rationalization and a return to more reasonable pricing, the effectiveness of these efforts will ultimately depend on how they are implemented,” one source said, adding that it remains to be seen whether the measures can offset weak downstream demand and persistent oversupply.
Production plans also remain mixed. According to research by Dow Jones Energy, a major producer at a polysilicon base in Inner Mongolia with around 200,000 mt/year of nominal capacity completed maintenance in September and was preparing to increase production. A base in Gansu with around 100,000 mt/year of capacity is also expected to complete a technical upgrade and resume production in Q4, although its expected output and utilization remain unclear.
At the same time, several manufacturers have planned production cuts. According to market sources, a polysilicon base in southwestern China with more than 300,000 mt/year of nominal capacity has planned significant output reductions and has not ruled out a complete shutdown in Q4, as it did last year. Some fluidized bed reactor granular polysilicon lines in Sichuan and Jiangsu are also reportedly being partially converted to silicon-carbon anode materials, which would directly reduce polysilicon output and effective capacity.
Looking ahead, market participants expect monthly polysilicon output to fall to around 80,000 mt from December through February as production cuts and Chinese New Year shutdowns take effect. One source said this level would be broadly consistent with both the reported production-control target and the minimum operating level that current producers can sustain.
However, elevated inventories and substantial idle capacity could limit the impact of these cuts. One market source said production reductions would need to be significant and sustained before materially tightening the market. Even if the reported measures are implemented, the resulting reduction would largely bring utilization back toward levels seen in the first half of the year. “With inventories still above 500,000 mt, the cuts alone may not be sufficient to stimulate significant downstream procurement,” the source said.
This view is broadly consistent with data presented by Yan Dazhou, director of the National Engineering Laboratory for Polysilicon Preparation Technology, at a CPIA seminar in July. According to his presentation, China’s polysilicon nameplate capacity is expected to reach 3.5 million mt in 2026, with first-half production standing at around 540,000 mt, indicating utilization of approximately 33.8%. Industry inventories were estimated at around 500,000 mt, while market prices had fallen below the cash production costs of most manufacturers.
“Although the polysilicon market has moved away from the July low, a sustained recovery will require more than regulatory support. Meaningful inventory reduction, lasting supply discipline and sufficient downstream price increases will ultimately determine whether the current rebound develops into a durable price recovery,” one market observer said.
—Reporting by Summer Zhang, summer.zhang@dowjones.com; Editing by Mei-Hwen Wong, mei-hwen.wong@dowjones.com