(Yicai) April 11 -- GCL Technology has signed another long-term supply deal with solar behemoth Longi Green Energy Technology for more silicon materials. Improved technologies lower costs of the Chinese photovoltaic materials firm and ensure it maintains competitive advantage despite the price of silicon dropping to near cost price for many producers, Shanghai Securities News reported today.

Longi will purchase 425,000 tons of N-type granular silicon from GCL by the end of 2026, Suzhou-based GCL said on April 3, citing the deal signed by the two parties. The order is worth CNY23.3 billion (USD3.2 billion) based on the latest price of CNY55,000 (USD7,600) per ton provided by the Silicon Industry of China Nonferrous Metals Industry Association.

The new order is for granular silicon, whereas previous orders were for silicon produced by the modified Siemens method, said Lan Tianshi, co-chief executive officer of GCL. Just a few years ago in 2020, granular silicon, which is made from silane in a fluidized bed, accounted for less than 3 percent of the silicon on the market, while the rest was silicon produced by the modified Siemens method.

GCL’s breakthrough in making granular silicon is keeping the company at the front of the pack. Its production of granular silicon surged four-and-a-half times last year from 2022 to 203,600 tons, resulting in a 27 percent drop in the cost of production, and the cost continues to fall. In the fourth quarter production costs at its Baotou base were as low as CNY35.90 (USD5) per kilogram.

GCL can produce around 420,000 tons of silicon materials per year and this will expand to over 500,000 tons a year, said Lan. GCL will become a major supplier in the silicon market, and will seek more tie-ups with leading firms.

Survival of the Fittest

For suppliers with less advanced production methods, though, the future looks bleak. It costs leading enterprises between CNY30,000 (USD4,150) and CNY50,000 to produce a ton of silicon but for smaller companies, startups and old production lines it costs at least CNY50,000 per ton, Eastmoney Securities said in a research report.

The market price of silicon plunged last year to near cost price, so some planned capacity expansion projects may not happen this year, the report said. Only industry leaders with low production costs may expand capacity as scheduled.

Out–of-date producers are being eliminated, said a source from a silicon materials company. Only big firms with industrial strengths and economies of scale are likely to get through this difficult period.

Editor: Kim Taylor