The roller-coaster ride is best seen through the lens of polysilicon, the key material in solar panels. Prices fell more than 40% over the course of a few weeks starting in December, and then rebounded more than 50% in less than a month.

The volatility is rippling across the solar supply chain and pressuring manufacturing giants even as they plan expansions to provide the world with more clean energy needed to stave off the impacts of climate change. 

“The solar value chain has undergone one of the most volatile two months in history, with major product prices bumping up and down by wide margins,” said Tony Fei, an analyst with BOCI Research. The firm said the volatility was the result of “extreme inter-segment competition for profits”.

Polysilicon prices began falling toward the end of last year as new plants came online. Major producers reacted in recent weeks by reducing sales and building up inventories to try to support prices. Low trading volume around the Lunar New Year holiday added to the volatility.

The ups and downs so far haven’t had an impact on overall solar demand, which grew by a record amount last year that is expected to be eclipsed this year. But it is causing multibillion-dollar solar giants to rapidly adjust pricing strategies as they whipsaw between seeking to protect profit margins and market share. 

Just in the past few weeks, top wafer manufacturers Longi Green Energy Technology and TCL Zhonghuan Renewable Energy Technology raised prices by nearly 20% in response to the rebounding cost of polysilicon. That led to top cell maker Tongwei boosting prices by as much as 8.5%.

“Volatility is expected to continue in coming months as polysilicon producers and their clients who manufacture wafers compete to gain advantage in a declining price environment,” said Alex Whitworth, a research director at consultancy Wood Mackenzie. 

Polysilicon prices are expected to eventually stabilise and begin sliding again as new production facilities come online. The recent swings have made polysilicon price reports from groups like the China Silicon Industry Association a closely watched industry beacon. The association will publish its next report on Wednesday. BM/DM