Chinese Government Investigates Polysilicon Imports

News are reporting that China is investigating the US and South Korean imports of polysilicon to the country. Majority buys their poly from the long-term contracts, which painfully slow, work their way down to spot market levels. Without cheap poly the best suited companies will have hard time to get back to profitability, as processing costs are based mostly on raw material cost reductions. The largest impact would be on Yingli. Yingli buys a lot of poly from OCI, one of companies under investigation. The legal obligation to buy poly from long-term contracts may be played out, forcing higher pricing. Although the market price formula is the one, which dictates negotiations for price change, it is unknown how tariff would impact the process.  Perhaps the tariffs could be use as an avenue to dissolve the arrangements, since it is new element not covered by the agreements? Existence of spot market would ensure little changes in pricing, companies would in turn bought spot instead contracted poly.

The unwelcome element of any retaliation is the fragmentation and the desire for retribution. South Korea may not be necessarily an ally of China, but surely the entire region is seen as a potential offset to the demand cooling off in Europe. Any friction which would say pull Japan, India further into the mechanism of levies, would slow the progression and investment value of the solar industry. Something, which oil lobby would embrace with "I told you so"