China often gets criticized by the West these days for adding too much capacity in emerging industries, and a perfect example is the solar energy sector. Not only has the country rapidly added huge amounts of new capacity for solar panel production, but also for the polysilicon that’s the main component used to make solar panels.
Now, it seems that Beijing is finally taking action to try and rectify the situation – by strongly “suggesting” that polysilicon producers cap their utilization rates at half, based on the latest comments from Daqo New Energy Corp. (DQ.US; 688303.SH), one of the nation’s leading producers. Here, we need to do a little reading between the lines since Daqo didn’t say outright it has been ordered to cut production.
But somewhat conveniently, the company said it managed to cut its utilization rate to 50% during the third quarter, citing “weak demand.”