In part one, we discussed investing in silicon suppliers, with respect to large companies that supply silicon--as a large part of their business--to the solar manufacturing industry.
This week, as promised, we'll take a look at some of the new silicon suppliers that have entered and will be entering the market, as well as the solar companies that are bringing part of the silicon supply chain in-house.
We'll get there by first diving into a Trina Solar Limited (NYSE: TSL) story that broke just yesterday.
Trina Nixes Poly Plant
Yesterday, before the market even opened, Trina announced the cancellation of a plan to build a $1 billion polysilicon production plant.
In a solar environment with a lingering silicon shortage, I naturally thought this was bad news. But to my surprise the shares were actually trading up in premarket, and then went on to touch a three-month high.
Here's why.
The plant wasn't cancelled for a lack of funding or sagging business. Instead, the company sited a "favorable change in the polysilicon environment" which has led it to "believe it has greater access to polysilicon feedstock to support its growth objectives."
The Street took that as a good sign. And taking into consideration Trina announced an eight-year contract to buy (rather than produce) polysilicon earlier this month, shares went on to gain 9%.
The cancelled plant was expected to have a capacity of 10,000 tons per year, which leads us naturally to our next topic.
Tons of Silicon from New Suppliers
Last week I hinted at vertical integration from panel manufacturers trying to bring silicon production in-house.
Like clockwork, Arise Technologies Corporation (TSX: APV) announced intentions to establish a high-purity silicon plant in Canada in 2011, with an eventual output rate of 10,000 metric tons per year--the same amount Trina was planning on producing from a company with less than one tenth the share price.
That's in addition to the company's Waterloo, Ontario plant, which has a target capacity of 50 tons per year beginning in 2009, going to 400 tons in 2010.
Arise will use the new silicon output to supply their growing solar cell production facility in Germany and to sell to other companies.
LDK Solar (NYSE: LDK) is also expanding its presence in the polysilicon sector. A solar wafer manufacturer by its own admission, LDK has recently contracted with Fluor (NYSE: FLR) to build the world's largest polysilicon plant.
When complete, the plant will produce up to 15,000 tons of polysilicon per year. Construction began in fall 2007 and the first production line is expected to be finished by the end of this year. The remaining two lines will be finished by summer 2009.
This is a fairly important announcement. An annual capacity of 15,000 tons is on par with output estimates from the world's biggest polysilicon producers--Wacker Chemie (XETRA: WCH) and Hemlock--as far out as 2010.
Investing in New Polysilicon Suppliers
There are simply too many new entrants in this market to cover in one article, but I'll do my best to paint a clear picture of what's going on.
Hoku Scientific (NASDAQ: HOKU) has obviously been the most well-covered company operating in this space.
Last fall, information came my way predicting Hoku would produce 1,000 tons in 2009, doubling capacity to 2,000 tons in 2010.
At a conference in February, CEO Dustin Shindo indicated a capacity of 3,500 tons in 2009, ramping to 8,000 tons by mid-2010.
Now don't get me wrong, I like this company. And I think the share price will benefit nicely once they begin shipping polysilicon.
But per an announcement last week, Hoku's Idaho plant isn't scheduled to be completed until September 2009, which will make it tough to reach their 3,500 ton stated output for that year. So share price may stagnate for a while, but it will certainly be worth more than the current price under $9 when the plant comes online.
Other new suppliers worth taking note of, with their predicted 2008 capacity:
· DC Chemical (SEO: 010060), 1,000 tons
· M. Setek, 2,800 tons
· SolarWorld (XETRA: SWV), 1,500 tons
· Nitol, 500 tons
· Elkem, a division of Orkla (OSL: ORK), 1,667 tons
There are a few other companies, both domestic and abroad, that are entering this space as well.
The Alternative Energy Speculator has already banked 180% on one of these companies. And I plan on taking additional gains from the polysilicon supply side of things going forward.
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Call it like you see it,
Nick
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