Q-Cells and LDK Solar Bury The Hatchet
Give peace a chance, it can pay off, man.
German PV cell maker Q-Cells and LDK Solar, the Chinese maker of multicrystalline silicon wafers, have reached an agreement to continue their supply contract for solar wafers from 2009 to 2018.
In a joint statement, the two companies said that they had “resolved all differences of opinion.”
While the total amount of silicon wafers to be supplied by LDK has not changed — six gigawatts over a ten-year period – the Chinese company now has more time to deliver the multicrystalline silicon wafers, although at a discount.
The release says:
Q-Cells and LDK Solar have agreed to increase the flexibility of delivery schedule. Flexible pricing based on market levels and Q-Cells’ preferred customer status would apply for the entire remainder of the contract term.
Under the new supply schedule, Q-Cells will receive 20 percent of the original agreed volumes this year and another third in the 2010 and 2011 period.
As we wrote last month, up until the middle of this decade, the primary market for silicon, which is the basic material used for making both silicon-based PV cells and electronic chips, was the electronics industry. With the renewable energy boom, silicon suppliers began adjusting their production to meet the solar market. This pent-up demand for solar-grade silicon tightened supply and drove prices up. PV manufacturers like Q-Cells, eager to meet this demand, rushed to sign expensive long-term supply contracts with silicon wafer suppliers.
Amidst this price frenzy, in early 2008, Q-Cells made a prepayment to LDK of $244.5 million. At the time, Q-cells was likely relieved to have secured a long-term contract with LDK and thought the $200+ million pre-payment was worth it. After peaking, prices fell because of declining demand brought on by the economic crisis, as well as growing supply from silicon producers. Q-Cells seemed to have lobbied hard for a price cut.
So it seems like Q-Cells’ brinkmanship paid-off. It walks away with a discounted supply contract. LDK gets to keep the contract and has more time to deliver the goods.
Photo Credit: Danny Hammontree via Flickr
