Skip to content Skip to Search
Skip navigation

Gulf spots opening in China’s polysilicon boom-bust cycle

Polysilicon is used for the production of solar panels and the Gulf could complement China in making them in-country with local materials Reuters
Polysilicon is used for the production of solar panels and the Gulf could complement China in making them in-country with local materials
  • Polysilicon price has fallen steeply
  • Central to solar PV panels
  • Gulf states aim to produce locally

Solar power capacity across the Middle East region trebled from 3 gigawatts to 9GW between 2020 and 2023, according to the trade association Energy Industries Council. 

In the Gulf alone, a further 40GW of photovoltaic (PV) solar power are scheduled for installation by 2030, the International Renewable Energy Agency (Irena), an intergovernmental organisation, says. 

For this to be achieved more solar panels are going to be required. And lots of polysilicon – a central ingredient in PV solar panels.

Polysilicon is made using the Siemens Process, a high-tech method requiring expertise and plenty of electricity. As the name suggests, the feedstock is silicon, usually extracted from sand.

The Gulf has plenty of sand and cheap power, and Gulf countries are looking to establish entire industrial supply chains locally. 

A handful of vertically integrated Chinese companies dominate polysilicon production. Chinese capacity stood at around 2.1 million tonnes per annum at the end of 2023, out of a global total of 2.3 million tpa, EnergyTrend data shows.

This capacity now far exceeds demand, explaining a recent price crash – which itself came after a price surge resulting from polysilicon shortages in 2021-2022.

Three Chinese manufacturers – Tongwei, GCL Tech and TBEA – account for around half of global capacity between them.

Tongwei works in the Gulf through a series of local partnerships, such as that with PowernSun in Dubai. 

In June GCL Tech and Mubadala – the $300 billion Abu Dhabi sovereign wealth fund – announced plans to build a polysilicon plant in the UAE. 

GCL has also been working with the Saudi authorities on plans for a production facility, Bloomberg reported.

Oman is the most advanced, however. China’s Shuangliang is working with United Solar Polysilicon on a 100,000 tpa, $1.3 billion production facility in the Sohar free zone. 

This is likely to open early in 2025 and become the first such facility in the region.

Polysilicon – polycrystalline silicon – is dervied from silicon, usually sand, using the electricity-intensive Siemens ProcessAlamy via Reuters
Polysilicon – polycrystalline silicon – is dervied from silicon, usually sand, using the electricity-intensive Siemens Process

The Gulf also has a good relationship with the US and Europe, which together account for around a fifth of the global solar installation market, says Johannes Bernreuter, head of consultancy Bernreuter Research. 

The US market is also expanding rapidly, thanks to the Inflation Reduction Act giving a major boost to solar deployment.

Accessing that market, however, is becoming increasingly difficult for Chinese companies. This is because much Chinese polysilicon production is in the province of Xinjiang, where the US and others say that Muslim Uighurs are used as forced labour. 

This has led to the Biden administration putting a ban on imports made in the province and those that use materials sourced from there.

In 2027 the EU is also due to introduce its own forced labour law, which is likely to block imports.

“Chinese companies don’t want to lose the European and US markets, so they are heading for other locations,” Bernreuter says. 

Polysilicon manufacturers in the GCC will be able to point to a production process – from mining to final product – all located outside China.  

“If you were about to open a new polysilicon plant in China right now, I’d say, well, good luck,” Alex Barrows, UK-based head of PV Economics and Sustainability at commodity analyst CRU, tells AGBI.

“But in Oman, or elsewhere in the Gulf, there is still the potential to make money from that non-China premium.”

Under the plans, Gulf states’ polysilicon production capacity will increase rapidly from the present level of zero. Output is likely to begin as early as the first half of next year.

The schemes also chime with the GCC states’ ambitions for economic diversification. These focus on localisation of supply chains – meaning those solar PV panels and modules will be made in-country from local materials.

Yet, while making polysilicon has the potential to benefit both aspirant regional manufacturers and Chinese investors, the market itself is a tough one.

The price of polysilicon manufactured in China has collapsed. Prices now average only around $5.90 per kg. They were around $8 per kg at the start of the year and $22 per kg in 2023, according to Bloomberg.

The Gulf’s new investments therefore come at a low point in the notorious polysilicon “pork cycle” – a two-to-three year repetition of boom and bust. 

“We’re definitely in the ‘bust’ part of the boom and bust cycle,” says CRU’s Barrows.

However, while the price of China-sourced polysilicon may have crashed, the price of the material sourced from outside the People’s Republic remains higher and far more stable – at around $20 per kg. 

Regional investors are therefore keen to take a slice of this premium, while also pushing forward diversification and energy transition plans.

As Bernreuter Research says, even when there is current overcapacity, “It may be that everyone wants to be the one to benefit from a shortage.”

Latest articles

Nio electric cars. Abu Dhabi's CYVN has invested in the company Video length: 04:21

Why Gulf governments keep investing in EVs

Oil-based economies need a Plan B – something they can turn to when crude markets are troubled. Gulf governments are using electric vehicles as that hedge, according to Kevin Chalhoub, CEO of EV Lab. “When oil won’t go well, probably electric cars will go well,” he says. “It’s a very exciting strategy. The Middle East […]

September 19, 2023, New York City, New York: (NEW) President of Nigeria, Bola Ahmed Tinubu, Speaks at UN 78th GA in New York.

Nigeria nears trade deal with Saudi Arabia

Nigeria is looking to finalise a $5 billion bilateral trade facility with Saudi Arabia, it said, following a meeting between its president, Bola Tinubu, and Crown Prince Mohammed bin Salman in Riyadh. The pair met on the sidelines of the joint Arab-Islamic Summit, which was convened to discuss the ongoing Israel-Hamas conflict. Following the meeting, […]

Grover was recruited as CEO in 2020 to lead Roshn’s construction of 400,000 homes as part of Vision 2030

Former CEO sues Roshn for $100m over ‘unpaid bonuses’

The former CEO of Roshn, David Grover, is suing the Saudi property developer for more than $100 million, claiming unpaid bonuses and wrongful termination.  Grover, who lost the initial stage of his case against the state-owned company in October, has appealed to a higher court in Riyadh, the Financial Times reports. Grover alleges that Roshn […]

Saudi car dealer Samaco Motors to go public in 2025

Saudi car dealer Samaco Motors to go public in 2025

Saudi Arabia’s Samaco Motors, the exclusive dealer of European cars including Audi, Bentley, Porsche, Lamborghini and Volkswagen, has revealed plans to go public on the Saudi market next year. The company’s CEO Mohammed Sharbatly revealed the news to Al-Eqtisadiah newspaper. Speaking on the sidelines of the launch of Porsche’s new electric vehicles in Riyadh, Sharbatly said […]