China's ban on scrap polysilicon imports divides solar industry

China's recently imposed ban on imports of scrap polysilicon – a waste material that can be used to make solar wafers and panels – has closed off a market for overseas chipmakers but may prove a boon to domestic firms, according to industry insiders.

The ban, which came into effect at the start of last month, is in accordance with China's solid waste pollution laws, according to a notice posted earlier this month on the Ministry of Environmental Protection's website.

When scrap polysilicon is reused to make solar panels and wafers, it comes in contact with heavy chemicals that could be harmful to the environment, the ministry said. The ban does not apply to pure, or virgin, polysilicon.

However, industry insiders suggested the move could be the latest example of the Chinese government rolling out protectionist measures to limit competition for its emerging clean tech industries.

Low-grade silicon that is deemed unsuitable for semiconductors is typically sold by chipmakers to solar wafer manufacturers and has proved particularly popular with smaller Chinese solar equipment firms.

KK Chan, chief executive of Nature Elements Capital, a Beijing-based private equity firm that invests in the renewable energy and clean tech sectors, told the Reuters news agency that the desire to protect Chinese polysilicon manufacturers may have played a part in the decision.

"In a way, the ruling was designed to protect [China's] very young polysilicon industry," he said. "The sector needs all the help it can get, given a supply glut of the material."

Eurasia Group, a global political risk research and consulting firm, similarly argued that the ban "likely portends a broader trend: Beijing will seek to expand protections for domestic suppliers in clean technology industries in the years ahead as these producers become increasingly competitive".

In a report to clients last week, the group also noted that "[China's] leadership will be wary of igniting a protectionist debate due to the large export markets for many of these technologies".

A representative from Canada's Targray Technology International – which supplies polysilicon to solar firms in China – told Dow Jones that shipments of both pure and scrap varieties of the material were held up at Chinese customs.

It is believed that customs officials have taken the measure in order to sort waste polysilicon from the pure form.

However, others within the industry sought to downplay the implications of the ban. Rick Doornbos, chief executive of US-based Hemlock Semiconductor – one of the world's largest polysilicon producers – told Dow Jones news service last week that the restriction applies only to "tops and tails from silicon ingot production, broken silicon wafers, and the small fraction of polysilicon production that does not meet quality specifications".

He added that the amount of scrap polysilicon affected by the new rule is only used in about 10 per cent of Chinese solar cell production. The proportion is relatively small and was already on the decline prior to the ban, said Doornbos.