First Solar tellurium contract could leave spot market short on supply, boost prices

Large-scale tellurium supply commitments to United States-based solar panel manufacturer First Solar could bolster prices for the metal,with some market participants expecting these undertakings to leave the market short a significant amount of spot supply.

Canada-based 5N Plus last week announced a three-year contract to supply First Solar with tellurium through to 2021.

Although the Canadian firm declined to comment on how much volume it will supply to First Solar over that period,industry sources believe the figure to be around 160-180 tonnes of tellurium per year, amounting to approximately 480-540 tonnes over the full duration of the contract.

As a result, market participants have expressed concerns over supply with a significant volume of tellurium- around 30% of total worldwide production per year – now effectively removed from the market for the next three years.

Annual production of tellurium is between 600 and 650 tonnes, according to industry sources.

“There is definitely pressure on the market as one of the major producers has most of its material tied up in long-term contracts and is currently not offering on the spot market,” a trader told Metal Bulletin.

A second trader expressed similar sentiment, noting he was unable to find tellurium on the spot market in Europe.

“I am being offered material above $95 [per kg] from China,” the second trader said.“The European producers are not offering and traders also don’t have material.”

Metal Bulletin’s free market tellurium price stood at $90-100 per kg on Wednesday May 9, unchanged from last Friday, but up 25% from $70-82 per kg on May 2.

Market participants attributed the price increase mainly to a supply shortage as a result of the solar industry’s demand.

“First Solar’s demand has increased because it is planning to increase production of solar panels and produce panels triple the size of the original panels.Producers can’t suddenly raise production, so this means less tellurium on the spot market,” the first trader added.

In an earnings call on April 26, First Solar announced the construction of a new Series 6 module manufacturing facility in the US state of Ohio,which would increase its domestic production capacity.

“The decision is in response to the continued strong demand for our Series 6 product and allows us to better address the growing US solar market,”First Solar chief executive officer and director Mark Widmar said during the earnings call.

“This greenfield factory will have a nameplate capacity of 1.2 gigawatts and will be built essentially next to our current manufacturing operations in Ohio,” Widmar added.

First Solar indicated that additional facility would bring the total planned Series 6 production in the United States to 1.8 gigawatts,further solidifying its position as the largest US solar module manufacturer.

Global solar photovoltaic installations are expected to exceed 104 gigawatts in 2018, compared with 98.9 gigawatts installed in 2017,according to research consultancy Wood Mackenzie.

First Solar declined to comment on its expected tellurium consumption.

While some market participants suggested tightened supply as a result of the significant volume commitment would boost prices,others believed these supply concerns were overblown.

“5N Plus has had long-term contracts with First Solar since 2007, and the current contract seems to be a renewal of those contracts and is already priced in,”a supplier explained to Metal Bulletin.

A second supplier cast similar doubts over strengthening prices.

“I am not hearing the higher offers and I am able to buy material much cheaper,” he said.

This article reprinted from Metal Bulletin.