REC shutting down Moses Lake production on Wednesday

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MOSES LAKE — Embattled polysilicon producer REC Silicon will end production at its Moses Lake facility on Wednesday, according to the company’s president and chief executive, Tore Torvund.

“We have already started to shut down production in Moses Lake, and that will occur by mid-next week,” Torvund said during the company’s first-quarter earnings presentation last Thursday. “We will keep the employees for another six weeks until we see what is the outcome of the trade war.”

If the U.S. and China do not reach an agreement that ends China’s 57 percent tariff on U.S.-made polysilicon, REC said it will lay off most of the company’s remaining 150 Moses Lake employees and mothball the facility at the end of June.

“We will regrettably have to do major layoffs in Moses Lake, which will definitely not only hurt REC but the community,” Torvund told investors and analysts during the earnings webcast. “But that is the only option that remains if we don’t get access to the Chinese market.”

China imposed the tariffs on U.S. polysilicon, used to make solar panels, after the U.S. imposed tariffs on Chinese solar panels. The tariffs effectively prevented REC from selling its product into the Chinese market, which at the time produced about 90 percent of the world’s solar panels.

At full capacity, REC can produce polysilicon for roughly $8 per kilogram, while the average Chinese polysilicon price hovers between $10-$11 per kilo. Because the Moses Lake facility is running at 25 percent capacity, it costs around $13.50 to produce a kilo of solar grade polysilicon — far too expensive for the Chinese market.

Once the Chinese tariffs fall, Torvund said REC could have the Moses Lake facility up and running at full capacity in “about six months” and it would cost about $15-$20 million to keep the plant maintained.

REC reported a loss of about $4.7 million on revenues of $45 million for the first three months of 2019. While the company has increased sales of polysilicon made in Moses Lake, reducing its inventories by nearly 500 metric tons (a metric ton is 1,000 kilograms, around 2,200 pounds), Torvund said the world price for solar grade polysilicon keeps falling.

However, while the company’s production facility in Butte, Montana, which produces silicon gas for the electronics market, continues to be profitable, high spot electricity prices in Montana forced the company to curtail production earlier this year.

“This is not a satisfactory situation financially,” Torvund said, adding the company will rely on Butte operations to keep itself going until the situation in Moses Lake sorts itself out.

Francine Sullivan, REC’s vice president of marketing, said President Donald J. Trump’s recent imposition of tariffs on Chinese goods was a necessary step to keep pressure on Beijing after Chinese trade negotiators backtracked on a number of trade matters the two countries had already agreed upon.

“This kind of brinksmanship is necessary in politics,” Sullivan said. “There is strong bipartisan support for a crackdown on China, and strong international support for that as well.”

Sullivan said U.S. trade negotiators have also come to understand how important preserving and supporting U.S. industry is. REC’s Butte facility is “the only silane supplier in North America,” Sullivan said, and a number of senior U.S. leaders are beginning to realize that preserving not just companies but entire industrial supply chains is important for the company’s economy and security.

She is optimistic that a deal will be reached, and believes REC’s fate is “a priority for the U.S. government.”

Torvund said the company is also looking to alternatives to China and solar panels for its Moses Lake product, such as anodes for batteries. However, silicon in batteries is still being researched, and some significant technical problems must be solved before any technology becomes commercial applicable.

He also noted that few Chinese polysilicon producers are making a profit in the current polysilicon market. He believes if the company can hold out, REC is a low-cost producer that can make a profit even in a world glutted with silicon.

“No one in the value chain is making money at today’s prices,” he said. “There’s still an oversupply, prices are rising a little bit, but this market is not sustainable.”

Shares of REC fell 1.24 percent on the Oslo Børs, Norway’s stock exchange, to end trading on Friday at 68 øre (7.8 cents) per share, down from an opening high of 71 øre (8.1 cents). Norway’s currency is the krone, and there are 100 øre in 1 krone.

Charles H. Featherstone can be reached via email at cfeatherstone@columbiabasinherald.com.

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