REC Silicon chief hopeful about future

MOSES LAKE — REC Silicon President and Chief Executive Officer Tore Torvund is sad about the situation his company faces but is confident REC has a future.

In fact, Torvund, who has lived in Moses Lake for the last 10 years overseeing work at the company’s polysilicon facility, is so confident in REC’s future that he recently upped his stake in the company after REC shares lost more than 10 percent of their value following news the company would layoff about 40 percent of its Moses Lake employees.

“The share price fell, I felt it was an overreaction. I am the CEO of the company; when I buy stock, people have confidence. It gave a signal to shareholders,” Torvund said. “I am confident in the present and future. I didn’t, I would not have done it.”

But as for the three-year-long trade dispute with China that has forced the company to reduce polysilicon production to 25 percent of capacity and layoff nearly 500 workers, down to around 200 in Moses Lake, Torvund said the company is doing what it has to do to survive.

“We have lost hundreds of millions of dollars,” he said. “It’s a very sad story, really.”

That story began in 2011, when REC Silicon spent $1.7 billion upping the production capacity of the Moses Lake plant to around 20,000 metric tons per year — around 10 percent of total world output — making the company the fifth largest producer of polysilicon in the world.

Polysilicon is nearly pure silicon used in making solar power cells and semiconductor chips. Torvund said the Moses Lake plant creates purified silicon in a continuous process that heats silane gas — a silicon atom bonded to four hydrogen atoms. The nearly pure silicon is then cast into ingots and cut into wafers, from which solar cells are made.

“Our buyers are those who make the wafers,” Torvund said.

Currently, roughly 80 percent of wafer makers for solar cells are based in China, with the remainder scattered in Taiwan, South Korea and elsewhere.

“No one in the U.S. makes wafers,” he said.

The dispute with China began in 2011 when an Oregon-based company that made solar panels filed a complaint with the U.S. Department of Commerce about Chinese government subsidies for Chinese solar panel makers. The U.S. responded by imposing a 30 percent tariff on Chinese solar products, and the Chinese government responded in 2014 by imposing a 57 percent duty on U.S. made polysilicon.

“It started with the U.S., China retaliated,” Torvund said. “Since then, we’ve not gotten access to the Chinese market.”

While several companies, including South Korean electronics giant LG, have said they will start building solar panels in the United States following the imposition of tariffs, Torvund said that’s merely the assembly of panels. No one is planning on making wafers in the U.S. any time soon, if ever.

Which means that the 80,000 metric tons annual capacity of the U.S. polysilicon industry — roughly a third of world output — is chasing a tiny handful of customers, mostly in Taiwan, Torvund explained.

“Lots of polysilicon is made in the U.S. without any customers,” he said. “We can’t make anything in Moses Lake without any customers.”

The company has been able to hold on for as long as it has because its production is very efficient and very cheap, Torvund said. Without the tariffs, REC’s product is more than competitive even in China’s market.

The company also produces polysilicon in a Butte, Montana, facility, but that plant makes polysilicon for the semiconductor industry, and is currently unaffected by the dispute with China, the REC chief said.

According to REC Spokesperson Sharon Palmerton, the Moses Lake plant has been engineered to produce solar grade polysilicon and it would be too costly to retrofit the plant to produce semiconductor grade polysilicon.

Torvund is fairly stoic in his view of the situation. The trade dispute started during President Barack Obama’s tenure and it has continued under the administration of Donald Trump.

“If you have this kind of trade dispute, if you start, the other country will do the same,” he said. “It’s a classic way how trade disputes will play out.”

And the losses have changed Torvund, who is now focused on the grim reality of REC’s survival rather than a boundless future of growth and expansion.

“We have lost hundred of millions of dollars. Before that, we talked about new investment, but we didn’t do it. It’s hard to even consider it again,” he said.

“There might be winners in a trade war, but for those who are dependent on global trade, we are the losers,” he said.

And the winners in this dispute, Torvund said, are polysilicon companies in South Korea, which have captured an even greater share of the Chinese market. Which, Torvund notes, is a sobering reminder of the reality of global commerce.

“U.S. companies are not irreplaceable in a global economy,” he said.

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