Some China-based solar firms hope to terminate long-term polysilicon supply contracts with international firms. The latter noted that it is quite difficult to do so because when the firms signed the contracts, there were material shortages in the market, and hence the contract terms tend to favor suppliers.

China-based solar makes hope to terminate the long-term supply contracts because their government is predicted to announce a preliminary result for its anti-dumping and anti-subsidy investigation against polysilicon firms in the US, EU, and South Korea in the first quarter of 2013. This means imported materials may be subject to punitive tariffs.

Solar makers in China stated that if the punitive tariffs are around 20-60% on imported materials, China-based firms will be unwilling and unable to pay even the lowest level of the rates, and hence international material suppliers need to make compromises on the contracts.

If China-based firms successfully terminate the contracts and turn to domestic material suppliers, prices and demand for domestic materials are likely to rise sharply.

International material suppliers noted that some contracts may include terms such as tariffs sharing if the rate changes, which can help China-based solar firms if imported materials are taxed.

Solar firms pointed out that the current spot price for polysilicon is around US$17-18/kg in China and the material price for most long-term supply contracts are around US$40-50/kg. If an additional 30% tax is added, it will become a strong incentive for China-based firms to terminate the supply contracts.