Lessons from the polysilicon plant accidents at Daqo and GCL

By Johannes Bernreuter, Head of Bernreuter Research

Within just three weeks, two Chinese polysilicon manufacturers have experienced accidents at their factories.

According to research notes of Roth Capital Partners quoted by pv magazine, a small fire occurred at the polysilicon plant of Daqo New Energy on July 1, which has affected a production capacity of 6,000 metric tons (MT).

On July 19 a series of four flash explosions, followed by a fifth on July 20, ripped through the distillation unit of the 48,000 MT polysilicon plant of Xinjiang GCL, an indirect subsidiary of GCL-Poly Energy Holdings. Roth Capital indicates that overpressure in the distillation system and boron removal filter may have caused leakage of trichlorosilane, which can react explosively with moisture in the air. The factory started up in October 2018.

Although both manufacturers are public companies – GCL-Poly is listed on the Stock Exchange of Hong Kong (SEHK: 3800) and Daqo on the New York Stock Exchange (NYSE: DQ) – neither has itself reported the respective event.

Both factories are located in the Xinjiang Uygur autonomous region in northwestern China, and both accidents happened during maintenance works. This is hardly a pure coincidence.

First, it appears to be difficult to attract enough highly qualified staff to the remote area of Xinjiang in the far northwest of China. Second, maintenance of polysilicon production equipment is a delicate task, which requires great diligence and strict observance of safety rules. In 2014 an explosion at the Yokkaichi Plant of Japanese polysilicon manufacturer Mitsubishi Materials Corporation killed five people and injured another twelve when a heat exchanger was dismantled for cleaning.

While the incident at Daqo is expected to halt production of the 6,000 MT unit for one month or two, estimates vary on how long the shutdown of Xinjiang GCL’s 48,000 MT plant will take. Bloomberg quotes a source familiar with the matter as saying that GCL will likely restart production only one month after the explosions whereas Roth Capital estimates the factory could be offline for up to nine months until authorities have investigated the case.

If GCL actually resumes production without thoroughly examining the cause of the explosions, it will lay the seed for further issues. The Chinese polysilicon industry should learn its lesson from the accidents at Daqo and GCL: Safety first!