Price dynamics and market relations in solar photovoltaic silicon feedstock trades

The paper intends to provide empirical evidence on silicon feedstock price dynamics to assess the way that major photovoltaic countries-the United States of America, Germany, Japan and South Korea-are related in trade competition to China. This issue is explored by addressing the following questions: How have feedstock prices transmitted between geographically separate and contractually different markets? How have different country markets been positioned in feedstock trades by contract? What causes the failure of full price transmission or perfect market integration? Based on a careful examination of China's status in feedstock trades, the price series by country and by contract are measured with the series by country and trade pattern over a reasonable period from 2007 to 2010. The dynamic price relations are analyzed with causality, cointegration and equilibrium tests. The results exhibit dominant but differential market relations by contract. The speed and extent of price transmission are substantially higher in spot trades. The failure of perfect market equilibrium is due to the material heterogeneity and contract arrangements. These findings imply that sufficient attention should be paid to the way that different photovoltaic silicon feedstock countries have competed and the factors that work to explain price inefficiency, but not price manipulations.