LDK Defends its Inventory Accounting

"Are you planning to release [the] auditor report officially someday?" the conference attendee asked.He didn’t answer directly, instead saying the report is controlled, not by LDK, but by the independent auditor.

"Of course, when they do the investigation, they have something confidential," he said. "It’s not controlled by us because this is not the company’s information. I have not seen the details, because it is not [for] the company to decide because this is a separate, independent -- totally independent -- investigation."

Stocking Up

Also during the fourth-quarter earnings conference call, analysts said that the inventory figures didn’t match up with their calculations, according to the Associated Press.

At the time, Lai said the inventory figures included other materials, including slurry, wires and packaging materials, aside from silicon. In addition, the company said that in had 1,600 tons of silicon "in possession," but only 856 tons in its warehouse.

According to the investor report, the remaining 752 tons -- valued at $121 million -- are in transit. During a conference call in October, Lai said LDK books silicon when it is bought, even if it is still being transported to its warehouse, likening it to customers owning products they buy at a store, even if they haven’t yet brought the purchases home.

Also at the Morgan Stanley conference, Peng said it has secured more than 80 percent of the silicon it needs for the coming year at a fixed price.

"This is a big advantage for LDK," he said.

While he acknowledged getting the other 20 percent is a challenge in the current silicon shortage, Peng said LDK has framework contracts for 800 tons of new silicon from producers in China, for which it’s made prepayments, as well as framework contracts for scrap silicon from the semiconductor industry. He added the company also plans to buy some silicon on auction and to buy some scrap silicon from the solar industry.

"Normally, we can get an extra 50 to 80 tons per month from these kinds of markets," he said. "We believe we can cover the 20 percent in the next few months."

According to DigiTimes, spot prices for high-purity silicon have grown more than 10 percent so far this year to between $450 and $470 per kilogram.

"On the spot market, the pricing is crazy," he said. "Silicon in the moment is the highest in history. The silicon production cost normally is below $30. Of course, now in the market, you can easily find from $180, $200, $300 -- even more."

But long-term contract prices are in the $60 to $80 per kilogram range, he said, adding that he expects prices to drop below $30 per kilogram in the long run, cutting silicon costs from $2 per watt to between 25 cents and 30 cents per watt.

LDK’s planned 15,000-ton polysilicon plant could help mitigate the shortage, if it doesn’t end this year, as Frost & Sullivan forecasts.

The company expects to begin receiving equipment for the plant in the second quarter and to have construction on the reactor building start in March, he said. The plant is on track to be completed by the end of this year and to begin producing silicon in the first quarter of next year, he said.

"Everything we see, we are happy about the schedule," he said. "We believe we will do completion for the capacity [of] 6,000 tons [of] production [at the] end of this year. So next year we will produce about 5,000 to 7,000 tons of silicon."

And in spite of some predictions that the silicon shortage is ending, Peng said he isn’t concerned about an oversupply.