OSLO, Norway — Despite last year’s Phase 1 trade agreement with China, REC Silicon President and CEO Tore Torvund said China has not yet lowered tariffs on the company’s main product, solar-grade silicon.

Speaking early Thursday to announce the company’s second quarter 2020 earnings, Torvund said REC has shipped “small quantities” of solar-grade silicon from its stockpiles in Moses Lake to Chinese customers only to be told the Chinese government is still charging a 57 percent tariff on its product.

“We’ve tested it several times,” Torvund said.

Because of that, Torvund said the company will delay restarting production at its Moses Lake facility and would “require additional capital” to resume production once the facility is able to restart.

Torvund also said the company received an $8.3 million loan from the Small Business Administration as part of the Paycheck Protection Program.

REC has reported the situation with China to the U.S. Trade Representative’s office, Torvund said, and has been told that Chinese trade officials say that because their government has two years to lower the tariffs on solar grade polysilicon, they are “not yet in breach” of the agreement.

The company produces silicon gas at both its Butte, Montana, and Moses Lake facilities, as well as silicon granules used to make wafers and modules for solar panels. It uses a patented process to produce solar-grade silicon that makes it one of the lowest-cost producers in the world. It was blocked from the Chinese market in 2013 as part of a tariff dispute between the U.S. and China over solar panels.

Torvund said that in the short term, the company is looking to get access again to the Chinese market, where over 90 percent of the world’s solar panels are made.

However, in the longer term, the company is also looking at creating both a “value chain” for solar-grade polysilicon outside of China as well as alternate uses for the company’s products, such as in batteries.

Torvund said REC is in talks with three different battery makers and several large auto makers for pilot projects to test silicon-anode batteries in Moses Lake. If successful, Torvund said a battery maker would need at least 10,000 metric tons of silane gas, and would need to be located in Moses Lake.

“It’s not convenient to transport, so a facility like that needs to be located adjacent to where you are making silane,” he said, noting that silane gas “is dangerous and difficult to handle.”

Earlier in July, REC Vice President for Business Development Francine Sullivan said the company was also in talks with a Portland-based start-up, Violet Power, to possibly build a large solar module manufacturing facility in Moses Lake using REC’s silicon.

Torvund said it “will take time” to develop demand for solar-grade silicon outside of China.

“It is not acceptable in the long term that all the wafers are made in China,” he said.

Torvund said the company currently had around $31 million in cash on hand at the end of June 2020, up $1.3 million compared with the previous quarter ending in March. Sales of electronic-grade silane gas used to make flat panel displays and semiconductors rose nearly 14 percent in the second quarter of 2020, thanks in large part to China dropping the 25 percent tariff on silane to zero, Torvund said.

However, he noted that Chinese semiconductor production is not significant, with most of the world’s best semiconductor chips — the brains of electronic devices — made in Taiwan or South Korea.

He also noted that the company’s patented fluid-bed reactor (FBR) process is getting close to producing electronic-grade silicon.

“If we were to make an investment in Moses Lake, we would target the semiconductor market with the FBR in Moses Lake,” he said.

Charles H. Featherstone can be reached at cfeatherstone@columbiabasinherald.com.