Chinese prices of polysilicon used in solar panels have turned higher, as industry-led efforts to solve oversupply begin to bear fruit.

Prices rose 2.2% on the week to 45,000 yuan ($6,139) a ton on Wednesday, the China Silicon Industry Association said in its latest evaluation. The market is now at its strongest since May, according to a separate assessment from PV Infolink.

“The sector’s self-discipline measures have officially started and output cuts by manufacturers played a positive role in the price rise,” the silicon association said. But the group cautioned against overestimating the recovery, citing high inventory levels, including enough stockpiles at panel makers to cover up to two months of production.

More than 30 Chinese manufacturers pledged in early December to control the supply of solar materials and products, in a bid to stem losses in a dramatically oversupplied market. Leading polysilicon producers, including Tongwei Co. and Xinjiang Daqo New Energy Co., have cut output by unspecified amounts as a result, and the silicon association estimated earlier this month that production will drop 5% in January.

But how effective the curbs will be is still up in the air as the extent of the industry’s commitment to self-regulation remains unclear. Even now, output quotas for polysilicon companies have yet to be determined, Daiwa Capital Markets analyst Dennis Ip said in a note on Wednesday.

Then there’s the question of demand. Global solar installations, which are dominated by China, are expected to grow by just 8% this year, compared to 34% last year and 76% in 2023. Chinese project developers may also wait until the second half of the year to buy more panels as they seek a better understanding of how the government’s shift toward market-based power sales will affect returns, Daiwa’s Ip said.

China’s first polysilicon futures contract, which launched on Dec. 26, also reflects wariness among investors. After storming higher on its debut with a limit-up move to 44,000 yuan a ton, prices have since subsided, with the most-active June contract closing 0.9% lower on Wednesday at 42,700 yuan a ton.

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