(Bloomberg) — China’s market regulator has warned several producers of polysilicon, a key material in solar panels, about monopoly risks stemming from their consolidation efforts in the oversupplied sector.

Six companies including Tongwei Co. and GCL Technology Holdings, along with the industry association, were summoned by the State Administration for Market Regulation, local media outlet Securities Times reported on Thursday, citing unnamed sources. The agency warned them not to coordinate on production capacity, sales volume and prices.

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Shares in Tongwei fell more than 3% after the market opened in Shanghai on Friday, while GCL dropped more than 4% in Hong Kong.

Tongwei and GCL declined to comment, and the China Photovoltaic Industry Association did not immediately respond to a request for comment.

The regulatory intervention comes after the country’s polysilicon sector spent much of last year setting up a fund through which major producers can buy outdated capacity from smaller rivals, easing a supply glut. Expectations for the fund’s setup had spurred a mid-year surge in polysilicon prices amid improved market sentiment, and it was launched in December.

“The meeting with the State Administration for Market Regulation likely confirms our skepticism of the polysilicon acquisition plan,” BofA Global Research analysts including Gary Tsang wrote in a note, adding that the plan “appears too aggressive”.

The latest development, thought not quite a failure of the sector’s consolidation efforts, nevertheless highlights challenges for an industry facing prolonged losses. “Some solar companies have said the surge in polysilicon prices without other supply chain price recovery is unsustainable,” the analysts said.

Going forward, the analysts expect a broader redistribution of profits across the solar supply chain rather than concentration in the polysilicon segment alone. Measures such as raising industry standards and gradually phasing out subsidies — including export tax rebates — are also likely to continue.

Key Data Points:

• Polysilicon prices in China jumped between 9.8% and 10.5% in the week through Wednesday, according to a weekly note from the China Silicon Industry Association

  • Downstream producers of wafers and cells are gradually raising their prices, making them more willing to accept price hikes in polysilicon

  • Full-year output in China was at 1.32 million tons, down by 28% from a year ago

  • Jan. Output is expected at 106,000 tons, down 5% from a month ago

• Wafer prices were up by between 8.4% and 9.2% in the week through Thursday, supported by output reduction and costs