After polysilicon price crash: Daqo loses its margin lead to OCI

Polysilicon EBITDA margins of Daqo, OCI, Wacker and REC Silicon from Q2 2022 through Q2 2023
After the polysilicon price crash in China, OCI Malaysia has overtaken Daqo with a higher EBITDA margin – Chart: Bernreuter Research

The polysilicon price crash in China seriously impacted the earnings before interest, taxes, depreciation and amortization (EBITDA) of Daqo in the second quarter. The Chinese polysilicon manufacturer lost its margin lead to OCI, whose Malaysian subsidiary benefited from a significant price premium for non-Chinese polysilicon.

  • Daqo New Energy saw its EBITDA margin almost halve from 69.1% in the first quarter to 36.1% in the second. The company had to make large price concessions to reduce its high inventory of approx. 20,000 metric tons (MT) at the end of the previous quarter to 10,550 MT. The price decay was somewhat mitigated by improved cash costs, which declined from US$6.61/kg to US$6.05/kg. This was primarily due to a lower price of silicon metal powder and higher production efficiency thanks to Daqo’s new 100,000 MT plant in Inner Mongolia, which ramped up in record time within three months.
  • OCI has changed its reporting after the chemicals group split itself into two units in May: OCI Company and OCI Holdings. Now OCI Malaysia with its 35,000 MT solar-grade polysilicon plant is a subsidiary of OCI Holdings while the electronic-grade polysilicon operations in South Korea remain a part of OCI Company’s Basic Chemicals division. OCI Malaysia’s results are now reported directly and not hidden behind the curtain of the Basic Chemicals division anymore. However, OCI has stopped reporting the EBITDA of its divisions and subsidiaries; it now discloses only the operating income. Building upon input from the investor relations department of OCI Holdings, we assume that the EBITDA margin of OCI Malaysia declined from approx. 60% in the first quarter to approx. 50% in the second, which was impacted by the manufacturer’s maintenance in June. Nonetheless, OCI benefited from the fact that the price of non-Chinese polysilicon dropped far less than the price in China.
  • Wacker recovered from the low capacity utilization in the first quarter when the company’s U.S. polysilicon plant in Charleston, Tennessee was shut down for maintenance. Consequently, the EBITDA margin of the polysilicon division returned from 22.2% to 30.5% in the second quarter, coming in relatively close to the level of 34.3% reached in the fourth quarter of last year. Like OCI, Wacker benefited from the higher price of non-Chinese solar-grade polysilicon, but it is still burdened by elevated energy costs in Germany; in contrast, OCI Malaysia enjoys a low electricity rate from the local hydropower plant. While Germany’s Economy Minister Robert Habeck (Green Party) is advocating for a state-subsidized industrial electricity tariff for power-hungry companies, Finance Minister Christian Lindner (Liberal Party) is opposing it, and Chancellor Olaf Scholz (Social Democrats) has also shown reservations.
  • REC Silicon has begun to come out of deep red territory. Although still negative, the company’s EBITDA margin improved significantly from -79.2% in the first quarter to -23.0%. This was mainly due to the Semiconductor segment, whose plant in Butte, Montana (USA) increased the sales volumes of silicon gases by 33% and of electronic-grade polysilicon by 50%. Supported by seasonally lower energy costs, the segment’s EBITDA contribution rose strongly from US$-3.4 million to US$10.1 million. REC Silicon has hedged a portion of its future electricity demand against price hikes, but is still evaluating more favorable solutions for the mid and longer term. The restart of the company’s fluidized bed reactor plant for solar-grade polysilicon in Moses Lake, Washington is now scheduled for early November; the off-take agreement with Hanwha is expected to be finalized in September.

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