Daqo feels the silicon metal price spike in its Q4 2021 results

Polysilicon EBITDA margins of Daqo, Wacker, OCI and REC Silicon from Q4 2020 through Q4 2021
Wacker and OCI shielded EBITDA margins from the silicon metal price spike better than Daqo did in Q4 – Chart: Bernreuter Research

While non-Chinese polysilicon manufacturers Wacker and OCI were able to improve their earnings before interest, taxes, depreciation and amortization (EBITDA) further in the fourth quarter, Chinese competitor Daqo felt the impact from the silicon metal price spike originating last fall:

  • Daqo New Energy reported an EBITDA margin of 63.5%, a noticeable drop from the record figure of 75.4% in the third quarter. On the one hand, the explosion of the silicon metal price in China catapulted the company’s production costs from $6.84/kg in the third quarter to $14.11/kg while its average selling price rose from $27.55/kg to $33.91/kg. On the other hand, Daqo’s quarterly sales volume slumped from 21,183 metric tons (MT) to 11,642 MT because its customers in the wafer sector digested inventories in December. By the end of January, however, demand recovered and Daqo’s inventory returned to a normal level. At the same time, costs for its silicon metal feedstock have come down from $8.68/kg in the fourth quarter to around $3.50/kg now (compared to $2.58/kg in the third quarter of 2021). Hence, Daqo’s chief financial officer Ming Yang expects the company’s production costs to decline to a range of $8 to $8.50 per kg in the second quarter.
  • OCI has obviously been less exposed to the silicon metal price spike in China. The company’s solar-grade polysilicon subsidiary in Malaysia minimized the impact through existing inventories and a diversified sourcing strategy while it was able to demand a price increase of 12% for its product in the fourth quarter. In effect, the EBITDA margin of OCI’s basic chemicals division rose slightly from 45.3% to 46.5%. Results in the first quarter will be influenced by a one-month maintenance of the polysilicon plant in Malaysia.
  • Wacker even increased the EBITDA margin of its polysilicon division from 49.1% to 54.3% in the fourth quarter. The Germany-based company achieved “significantly higher” prices for its high-purity, solar-grade polysilicon, larger sales volumes of electronic-grade material for the semiconductor industry and further cost reductions. Although Wacker covers around one third of its silicon metal demand with a captive smelter in Norway and has a broad supplier portfolio, the company sees headwinds developing from an “unprecedented rise in silicon metal and energy prices.”
  • REC Silicon was still in the red with an EBITDA margin of -0.9%, after -10.2% in the previous quarter. Although the company’s small electronic-grade polysilicon and silane plant in Butte, Montana (USA) improved the EBITDA margin of its semiconductor materials business from 5% to 21.5%, it is still impacted by high electricity prices. The segment’s gains in the fourth quarter were not only eaten up by ongoing overhead costs, but also by accruals for variable compensation and stock option plans.

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