Daqo’s sales crash as the polysilicon price falls below costs

The collapse of sales and earnings before interest, taxes, depreciation and amortization (EBITDA) at Daqo New Energy in the first quarter shines a spotlight on the unresolved oversupply dilemma of the Chinese polysilicon industry. The EBITDA margin of OCI TerraSus in Malaysia also slipped into red territory, but will recover upon the completion of regular maintenance. By comparison, the performance of German competitor Wacker is very stable.

• Daqo New Energy reported a surprisingly steep drop of its sales volume to only 4,482 metric tons (MT) in the first quarter, a plunge by 88.3% from 38,167 MT in the forth quarter of 2025. After the market price fell below Daqo’s production costs of US$5.95/kg (cash costs of $4.59/kg plus depreciation of $1.36/kg) in February, the company stopped selling in order to adhere to the government’s self-regulation guidelines that prohibit sales below costs. Daqo’s average selling price in the first quarter (effectively in January) was $5.95/kg, 2.2% up from $5.83/kg in the fourth quarter.
  Despite the plummeting sales, Daqo increased its output from 42,181 MT in the previous quarter by 2.9% to 43,402 MT, far exceeding its guidance of 35,000 MT to 40,000 MT. The production volume corresponds to a utilization rate of 50%, based on an effective capacity of 350,000 MT (57% of the nameplate capacity of 305,000 MT).
  At the presentation of the first-quarter results, Chief Financial Officer Ming Yang argued that the company is maintaining the high utilization compared to sales because that level is a “fairly optimal operating condition in terms of both quality and cost.” Any changes would bring short-term volatility to both parameters. The 3% increase of the cash costs from $4.45/kg in the previous quarter to $4.59/kg was mainly due to exchange rate effects, whereas manufacturing costs in Chinese yuan declined slightly.
  As a consequence of extremely low sales and revenues, however, Daqo’s EBITDA margin crashed from 23.7% in the fourth quarter to negative 311.1%. The gross margin of negative 521% was additionally impacted by provisions of $98.4 million for inventory impairment. The company’s cash balance, short-term investments and bank deposits declined from $2.27 billion at the end of 2025 to $2.02 billion at the end of March.
  Daqo’s management expects that the Chinese government will issue a price guidance based on new production cost data in June. If the market price should not rise then, the company would be forced to lower its utilization rate. For the second quarter, however, Daqo is still planning an output of 35,000 MT to 40,000 MT.
• OCI TerraSus (formerly OCI Malaysia) also experienced a plunge into red territory, albeit less severe. Due to regular maintenance at the company’s 35,000 MT plant, production costs went up in the first quarter. Moreover, an inventory impairment of KRW13 billion (US$8.8 million) weighed on the result.
  Consequently, the operating income nosedived from KRW33.2 billion (US$22.9 million) in the fourth quarter to negative KRW27 billion (US$18.3 million). Revenues also dropped from KRW144.9 billion (US$100 million) by 30.3% to KRW101 billion (US$68.6 million) as customers shifted to a wait-and-see mode in view of the delayed decision on import duties under Section 232 of the U.S. Trade Expansion Act. We estimate that the company’s EBITDA margin fell from 30% in the previous quarter to approx. −16%.
  OCI expects that a result of the Section 232 investigation will be announced at the end of the second quarter. Upon completion of maintenance, the company is planning to return to full operation during the quarter.
• Wacker has further stabilized its performance. Since the first quarter of 2025, the EBITDA margin of the polysilicon division has been hovering around 10% in each quarter; however, the EBIT margin (earnings after depreciation) has been negative between −1.5% and −10.0% since then. The first quarter of 2026 was no different: The EBITDA margin came in at 10.0%, almost identical to the prior-year value of 9.9%; the EBIT margin was −1.5%.
  The overall trend has not changed either: Sales of electronic-grade polysilicon for the semiconductor industry continue to grow strongly while the wait-and-see sentiment around the Section 232 case keeps the demand for solar-grade polysilicon low. In effect, this resulted in a year-over-year sales decline by 8% for the division in the first quarter.
  As Wacker is running its solar-grade facilities “at minimum utilization,” however, the company was able to reduce its polysilicon inventories slightly. According to Chief Financial Officer Tobias Ohler, the larger share of higher-priced electronic-grade material in the product mix and general cost savings offset higher energy costs.
  In early April a local newspaper in Burghausen (Bavaria), the location of Wacker’s main factory site, reported that the company is going to spin off its polysilicon division as a separate company on January 1, 2027. The paper cited a statement from the Wacker board as follows: “This independence is intended to create the framework to further advance the polysilicon business (...) and the strategic focus on the semiconductor sector.” At the presentation of the first-quarter results, Wacker’s management did not comment on this plan.