Margin of Chinese polysilicon maker Daqo crashes into deep red

The earnings before interest, taxes, depreciation and amortization (EBITDA) of Chinese polysilicon manufacturer Daqo New Energy slumped into deep red territory in the second quarter since the company was severely hit by the plummeting polysilicon price in China. In contrast, its non-Chinese competitors OCI Malaysia and Wacker improved their earnings significantly. Both benefitted from reduced costs and the continuously high price level of non-Chinese polysilicon.

• Daqo New Energy saw its EBITDA margin crash from 18.5% in the first quarter to -65.9% in the second. While China’s third largest polysilicon manufacturer was able to reduce its cash costs from US$5.61/kg in the previous quarter by 4% to $5.39/kg, its average selling price plummeted from $7.66/kg by 33% to $5.12/kg and thus fell below its cash costs. Due to the price decay, the company had to record an impairment of $108 million on its inventory.
  The timing for the ramp-up of the second 100,000-ton phase at Daqo’s new polysilicon plant in Inner Mongolia could hardly have been worse: The company’s sales volume slumped from 53,987 metric tons (MT) in the first quarter by 20% to 43,082 MT. Despite the ramp-up in Inner Mongolia, the total production volume only grew from 62,278 MT in the first quarter to 64,961 MT as Daqo began to reduce its overall utilization rate. Nevertheless, the company produced 30,171 MT more than it sold in the first half of 2024. In the third quarter, Daqo is planning an output of 43,000 MT to 46,000 MT; based on an effective annual production capacity of 350,000 MT, this volume corresponds to a utilization rate of only 50%.
• OCI Malaysia increased its revenues by 9.3% and the operating income even by 48.4% in the second quarter. We estimate that the company’s EBITDA margin returned from 30.5% in the first quarter to approx. 38% in the second, about the same level it achieved in the fourth quarter of 2023. Since the company finished the planned maintenance of its 35,000 MT polysilicon plant, its utilization rate rose from 70% in the first quarter to more than 90% in the second as announced.
  However, the sales volume began to decline in June after customers in Southeast Asia cut production in reaction to the U.S. anti-dumping investigation against solar modules imported from Cambodia, Malaysia, Thailand and Vietnam. Consequently, OCI reduced the utilization rate of its polysilicon plant to 70% again in the third quarter and was planning to prepone the next regular maintenance from the first half of 2025 to the fourth quarter of 2024. How this plan will be impacted by the major accident that occurred at its factory on August 14 is unclear. The company has also announced it would seek new supply contracts with customers in Southeast Asian countries unaffected by the U.S. anti-dumping investigation, such as Indonesia or Laos.
  According to a report by Bloomberg, the parent OCI Holdings is considering an initial public offering of OCI Malaysia on the Kuala Lumpur stock exchange in the second half of 2025 to raise up to US$320 million for the planned capacity expansion from 35,000 MT to 56,600 MT by 2027.
• Wacker displayed an earnings trend similar to that of OCI: The EBITDA margin of its polysilicon division rose from 14.5% in the first quarter to 23.8% in the second. Lower energy costs in Germany continued to improve Wacker’s earnings. By the end of the quarter, the company was also able to shift the price defined in half of its solar-grade polysilicon supply contracts with Chinese customers completely from the extremely low market price in China to the much higher level outside China.
  Due to the uncertainty revolving around the U.S. anti-dumping issue, however, the sales volume of the polysilicon division declined by 22.7% from the previous quarter. For the third quarter, Wacker is planning a similar production volume as in the second although its 20,000 MT plant in the U.S. provides more available capacity again after fully re-ramping in the second quarter, following technical upgrades. Yet, the company will likely build up some inventory buffer for the time when polysilicon demand for the U.S. solar market returns.
• REC Silicon likely reached the culmination of its quarterly startup costs for the fluidized bed reactor (FBR) plant in Moses Lake in the U.S. state of Washington with an amount of US$37.9 million in the second quarter, compared to $27.0 million in the first. Consequently, the company’s negative EBITDA margin fell from -74.7% in the first quarter to a record low of -101.3%.
  The Semiconductor Materials segment in Butte, Montana was only partly able to make up for the high costs in Moses Lake; its EBITDA contribution rose from $2.8 million in the previous quarter to $7.0 million. The increase was mainly due to a price leap of 16.5% for silicon gases; however, shipment volumes dropped from 849 MT in the previous quarter by 23% to 654 MT as the demand from the PV industry was weak in view of overcapacity and the U.S. anti-dumping investigation against Southeast Asian countries. The commercial production of electronic-grade polysilicon in Butte was terminated as scheduled at the end of the second quarter.
  At the solar-grade FBR plant in Moses Lake, the start of shipments has repeatedly been delayed because one impurity element contaminates the polysilicon granules in the post-treatment facility, where hydrogen is outgassed and silicon dust removed from the granules. To solve the problem, REC Silicon has decided to introduce a physical barrier that prevents the interaction of the granules with the contaminating surface of piping and vessels. The first product delivery is now scheduled for mid-September.