Mixed trends in polysilicon manufacturers’ first-quarter results

Polysilicon EBITDA margins of Daqo, Wacker, OCI and REC Silicon from Q1 2021 through Q1 2022
In contrast to Daqo, Wacker and OCI are facing shrinking EBITDA margins due to rising production costs – Chart: Bernreuter Research

While Chinese polysilicon manufacturer Daqo New Energy was able to stabilize its profit margin in the first quarter, non-Chinese competitors Wacker and OCI saw their earnings before interest, taxes, depreciation and amortization (EBITDA) decline in the wake of rising costs:

  • Daqo New Energy reported an EBITDA margin of 64.6%, a slight improvement from the result of 63.5% in the fourth quarter of 2021, which was impacted by high silicon metal costs in China. As the silicon metal price returned to a lower level in the first quarter, the company’s production costs decreased from $14.11/kg in the previous quarter to $10.09/kg. Going forward, Daqo will benefit from economies of scale after its new Phase 4B production facility ramped up in the first quarter.
  • Wacker is facing the opposite trend. The EBITDA margin of its polysilicon division declined from 54.3% in the prior quarter to 42.7%. In the fourth quarter of 2021, the Germany-based company still mitigated the increase of silicon metal and electricity costs through existing inventories and hedging instruments; however, Wacker already warned of an “unprecedented rise in silicon metal and energy prices” when it presented its fourth-quarter results in March. These effects are now kicking in. Moreover, logistics issues concerning Wacker’s solar-grade polysilicon exports to China could weigh on its result in the second quarter. Compared to March, the export volume in April plummeted by 56%, probably due to the Covid-19 lockdown in Shanghai, which reduced the capacity of the city port by about half.
  • OCI almost halved the EBITDA margin of its basic chemicals division from 46.5% to 26.2% already in the first quarter. The company’s solar-grade polysilicon subsidiary in Malaysia had to prolong the maintenance of its plant, which was planned for one month, because Covid-19 restrictions delayed the delivery of equipment. Consequently, the output dropped by 44% compared to the previous quarter. OCI is planning to complete its debottlenecking project, which will increase the production capacity in Malaysia from 30,000 to 35,000 metric tons, in the second quarter.
  • REC Silicon achieved a positive operating EBITDA margin of 10.3% after it was in the red for three consecutive quarters. The company’s small electronic-grade polysilicon and silane plant in Butte, Montana (USA) improved the EBITDA margin of its semiconductor materials business from 21.5% to 31% although the polysilicon sales volume dropped by 44% in the seasonally weak first quarter. After Hanwha Solutions and Hanwha Corporation completed the acquisition of a combined stake of 33.3% in the company in early May, REC Silicon has announced it will reopen its granular polysilicon and silane plant in Moses Lake, Washington in the fourth quarter of 2023 and ramp it up to 100% utilization by the end of 2024. The two Hanwha affiliates have proposed off-take contracts for the complete polysilicon and silane output in Moses Lake. Regarding the potential silane demand from manufacturers of silicon-containing battery anodes (in particular, Group14 Technologies and Sila Nanotechnologies), CEO James May said: “We will determine how to address that as time goes on.”

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