Polysilicon maker Daqo back in black, Wacker and OCI in limbo

The earnings before interest, taxes, depreciation and amortization (EBITDA) of non-Chinese polysilicon manufacturers, in particular Wacker, continue to suffer from the uncertainty about the solar market in the United States. By contrast, Chinese producer Daqo New Energy greatly benefitted from the price increase decreed by the government.

• Wacker saw its earnings decline in the third quarter: The EBITDA margin of its polysilicon division fell from the small interim high of 15.4% in the second quarter back to 8.9%, even undercutting the low level of the first quarter (9.9%). The first three quarters have thus remained by five to eight percentage points below the 2024 EBITDA level of 14% to 24%.
  Although Wacker continues to report soaring sales volumes of electronic-grade polysilicon for the semiconductor industry, the price of solar-grade polysilicon is suffering from sluggish demand due to the uncertainty about the PV market in the United States, the main destination of solar modules made of non-Chinese polysilicon. The ongoing U.S. anti-dumping proceedings against solar module imports from India, Indonesia and Laos, the pending investment tax credit guideline on “foreign entities of concern” and the national security investigation of imports of polysilicon and its derivatives under Section 232 of the U.S. Trade Expansion Act keep potential polysilicon buyers waiting for clarity about market conditions.
  In the Section 232 case, investment firm Roth Capital has indicated that the future tariff regime could resemble a proposal from the Coalition for a Prosperous America, a pro-tariff lobbying group of U.S. manufacturers, which suggested a duty-free annual quota of 40,000 metric tons for polysilicon imports from “trusted allied countries with secure, non-Chinese controlled supply chains.” Such a – or even a lower – quota might incentivize Wacker to convert a larger part of its polysilicon production capacity in Charleston, Tennessee from electronic grade back to solar grade to satisfy a higher demand for U.S.-made material.
  The company’s two German polysilicon plants will benefit from a subsidized electricity rate of 5 euro cents (6 U.S. cents) per kilowatt hour for energy-intensive industries, which the governing coalition of conservatives and Social Democrats agreed upon for a three-year period from 2026 through 2028.
• OCI TerraSus (formerly OCI Malaysia) is on the way to recover from its deep red result in the second quarter when the company suspended production in May in reaction to weak demand. Although its plant restarted only in September, OCI TerraSus recorded remarkable revenues of KRW132 billion (US$90.3 million) in the third quarter. The high amount, which even exceeded the revenues of KRW112.5 billion (US$77.1 million) in the first quarter, obviously resulted from the sale of large inventories.
  The operating income, however, improved only slightly from the heavy loss of KRW74 billion (US$52.9 million) in the second quarter; it was still negative at minus  KRW65 billion (US$44.5 million). Fixed costs, ramp-up expenses and inventory valuation losses weighed on the result. We estimate that the company’s EBITDA margin recovered from -163% in the previous quarter to approx. -41%.
  In contrast to Wacker, OCI TerraSus reported that demand from customers increased as the U.S. tightened its enforcement of the Uyghur Forced Labor Prevention Act again, which bans the import of products containing materials from China’s Xinjiang Uyghur autonomous region. The company is also optimistic about “continued sales momentum” in the fourth quarter.
• Daqo New Energy returned to black territory after five consecutive quarters of losses. Its EBITDA margin jumped from -64.0% in the second quarter to +18.7% in the third.
  Main driver was a 38.4% increase of its average selling price from $4.19/kg in the previous quarter to $5.80/kg, caused by the government’s decree in July that polysilicon must not be sold below production costs. Moreover, Daqo was able to further reduce its cash costs by 11% from $5.12/kg in the second quarter to $4.54/kg in the third, despite the reduced utilization of its plants.
  The company’s sales volume exploded by 140% from 18,106 metric tons (MT) in the second quarter to 42,406 MT since customers obviously stockpiled polysilicon in view of rising prices. As Daqo’s output only rose from 26,012 MT to 30,650 MT, the company reduced its inventory significantly by 11,756 MT.
  ,However, Daqo is planning to boost its output to a range of 39,500 MT to 42,500 MT in the fourth quarter. While the company justifies its strategy with reduced production costs at higher volumes and a “more optimistic outlook” on industry consolidation, that move could undo the success of inventory reduction again.