Polysilicon maker OCI returns to profit and overtakes Wacker

Malaysian polysilicon manufacturer OCI TerraSus returned to positive earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter, after a loss resulting from the shutdown of its plant in the previous quarter. OCI even exceeded the EBITDA margin of its German competitor Wacker, which felt the weak demand caused by the market uncertainty about U.S. anti-dumping duties on solar module imports from Southeast Asia. Chinese producer Daqo New Energy continues to be haunted by the ultra-low price level on the domestic market.

• OCI TerraSus (formerly OCI Malaysia) returned to a profit after the shutdown of its plant in the fourth quarter to repair the damages from the heavy accident in August 2024. While sales increased by 19% to KRW112 billion (US$77.1 million) in the first quarter, the operating income turned positive to KRW12 billion (US$8.26 million) from a loss of KRW27 billion (US$19.35 million) in the fourth quarter. We estimate that the company’s EBITDA margin improved strongly from -16%  in the previous quarter to approx. +20%.
  Although OCI TerraSus registered more orders from countries that are exempt from U.S. import tariffs, total demand was weaker than expected due to the market uncertainty around the U.S. anti-dumping and countervailing duties on solar module imports from Cambodia, Malaysia, Thailand and Vietnam. As a consequence, the company has lowered the utilization rate of its polysilicon plant in the second quarter.
  Despite the heavy accident with two fatalities in August 2024, OCI is far from changing its hazardous safety culture: On January 22, only five months after the accident, an explosion occurred at the Malaysian plant again, presumably caused by a hydrogen gas leak in a filter vessel. Thanks to a shelter wall, the damage was limited; no injuries were reported. The parent company OCI Holdings still conceals the much more devastating August accident and is not known to have initiated an investigation, whereas industry expert Alan Crawford has published a thorough analysis.
• Wacker reported a declining earnings trend in the first quarter: The EBITDA margin of its polysilicon division decreased from 17.1% in the fourth quarter (excluding the special effect from production tax credits under the U.S. Inflation Reduction Act) to 11.7%. It was also below the 14% level of the margins reached in the third and first quarter of 2024.
  While sales volumes of electronic-grade polysilicon for the semiconductor industry were “significantly higher,” demand for solar-grade material remained weak. As the industry was waiting. for the final U.S. anti-dumping and countervailing duties on solar module imports from Southeast Asia, Wacker reduced the utilization rate of its polysilicon plants from 66% in the fourth quarter to around 50%. That weighed on the result in the first quarter.
  After the final U.S. duty rates were announced on April 21, Wacker’s CEO Christian Hartel expects that it will take one to two quarters until customers have relocated their production facilities and demand will pick up again.
• Daqo New Energy improved its result only at first sight. The company’s negative EBITDA margin decreased from -121.1% in the fourth quarter, which was impacted by a huge impairment charge, to -39.1% in the first, but it was still much worse than the margin of -17.3% in the third quarter of 2024.
  There are two main reasons: On the one hand, Daqo’s average selling price continued to decline from US$4.62/kg in the previous quarter by 5.4% to $4.37/kg, whereas the price on the Chinese spot market remained stable. On the other hand, the company’s cash costs increased from US$5.04/kg by 5.4% to $5.31/kg, thus widening the gap between price and cash cost to almost $1/kg.
  The rising costs were primarily caused by maintenance and a low utilization rate of 28.4%: Daqo’s output further slumped from 34,236 metric tons (MT) in the fourth quarter by 27.5% to 24,810 MT. The sales volume dropped even more strongly from 42,191 MT by 33.6% to 28,008 MT, but still remained above the output so that the company was able to reduce its inventory slightly by 3,198 MT. Despite the accumulating losses, Daqo still owns cash reserves, short-term investments and bank deposits totaling US$2.15 billion.