Polysilicon makers achieved mixed results in the fourth quarter

Polysilicon manufacturers achieved mixed results in the fourth quarter of 2023. While Chinese producer Daqo New Energy was able to improve its earnings before interest, taxes, depreciation and amortization (EBITDA) significantly and OCI Malaysia performed only slightly worse on a high level, Germany’s Wacker and U.S.-based REC Silicon did not escape unscathed.

• Daqo New Energy reported a massive rebound of its EBITDA from US$70.2 million in the third quarter to US$128.2 million in the fourth; its EBITDA margin soared from 14.5% to 26.9%. Part of the improvement came from a $19.4 million higher gross profit, which resulted from slightly reduced production costs and a higher average selling price (ASP). Although the polysilicon spot market price fell by 8% in the fourth quarter, Daqo was able to raise its ASP by 3.8% from $7.68/kg to $7.97/kg as the share of high-quality polysilicon for n-type wafers in its total output grew to 60% in December. The larger part of the EBITDA improvement, however, was due to a major reduction of selling, general and administrative expenses, including $26.7 million less expenses on non-cash share-based compensation for the company’s share incentive plan.
• OCI Malaysia saw both its revenues and operating income decline by 10.6% and 22.5%, respectively, quarter over quarter. We estimate that the company’s EBITDA margin decreased from approx. 42.5% in the third quarter to 38% in the fourth. Although OCI Malaysia had planned to increase the output, the utilization rate of its polysilicon plant dropped because problems with old production facilities emerged at the end of the quarter. Regarding its expansion plans for Malaysia, the company specified that the production capacity of the solar-grade polysilicon plant would be increased from 35,000 metric tons (MT) currently by 21,600 MT to 56,600 MT in 2027. This route is much less ambitious than the originally envisaged expansion by 30,000 MT until 2025; most likely, the limited electricity supply from the hydropower plant nearby and the planned 11,000 MT factory for electronic-grade polysilicon have prompted this change of course.
• Wacker experienced an even stronger downtrend. After the EBITDA margin of its polysilicon division plummeted from 30.5% in the second quarter to 13.5% in the third, it halved again to 6.8% in the fourth. Since about 50% of Wacker’s solar-grade polysilicon supply contracts with Chinese customers are still tied to the market price in China, the division felt the decline of the Chinese spot price. Lower volumes from Wacker’s U.S. polysilicon plant in Charleston, Tennessee due to “some outages” also weighed on the result. At least, sinking energy costs in Germany are supposed to improve earnings in the first quarter of 2024. For the whole year, Wacker expects that the EBITDA margin of its polysilicon division will recover to a range of 15% to 25%.
• REC Silicon was deeply in the red again. The company’s EBITDA margin fell from -51.2% in the third quarter to -77% in the fourth. Although the Semiconductor Materials segment increased its revenues from US$34.7 million in the previous quarter to US$40.3 million based on 10.4% larger silicon gas volumes and a 35.6% price increase for electronic-grade polysilicon, its EBITDA contribution dropped from US$6.1 million to US$1.1 million. The reason is an accrual for the plant in Butte, Montana (USA); the company announced it would shut down polysilicon production in the second half of 2024 and concentrate on silicon gases in Butte after it was not able to reach sustainably lower electricity rates. This will leave Wacker as the only supplier of high-end polysilicon for making monocrystalline float-zone silicon worldwide. REC Silicon’s result was also impacted by an expenditure of $25.8 million for the restart of the company’s fluidized bed reactor plant in Moses Lake, Washington, compared to $16 million in the third quarter. The company expects the first shipment of polysilicon granules early in the second quarter.