Polysilicon makers Daqo and Wacker down to same margin level

Polysilicon EBITDA margins of Daqo, OCI, Wacker and REC Silicon from Q3 2022 through Q3 2023
Both Daqo and Wacker feel the effect of the polysilicon price crash in China in their EBITDA margins – Chart: Bernreuter Research

The polysilicon price crash in China has hit the earnings before interest, taxes, depreciation and amortization (EBITDA) of Chinese low-cost producer Daqo New Energy and its German competitor Wacker alike. The EBITDA margins of both manufacturers fell below 15% in the third quarter, with a difference of only one percentage point.

In the second quarter of 2020, when the polysilicon spot price reached its historical low of US$6.75/kg and Wacker reduced the utilization rate of its German plants to 70%, the distance between the EBITDA margins of both companies was still much larger: +20.1% for Daqo versus -23.0% for Wacker’s polysilicon division. Now, however, Daqo is obviously paying a higher electricity rate and Wacker is benefitting both from a larger share of higher-priced electronic-grade polysilicon in its output and from a higher price for non-Chinese solar-grade polysilicon (but only for a part of its sales).

  • Daqo New Energy saw another steep slump of its EBITDA margin from 36.1% in the second quarter to 14.5% in the third. The company even recorded a net loss of US$6.3 million. Its EBITDA margin had already nearly halved in the second quarter, but the impact of the price crash in June became fully visible only in the third quarter when Daqo’s average selling price sank from $12.33/kg in the previous quarter to $7.68/kg. The price decay was again mitigated by lower cash costs, which declined from US$6.05/kg to US$5.67/kg. Both the completed ramp-up of Daqo’s new 100,000 MT plant in Inner Mongolia and lower silicon metal costs improved the result.
  • Wacker did not perform well either. After the EBITDA margin of its polysilicon division improved to 30.5% in the second quarter, it plummeted to 13.5% in the third – a development similar to that at Daqo. Since about half of Wacker’s solar-grade polysilicon supply contracts with Chinese customers are still tied to the market price in China, the company felt the effect of the price crash; Wacker is aiming to shift all contracts to a price index for non-Chinese polysilicon by the end of 2024. The result of the third quarter was also impacted by lower output from Wacker’s U.S. polysilicon plant in Charleston, Tennessee, which carried out maintenance although it was already shut down for maintenance in the first quarter. Last but not least, the company is still working through higher-priced silicon metal inventories.
  • OCI Malaysia reported a revenue increase of 16% quarter over quarter, but a flat operating income. Bernreuter Research estimates that the company’s EBITDA margin declined from approx. 50% in the second quarter to 42.5% in the third. OCI said it had higher costs due to planned maintenance, but was able to keep its utilization rate at over 90%. In the fourth quarter, output is expected to increase.
  • REC Silicon also reversed the positive trend seen in the second quarter. The company’s EBITDA margin fell from -23.0% to -51.2%. The EBITDA contribution of the Semiconductor Materials segment dropped from US$10.1 million in the previous quarter to US$6.1 million. While the  plant in Butte, Montana (USA) increased its polysilicon sales volume by 10%, the larger volume of silicon gases declined by 11%. The biggest item was an expenditure of $16 million for the restart of the company’s fluidized bed reactor plant in Moses Lake, Washington, compared to $11.4 million in the second quarter. The plant began to produce granular polysilicon in late November; the final off-take agreement with Hanwha was cocluded in September.

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