Polysilicon manufacturer Daqo on the way to cash costs of $5/kg

Polysilicon EBITDA margins of Daqo, OCI, Wacker and REC Silicon from Q4 2018 through Q4 2019
Fostered by a very low power tariff, China-based Daqo has a huge edge over its non-Chinese competitors – Chart: Bernreuter Research

China-based polysilicon producer Daqo New Energy has harvested the first fruits of its major capacity expansion. In the fourth quarter of 2019, the company reached record-low manufacturing costs (including depreciation) of $6.38/kg and cash production costs of $5.47/kg, down from $6.97/kg and $5.85/kg, respectively, in the previous quarter.

For the first quarter of 2020, Daqo is targeting manufacturing costs of $6.10/kg. Correspondingly, cash costs will probably fall to about $5.30/kg.

The company doubled its nominal production capacity from 35,000 metric tons (MT) to 70,000 MT in the fourth quarter of 2019. Its effective capacity, however, is closer to 80,000 MT now.

The new economies of scale also boosted Daqo’s EBITDA margin from 23.5% to 38.2% quarter over quarter. Even if one eliminates cash incentives by the local government, the margin still amounts to 33.8% (see chart above).

With the capacity expansion, Daqo’s electricity rate has dropped to approx. 2.5 $Cents/kWh, giving the company a significant edge over non-Chinese competitors. The Korean manufacturers OCI and Hanwha have already shut down plants under this cost pressure.

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