Polysilicon margins have started to descend from their peak

Polysilicon EBITDA margins of Daqo, OCI, Wacker and REC Silicon from Q1 2022 through Q1 2023
EBITDA margins of polysilicon manufacturers Daqo, OCI, Wacker and REC all declined in the first quarter – Chart: Bernreuter Research

Weak demand and declining prices left first marks on the results of polysilicon manufacturers in the first quarter of 2023. The earnings before interest, taxes, depreciation and amortization (EBITDA) have started to descend from their peak in the fourth quarter.

  • Daqo New Energy recorded an EBITDA margin of 69.1% in the first quarter, a tangible drop from its second best result of 75.0% in the previous quarter. Weak demand and sinking polysilicon prices weighed on the company’s EBITDA while its inventory piled up to approx. 20,000 metric tons (MT), compared to a production volume of 33,848 MT. In contrast, Daqo’s cash costs (excluding depreciation) slightly improved from US$6.78/kg in the fourth quarter to US$6.61/kg, primarily due to a lower price of silicon metal powder.
  • OCI saw the EBITDA margin of its basic chemicals division decline from 46.8% to 38.4%. Both the sales volume and the average selling price of polysilicon fell by 10% compared to the fourth quarter; however, the division was still able to command a high premium on the market price. Beside that, OCI had to struggle with an increase of electricity costs for basic chemical products by 41% year over year.
  • Wacker suffered an even stronger drop in earnings. The EBITDA margin of the company’s polysilicon division fell from 34.3% in the fourth quarter to 22.2%. Although Wacker was able to increase both volumes and prices of electronic-grade polysilicon for the semiconductor industry and to keep prices of solar-grade polysilicon stable, its EBITDA was impacted by “significantly lower” sales volumes of solar-grade material. On the one hand, customers held back orders at the beginning of the year; on the other, the company’s U.S. plant in Charleston, Tennessee was shut down for maintenance. Elevated energy costs in Germany continued to depress the EBITDA. For the full year, Wacker expects a polysilicon margin in the range of 19% to 28%.
  • REC Silicon continues to navigate in deep red territory. The company’s EBITDA margin further declined from -74.7% in the fourth quarter to -79.2%. The reasons are pretty much the same as in the previous quarter: High electricity prices forced REC to reduce polysilicon production by another 9% after it already trimmed the output by 30% in the fourth quarter. On top of that, seasonal weakness and high inventories in the semiconductor industry drove down sales volumes of electronic-grade polysilicon from REC’s plant in Butte, Montana (USA) by 58%. The company is planning to implement a more favorable procurement strategy on Montana’s volatile power market by the end of the third quarter. Expenses of US$19.7 million for restarting the solar-grade granular polysilicon plant in Moses Lake, Washington remained a drag on REC Silicon’s quarterly result.

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