Price hike gives non-Chinese polysilicon producers a breather

The strong rise of polysilicon prices since mid-2020 has led the results of non-Chinese manufacturers Wacker and OCI back into positive territory. Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third and fourth quarters improved significantly:

• Coming from a negative EBITDA margin of -23.0% in the second quarter, the polysilicon division of Wacker made a big leap to a positive margin of 3.7% in the third quarter, which further rose to 18.6% in the fourth quarter. Besides increasing prices for solar-grade polysilicon, growing sales volumes of higher-margin, electronic-grade material for the semiconductor industry and reduced production costs contributed to the significantly improved EBITDA. After Wacker impaired polysilicon assets by €760 million in 2019, depreciation rates have more than halved; that even resulted in a positive EBIT margin (4.8%) in the fourth quarter – for the first time since 2015 (excluding the insurance compensation in the third quarter of 2019 for the accident at Wacker’s U.S. plant in 2017).
• The basic chemical business of OCI, which mainly comprises polysilicon, already reached a double-digit EBITDA margin of 17.5% in the third quarter as it saw the first positive results of closing OCI’s high-cost, solar-grade production facilities in South Korea and debottlenecking its polysilicon plant in Malaysia. Although the Malaysian plant operated at full utilization and reduced production costs in the fourth quarter, the EBITDA margin slightly decreased to 16.4%, likely due to negative exchange rate effects.
• Unsurprisingly, China-based manufacturer Daqo has also profited from higher polysilicon prices. The company’s EBITDA margin jumped from 20.1% in the second to 41.1% in the third quarter and further climbed to 46.8% in the fourth quarter. In contrast to previous years, other operating income from cash incentives by the local government was almost negligible in 2020.
• Since mid-2020, REC Silicon has been earning revenues exclusively from sales of electronic-grade polysilicon and silicon gases produced at its plant in Butte, Montana (USA). The business is fluctuating quarterly; between 70% and 80% of Butte’s EBITDA contribution is consumed by maintaining the mothballed solar-grade polysilicon plant in Moses Lake, Washington in an operational state and by overhead costs. As a result, the company’s EBITDA margin declined from 9.4% in the second to 6.3% in the third and 5.3% in the fourth quarter. (The one-off effect of a non-cash settlement of property tax in the third quarter is shown as a dashed line in the chart above.)

As prices have spiked since the Chinese New Year holidays in mid-February and supply will remain tight for most of this year, the EBITDA margins of polysilicon manufacturers will continue to rise.