Price pressure: Wacker impairs polysilicon assets by €750 million

Depreciation rates of Daqo New Energy and Wacker Polysilicon from Q3 2018 through Q3 2019 and estimate for full 2019
Wacker Polysilicon will impair the 2.4-fold of its – compared to Daqo’s – already high annual depreciation – Chart: Bernreuter Research

The sustained streak of record-low polysilicon prices is leaving its trace in the industry: Leading German polysilicon manufacturer Wacker has announced it will take a massive impairment of €750 million (US$832 million) on the carrying value of its polysilicon plants in its 2019 financial statements.

The write-down amounts to the 2.4-fold value of Wacker Polysilicon’s annual depreciation rate. Beside the lower than expected PV demand in China, Wacker blames the price decay on overcapacity from the expansion of Chinese polysilicon manufacturers, fostered by government incentives, such as extremely low electricity rates.

For instance, China-based polysilicon manufacturer Daqo New Energy enjoys a power tariff of only US$0.03 per kWh in Xinjiang whereas the price for large industrial customers on the German electricity market is approximately twice as high.

Capital expenditures (capex) for Chinese polysilicon plants are also significantly lower compared to the western world. Daqo’s regular depreciation rate in $/kg is only 30% of Wacker Polysilicon’s amount (see chart).

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