The time of sky-high polysilicon margins is drawing to a close

Polysilicon EBITDA margins of Daqo, OCI, Wacker and REC Silicon from Q4 2021 through Q4 2022
Polysilicon manufacturers Daqo, OCI and Wacker all improved their EBITDA margins in the fourth quarter – Chart: Bernreuter Research

2022 was another fat year for the polysilicon manufacturers Daqo, OCI and Wacker. But for a long time, the fourth quarter will have been the last one with ample earnings before interest, taxes, depreciation and amortization (EBITDA). As the polysilicon price has begun sinking, the time of sky-high  margins is drawing to a close.

  • Daqo New Energy returned to an EBITDA margin of 75.0% in the fourth quarter after costs resulting from the company’s 2022 share incentive plan for key employees inflated the selling, general and administrative expenses in the third quarter. The fourth-quarter result came in slightly below the record margin of 76.8% in the second quarter as both a higher silicon metal price and rising electricity rates drove up production costs. Daqo’s cash costs (excluding depreciation) increased from US$6.06/kg in the third quarter to US$6.78/kg.
  • OCI further improved the EBITDA margin of its basic chemicals division from 43.4% to 46.8%. After debottlenecking the capacity of its solar-grade polysilicon plant in Malaysia from 30,000 to 35,000 metric tons in the middle of the year, the company continued to increase the plant’s utilization rate. Consequently, the polysilicon sales volume rose by 13% compared to the third quarter. OCI has also revealed details of its planned polysilicon capacity expansion by 2027.
  • Wacker obviously benefitted from strong demand and considerably lower spot prices for natural gas and electricity in Europe in the fourth quarter. The EBITDA margin of the company’s polysilicon division slightly recovered from 30.8% in the third quarter to 34.3%. That, however, was significantly less than Wacker’s annual guidance had indicated. For the first quarter of 2023, the company announced that sales and EBITDA of the polysilicon division would be “substantially lower” due to plant maintenance and less shipments to contract customers.
  • REC Silicon is the negative exception in the streak of success news. The company’s EBITDA margin further deteriorated from -37.7% in the third quarter to -74.7%. On the one hand, unexpectedly strong electricity price spikes forced REC to reduce polysilicon production by 30% compared to the third quarter. Sales volumes of polysilicon and silicon gases from its plant in Butte, Montana (USA) fell by 22.5% and 12.2%, respectively. The company has engaged a consultant to evaluate better options on Montana’s volatile power market. On the other hand, expenses of US$17.1 million for restarting the solar-grade granular polysilicon plant in Moses Lake, Washington weighed heavily on the company’s fourth-quarter result. REC Silicon now estimates the total capital expenditure at US$160 million for the planned restart in the fourth quarter of 2023.

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