Wacker is approaching the margin of Chinese competitor Daqo

Polysilicon EBITDA margins of OCI Malaysia, Daqo, Wacker and REC Silicon from Q1 2023 through Q1 2024
The margins of Chinese producer Daqo and Germany’s Wacker approached each other in the first quarter – Chart: Bernreuter Research

After special effects influenced the earnings before interest, taxes, depreciation and amortization (EBITDA) of Chinese producer Daqo New Energy and Germany’s Wacker in the fourth quarter of 2023, the EBITDA margins of the two polysilicon manufacturers approached each other in the first quarter. Since the polysilicon price in China has now fallen even below Daqo’s cash costs, Wacker could soon outstrip the margin of the Chinese competitor, as OCI Malaysia did one year ago.

  • OCI Malaysia saw the decline of its revenues and operating income accelerate by 25.9% and 47.2%, respectively, in the first quarter. We estimate that the company’s EBITDA margin decreased from approx. 38% in the fourth quarter to 30.5% in the first; yet, OCI remains ahead of its peers. The worse result was primarily impacted by planned maintenance, which reduced the utilization rate of the company’s 35,000-ton polysilicon plant to 70% and consequently increased manufacturing costs. For the second quarter, OCI is planning to ramp up the utilization to more than 90%.
  • Daqo New Energy reported an EBITDA margin of 18.5% in the first quarter, still decently above the margin of 14.5% achieved in the third quarter of 2023, when resignation expenses after the departure of former CEO Zhang Longgen weighed on the result. The outlier of 26.9% in the fourth quarter was mainly due to subsidies of more than US$38 million from the local government, hidden behind the item of other operating income. Daqo’s average selling price (ASP) fell from $7.97/kg in the fourth quarter to $7.66/kg in the first, almost the same level as the ASP of $7.68/kg reached in the third quarter last year. While the share of high-quality polysilicon for n-type wafers in its total output grew from 60% in December to 72% in March, the company reduced its cash production costs from $5.72/kg in the fourth quarter to $5.61/kg in the first. Despite oversupply, Daqo’s second 100,000-ton phase of its new polysilicon plant in Inner Mongolia is scheduled to start pilot production in the second quarter and to ramp up to full capacity by the end of the third quarter.
  • Wacker reversed the downtrend it had experienced over the previous two quarters. The EBITDA margin of its polysilicon division recovered from 6.8% in the fourth quarter, which was negatively influenced by year-end effects from provisions and other items, to 14.5% in the first. That was even above the margin of 13.5% achieved in the third quarter last year. As expected, lower energy costs in Germany helped Wacker improve its earnings. While the division is working on shifting the price defined in half of its solar-grade polysilicon supply contracts with Chinese customers from the low market price in China to the higher level outside China by the end of 2024, the first-quarter results “still reflect a significant exposure to the market prices in China,” according to chief financial officer Tobias Ohler.
  • REC Silicon continued to carry the load of startup costs for its fluidized bed reactor (FBR) plant in Moses Lake in the U.S. state of Washington. The company’s negative EBITDA margin improved only slightly from -77.0% in the fourth quarter to -74.7% in the first. The Semiconductor Materials segment in Butte, Montana increased its EBITDA contribution from US$1.1 million in the previous quarter to US$2.8 million, based on 2.1% larger silicon gas sales volumes; due to somewhat lower polysilicon sales and restructuring costs of $2 million for the closure of the polysilicon business in Butte by the end of 2024, however, the EBITDA remained significantly below the amount of $6.1 million achieved in the third quarter last year. For restarting the solar-grade FBR plant in Moses Lake, the company spent $26.8 million in the first quarter, similar to $25.8 million in the previous quarter. The plant produced 464 tons of off-spec polysilicon granules in the first quarter and has met five of six key purity parameters so far. Only once all six parameters have been reached will the company start shipping, which is why the first delivery has been pushed out to the end of the second quarter. After reaching the full FBR capacity of 16,000 tons by the end of 2024, REC Silicon is aiming to return to positive EBITDA in 2025.

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