Polysilicon Market Bleeds Top 4 Chinese Manufacturers With Losses In H1

German polysilicon market specialist Bernreuter Research reports that the top 4 Chinese polysilicon manufacturers all slipped into losses in the first half of 2024. Consequently, at least three of the top 4 have cut down on capacity utilisation in the second half of the year, even as Tongwei continues to maintain output. In the first half, all four had been running at over 90% utilisation rates. GCL, Daqo and Xinte are the firms that reduced the operating rate of their plants significantly in the third quarter.

Pic Courtesy: Bernreuter

• Tongwei shipped 228,900 metric tons (MT) of polysilicon in the first half of 2024; Bernreuter estimates that the market leader produced 240,000 MT, including roughly 8,000 MT from its new 200,000 MT plant in Baoshan, Yunnan province, which started up in May and has now reached full capacity, according to Tongwei’s semi-annual report released on August 30. As if that weren’t enough, the report says that the company’s second new 200,000 MT plant in Baotou, Inner Mongolia “is expected to be completed and put into production before the end of the year” – despite persisting oversupply. In the first half of 2024, the company recorded a net loss attributable to shareholders of CNY3.13 billion (US$440 million), corresponding to a negative net profit margin of -7.1%. Its photovoltaics (PV) business unit still achieved a positive gross profit margin of 6.0%, underlining the advantages of Tongwei’s vertical integration from polysilicon to solar modules. By the end of 2024, Tongwei will further extend its industrial chain with two silicon metal factories in Sichuan and Inner Mongolia comprising a total capacity of 300,000 MT. The massive expansion, however, comes at a price: The PV business unit’s ratio of total liabilities to total assets has a pretty high score of 70%.

• GCL Technology says it started to ramp up its new 120,000 MT fluidized-bed reactor plant for polysilicon granules in Hohhot, Inner Mongolia – its fourth after three 100,000 MT plants in Xuzhou (Jiangsu province), Leshan (Sichuan province) and Baotou (Inner Mongolia) – in the first quarter; however, the company’s total production volume of 136,359 MT in the first half of the year (annualized: 272,718 MT) indicates that the ramp up has been slow. In view of the price decay, GCL began to reduce the utilization of its plants in May and launched a production system optimization project, which is expected to be completed in September.
  The company reported a net los attributable to shareholders of CNY1.52 billion (US$213 million) in the first half of 2024; the negative net profit margin amounts to -17.1%. While the margin was still slightly positive with 0.6% in the first quarter, it plunged to -45.7% in the second. GCL’s solar materials segment (polysilicon and wafers) has a debt-to-asset ratio of 42.7% now, an enormous improvement compared to 70.4% in 2020. This is obviously a result from the fat earning years during the polysilicon shortage in 2021 and 2022.

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• Daqo New Energy accumulated a net loss attributable to shareholders of US$104 million in the first half of 2024, equivalent to a negative net profit margin of -16.4%. The value plummeted from a positive 3.7% in the first quarter to -54.5% in the second. Above all, the large inventory volume of 20,800 MT at the end of June contributed to the red figures in the second quarter . Nevertheless, Daqo’s debt-to-asset ratio of 11.0% is still extraordinarily low.

• Xinte Energy surprised positively with its income statement for the first half of 2024. After problems with ramping up its new 100,000 MT plant in Inner Mongolia in 2023, the company achieved a high utilization rate of 96.1% in the first half of 2024 and reduced its manufacturing costs by 30% over the first half of 2023. As a result, the polysilicon segment’s gross profit margin of -7.8% is comparable to that of GCL’s solar material business (-6.6%), and Xinte’s net profit margin (including its power plant business) of -7.6% almost matches that of Tongwei (-7.1%). Moreover, the polysilicon segment’s debt-to-asset ratio of 31.4% has become the second lowest; it is only behind Daqo’s extremely low value. However, according to a Chinese news article, which was indirectly confirmed by a report from price data provider OPIS, the company was running at a utilization rate of only 25% in August.

The losses, while predicted, will still hurt, and leave the industry with very little leeway for further drops. Fresh capacity coming up in China as well as in key export markets will further stymie hopes of a reversal, unless there is a major collapse at a key firm. For now, it does seem that the answer will have to be found in China itself, as capacities elsewhere are being protected with tariffs and other non-tariff barriers like the Uighur issue in the case of the US or specific PLI schemes in India.

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