Daqo Sold More Polysilicon Than Guided In Q2/2020

Daqo New Energy Reported Profitability & Higher Polysilicon Production During Q2/2020; Management Expects Polysilicon Demand To Outstrip Supply Over 15 Months To 18 Months
07:24 PM (Beijing Time) - 21. August 2020
Presentation1

While Daqo New Energy managed to lower its average production cost for polysilicon in Q2/2020 to $5.79 per kg, the ASP declined to $7.04 per kg. The management has guided for its Q3/2020 production volume a range of 17,000 MT to 17,500 MT. (Source: Daqo New Energy)

Key Takeaways

  • Daqo’s Q2/2020 results show the company exceeded its production guidance and sold 18,881 MT during the quarter
  • It has reiterated annual polysilicon production guidance for 2020 after it returns to full capacity utilization in September 2020
  • Management does not see enough polysilicon supply in the market over the next 15 months to 18 months

For all the threat of COVID-19 disrupting businesses, Chinese polysilicon producer Daqo New Energy did quite well reporting profitability during Q2/2020 with $2.4 million net income compared to a net loss of $2.2 million in Q1/2019 (see Daqo Sales Up But Losses In Q2/19). Yet it was a significant drop from $33.2 million in the previous quarter (see Daqo Ticked All Right Boxes In Q1/2020).

It produced 18,097 metric tons (MT) polysilicon in the reporting quarter exceeding its own guidance and sold 18,881 MT with an average total production cost of $5.79 per kg bringing it down from $5.86 per kg in Q1/2020. Nonetheless, the average selling price (ASP) for polysilicon declined to $7.04 per kg compared to $8.79 per kg in the previous quarter.

“Towards the end of the second quarter, we began to see very positive momentum in solar PV demand in both domestic and overseas markets, supported by further capacity expansions by downstream mono-wafer customers. This has translated into meaningful demand improvement for polysilicon, which has driven a significant increase in polysilicon ASPs recently,” pointed out Daqo CEO Longgen Zhang. “Current market ASPs for mono-grade polysilicon are approximately $11~$12/kg, a significant improvement from approximately $7.5/kg in the second quarter. We expect polysilicon supply to remain tight as the overall demand for PV solar continues to grow, supported by continued mono-wafer production capacity expansion and limited additional supply of polysilicon over the next 15 months.”

Daqo management does not see any new polysilicon production capacity coming online in the next 15 months to 18 months. Even if Tongwei and Asia Silicon bring new capacity online, it believes this still won’t suffice demand which will further push up ASP for the material.

Speaking about technological improvements, Daqo said close to 95% of its polysilicon production capacity reached mono-grade quality. As the company improved its cost structure its cash cost during Q2/2020 reached a ‘historically-low’ of $4.87 per kg.

Going forward, Daqo expects some impact on its quarterly production volume owing to technology upgrade and equipment modifications works scheduled for August 2020; hence it has guided to produce 17,500 MT to 18,000 MT of polysilicon in Q3/2020. The management is confident of returning to full utilization in September 2020. It has reiterated annual production volume for 2020 between 73,000 MT to 75,000 MT.

Regarding the current tight supply of polysilicon on the global module manufacturing industry, analyst Philip Shen of investment bank Roth commented, “With GCL’s Xinjiang facility expected to be shut down until at least October and the Leshan flooding taking ~20k MT of Tongwei’s poly capacity offline, we see further near-term tightening of poly supply and higher poly ASPs. Moreover, we believe poly capacity could remain in short supply in 2021 as it appears no meaningful capacity expansion is expected, while demand could be robust.”

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

Write, follow the author.
Email

Anu Bhambhani