Leading Chinese polysilicon producer Daqo New Energy has increased its annual production volume guidance for 2022 after having achieved 'better-than-expected' operational performance in H1/2022 as its gross profit for Q2/2022 went up over 16% QoQ and over 200% YoY to $946.9 million.
Daqo's revenues in Q2/2022 slightly declined to $1.244 billion compared to $1.28 billion in the previous quarter, due to a decrease in sales volume but mostly offset by high ASPs. Gross margin was 76.1%, up from 63.5% in the previous quarter and 68.7% in the previous year. For this the management attributes 28% reduction in polysilicon production cost sequentially.
The company produced 35,326 metric tons (MT) polysilicon in the reporting quarter, and sold 37,545 MT for $33.08 per kg ASP. The ASP improved from $32.76 per kg in the previous quarter.
Daqo managed to bring down the average total production cost of polysilicon in the reporting quarter to $7.26 per kg, down from $10.09 per kg in Q1/2022. "With higher manufacturing efficiency and better economy of scale, we reduced our per unit electricity cost and depreciation cost by 7% and 13% in RMB terms quarter-over-quarter, respectively. In addition, our metallurgical–grade silicon cost in the second quarter was reduced by 37% as compared to the first quarter. With our facility in optimized stable operations, we believe we will be able to maintain, and possibly further improve, our cost structure in Q3 and Q4 this year," said Daqo CEO Longgen Zhang.
In the next 2 quarters, Daqo plans to conduct annual maintenance of its facilities in phases, and also carry out technological improvement projects. With these plans, the manufacturer targets to produce 31,000 MT to 32,000 MT polysilicon in Q3/2022. Zhang said the company is sold out for August and has strong order backlog.
But for the annual production capacity, the targets have been increased to 129,000 MT to 132,000 MT, up from the previous guidance of 120,000 MT to 125,000 MT (see Daqo Revenues & Gross Profit Up In Q1/2022).
According to the management, the current challenges in the solar PV value chain are here to stay. Zhang explained, "Challenges in getting energy consumption approvals, long construction times, and delayed ramp-up times, as well as the operational inexperience of new players, make polysilicon one of the sectors with the highest entry barriers and slowest expansion growth in the solar PV manufacturing value chain. We expect this imbalance to continue for a while and help our sector greatly benefit from the robust market demand."
End of July, Roth Capital Partners also shared a similar view when the analyst firm said that polysilicon supply growth is lagging demand growth, but the situation could potentially see some alleviation by YE'23. The financial analysts said that polysilicon prices were flat last week (WoW), 'but are expected to continue increasing modestly when companies start the next round of order bookings in August.'
Of late, several new silicon projects have been announced or started production in China, including GCL Technology's 100,000 ton granular silicon project, which began operations in Leshan end of July (see China PV News Snippets). In early August, integrated solar PV manufacturer from China, Tongwei announced that production of the first phase of its joint venture Yongxiang Energy Technology's 120,000-ton high-purity crystalline silicon project has begun in Sichuan (see China PV News Snippets).