Lower Production Targets and Price Drops
Daqo has revised its third-quarter production forecast to 43,000–46,000 tons, down from 64,961 tons in the second quarter and 57,664 tons during the same period in 2023. Additionally, the company has lowered its full-year production estimate to 210,000–220,000 tons, a significant reduction from its earlier target of 280,000–300,000 tons.
The decision to cut production is largely driven by a sharp drop in polysilicon prices, which fell to below 40 yuan per kilogram by the end of May, from over 60 yuan per kilogram in early April. Daqo noted that increased industry-wide inventories have led to an oversupply. By June’s end, the total industry stockpile had expanded to more than a month’s worth of production, up from 18–20 days in early April.
Industry Impact and Responses
Across the sector, production has declined, with China’s overall polysilicon output dropping 16% to 162,000 tons in June, down from 192,000 tons in April. However, even with these cuts, supply continued to exceed demand as solar silicon wafer producers reduced their production rates to around 50 gigawatts (GW) in June.
CEO Xiang Xu highlighted that while production cuts in July have somewhat eased the oversupply, a rebound in downstream demand will be essential to lowering inventory levels and stabilizing prices. There are signs of recovery, with China’s solar panel installations hitting 102.48 GW in the first half of 2024, representing a 30.7% year-on-year increase.
Consolidation and Production Enhancements
Daqo expects that the industry will see consolidation as higher-cost producers struggle to remain viable. Xu pointed out that many solar companies are facing severe cash flow issues, delaying loan repayments and deliveries. The China Photovoltaic Industry Association (CPIA) has called for collaborative efforts among governments, financial institutions, and companies to accelerate consolidation within the sector.
On the production side, Daqo has initiated operations at its new 100,000-ton Phase 5B polysilicon plant in Inner Mongolia, contributing 12% of the company’s total output in the second quarter. Combined production from Daqo’s two facilities reached 64,961 tons, exceeding expectations.
Moreover, Daqo has made significant progress in producing higher-quality N-type polysilicon, with 73% of its output in the second quarter meeting this standard. The new Phase 5B facility achieved 70% N-type production and is expected to reach 100% by the end of 2025. The company also reduced its production costs to $6.19 per kilogram in the second quarter, a 3% decline from the previous quarter.
This strategic focus on cost-efficiency and high-quality production positions Daqo to better navigate the challenges in the polysilicon market.
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