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Polysilicon Price Plunge Triggers Losses for China’s Top Producers

The sharp drop in polysilicon prices has resulted in negative profit margins for leading producers like Tongwei, GCL Technology, Daqo New Energy, and Xinte Energy in the first half of 2024, forcing production cuts and strategic shifts amid volatile market conditions.

September 04, 2024. By EI News Network

The steep decline in polysilicon prices in China has significantly impacted the earnings of the world’s top four polysilicon producers viz. Tongwei, GCL Technology, Daqo New Energy, and Xinte Energy. This was revealed in a report by Bernreuter Research, a German polysilicon market specialist.

As per its report, in the first half of 2024, all four companies reported negative net profit margins.Despite operating at utilisation rates of around 90 percent during the early part of the year, GCL, Daqo, and Xinte scaled back their plant operations significantly in the third quarter due to market prices falling below production costs. Tongwei, however, continues to maintain high production levels.

Tongwei shipped 228,900 metric tons (MT) of polysilicon and produced an estimated 240,000 MT, including output from its new 200,000 MT plant in Baoshan, Yunnan, which reached full capacity in May. A second 200,000 MT plant in Baotou, Inner Mongolia, is expected to be operational by the end of the year. Despite the oversupply, Tongwei’s aggressive strategy aims to outpace weaker competitors.

The company reported a net loss of CNY 3.13 billion (USD 440 million) with a negative net profit margin of -7.1 percent. However, its photovoltaics (PV) business maintained a positive gross profit margin of 6.0 percent, thanks to its vertical integration. Tongwei is further expanding with two silicon metal factories, which raises its total liabilities-to-assets ratio to 70 percent.

GCL Technology, which ramped up its new 120,000 MT plant for polysilicon granules in Inner Mongolia, faced slower production rates. The company reported a net loss of CNY 1.52 billion (USD 213 million) for the first half of 2024, with a negative net profit margin of -17.1 percent. GCL’s debt-to-asset ratio improved to 42.7 percent, a notable decrease from previous years.

Daqo New Energy posted a net loss of USD 104 million, with a negative net profit margin of -16.4 percent. The company's inventory surplus was a major contributor to these losses, despite maintaining a low debt-to-asset ratio of 11.0 percent.

Xinte Energy, despite facing challenges, showed some positive results. It achieved a high utilisation rate of 96.1 percent and reduced manufacturing costs by 30 percent compared to the previous year. The company’s polysilicon segment had a gross profit margin of -7.8 percent, closely aligning with Tongwei’s figures, and a net profit margin of -7.6 percent. However, a Chinese news report suggests that Xinte's utilisation rate dropped to 25 percent in August due to the persistently low polysilicon prices.

It may be noted that Polysilicon is a primary material in manufacturing photovoltaic (PV) cells. It is used to create silicon wafers, which are the core component of most solar panels. These wafers are sliced from ingots of polysilicon, and their ability to convert sunlight into electricity is fundamental to solar energy technology. As polysilicon prices fluctuate, they can affect the overall cost of solar energy systems, influencing the affordability and adoption of solar technology.

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