INDUSTRY BRIEF: Polysilicon makers slash output to 30-40% of capacity

Chinese polysilicon makers have slashed their output and are currently operating at less than 40% of capacity, as they struggle to cut their losses from selling product at less below costs, financial media Caixin reported on Friday. An official from Daqo New Energy (DQ.US; 688303.SH), a leading supplier, told Caixin the company was currently using between 30% and 40% of its capacity, which he described as “roughly in line with the industry average.”

Daqo and its peers are struggling after building up huge new capacity over the last two years when prices were soaring for polysilicon, the main ingredient used to make solar cells. But the huge addition of new capacity, combined with moderating demand for solar panels, has caused prices to plunge, pushing most major polysilicon manufacturers into the red.

Daqo is typical of the industry, reporting it cost the company $7.57 to produce each kilogram of polysilicon in the first three months of this year, far higher than its average selling price of $4.37 per kilogram. As it slashed production and polysilicon prices tumbled, Daqo’s revenue fell to $124 million in the first quarter of this year from $415 million a year earlier. It reported a net loss of $71.8 million in the first quarter, reversing a net profit of $15.5 million a year earlier.

An official from the Expert Committee of the Silicon Industry Branch under the China Nonferrous Metals Industry Association told Caixin that most producers started cutting back on their production as early as the second half of last year. He added that clearance of large amounts of inventory is necessary before prices can stabilize and start to rise again.

By Doug Young

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