FAST NEWS: Daqo Secures Major New Polysilicon Order

The latest: Polysilicon maker Daqo New Energy Corp. (DQ.US; 688303.SH) said on Tuesday it has signed a new contract to supply an unspecified customer with 46,200 metric tons (MT) of high-purity polysilicon between 2023 and 2027.

Looking up: Four days earlier, Daqo disclosed the signing of an even larger deal to supply 150,300 MT of polysilicon to a subsidiary of Shuangliang Eco-Energy (600481.SH), meaning the company has locked in two large long-term orders in less than a week.

Take Note: Both contracts state actual prices for the purchases will be negotiated monthly according to market conditions. That means that Daqo’s revenue, and probably its profit margins, could take a hit if polysilicon prices drop from their current record highs.

Digging Deeper: Demand for polysilicon has surged over the past two years on big demand for solar energy, pushing prices for the key component in solar panel production to record highs. Manufacturers like Daqo have been working hard to increase their production capacity to take advantage of the strong demand. Daqo is currently building a massive $5.2 billion facility in Inner Mongolia, which will triple its current capacity to as much as 300,000 MT per year. The two new supply contracts would represent up to 15% of the company’s annual capacity after all the new capacity comes on stream.

Market Reaction: Daqo shares surged 6% to $50.97 in New York on Tuesday, and now trade in the middle of their 52-week price range. The company’s Shanghai-listed A shares closed flat at 51.53 yuan at the midday break on Wednesday, and are more than double their IPO price of 21.49 yuan last year.

Translation by Jony Ho

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