Daqo to Slash Q3 Polysilicon Production Amid Market Price Drop

Chinese polysilicon producer Daqo New Energy plans to reduce its production in the third quarter of 2024 due to a continuing decline in polysilicon prices. This strategic decision aims to curb an oversupply in the market as the company adjusts its production targets and carries out necessary maintenance.

Lower Production Forecast and Falling Prices

Daqo projects a third-quarter production range of 43,000 to 46,000 tons, a significant reduction from the 64,961 tons produced in the second quarter and the 57,664 tons produced in the same period in 2023. The company also revised its full-year production estimate down to 210,000–220,000 tons, from an earlier forecast of 280,000–300,000 tons.

The drastic fall in polysilicon prices—below 40 yuan per kilogram (kg) by the end of May, from over 60 yuan/kg in early April—was a major factor in the company's decision. Daqo reported that industry-wide inventories increased, contributing to excess supply. By the end of June, total industry inventories had grown to over a month’s worth of production, up from 18–20 days in early April.

Industry-Wide Impact and Response

The industry as a whole saw a reduction in production, with China's polysilicon output dropping by 16% to 162,000 tons in June from 192,000 tons in April. Despite these cuts, supply still exceeded demand, with solar silicon wafer customers reducing their production rates to around 50 gigawatts (GW) in June.

Daqo's CEO, Xiang Xu, emphasized that while production cuts in July helped mitigate oversupply, a rebound in downstream demand will be critical to driving down inventory levels and stabilizing prices. China's solar panel installations reached 102.48 GW in the first half of 2024, reflecting a 30.7% year-over-year growth, offering some hope for recovery.

Future Consolidation and Production Improvements

Daqo expects industry consolidation as higher-cost producers struggle to remain competitive. "Many solar firms are facing significant cash flow challenges, delaying loan repayments and deliveries," Xu said. The China Photovoltaic Industry Association (CPIA) has called for coordinated efforts between governments, financial institutions, and companies to accelerate industry consolidation.

On the production front, Daqo has begun initial operations at its new 100,000-ton Phase 5B polysilicon plant in Inner Mongolia, which accounted for 12% of the company’s total output in the second quarter. Daqo’s combined production from its two facilities reached 64,961 tons, surpassing expectations.

Furthermore, the company has made strides in producing higher-quality N-type polysilicon, with 73% of its output in the second quarter meeting this standard. The Phase 5B facility achieved 70% N-type production and is on track to reach 100% by the end of 2025. The company also reduced production costs to $6.19/kg in the second quarter, a 3% decrease from the previous quarter.