In addition, Daqo recorded a third consecutive quarterly decline in its sales volume to 43,082 tonnes in the second quarter of 2024.

Polysilicon sales peaked at 63,263 tons in the third quarter of 2023, when prices were more than double current prices. Since June 2024, polysilicon prices have stabilized below the 40 RMB/kg (5.6 US dollars/kg) mark (premium access). Sales declines also impacted the results of polysilicon producer Wacker Chemie in the second quarter of 2024.

Xiang Xu, CEO of Daqo New Energy, said: “The solar industry faced significant challenges in the second quarter as market prices across the solar value chain fell below the cost of production for almost the entire industry. As the average selling price of polysilicon fell below our cost of production at the end of the quarter, we were required to record a non-cash inventory impairment of $108 million in accordance with accounting standards as our market value fell below carrying value.”

As both sales volume and ASP declined in the second quarter of 2024, Daqo’s revenues also declined, both sequentially and annually. In the second quarter of 2024, Daqo reported revenue of $219.9 million, nearly half of the first quarter of 2024 and a third of the second quarter of 2023, when the company reported revenue of $636.7 million.

In addition, the company reported a gross loss of $159 million in the second quarter of 2024, compared to a gross profit of $259 million in the same period last year.

Despite a downward trend in polysilicon sales volume, ASP and revenue, the company further increased its production capacity to 64,961 tons in the second quarter of 2024, an increase of 2,683 tons over the previous quarter.

In the second quarter of 2024, the polysilicon producer began initial production at its 100,000-ton Phase 5B polysilicon plant in Inner Mongolia. This plant contributed nearly 12% to the company’s total production volume.

“Through continued investment in R&D and our commitment to improving purity at both plants, our overall N-type product mix reached 73% during the quarter. Notably, even our Phase 5B, which was still in the ramp-up phase, had 70% N-type in the product mix, which increases our confidence in achieving 100% N-type by the end of next year,” added Xu.

Daqo adjusts production capacity for the rest of the year

Due to current market conditions and prices, Daqo New Energy has adjusted its production targets for the third quarter of 2024 and for the full year of 2024. In the third quarter of 2024, the company aims to produce between 43,000 and 46,000 tonnes as it has begun maintenance work and reduced its production capacity to “support prices and reduce our cash burn,” Xu said.

For the full year 2024, the company is targeting a production volume of 210,000 to 220,000 tons of polysilicon.

“As prices fell below the industry’s cash costs for weeks and inventories piled up, we began to see maintenance and production cuts across the industry. According to industry statistics, China’s total polysilicon production volume fell by about 16% from about 192,000 tons per month in April to about 162,000 tons in June. However, polysilicon supply still exceeded wafer customer demand, which fell to about 50 GW in June due to lower capacity utilization. Although there were further polysilicon production cuts in the industry in July, an increase in demand from downstream manufacturers will be needed to drive inventory reduction and price recovery,” Xu added.

According to Xu, Chinese solar manufacturers may have reached a cyclical low – a view shared by several Chinese photovoltaic giants in May – although he sees no clear signs of a possible improvement. Xu added that selling products at lower production costs is “unsustainable” and will therefore lead to market consolidation.