2024 is the worst year for Chinese polysilicon companies.

It is reported that three of the four major polysilicon companies have recently disclosed their 2024 results.

Among them, Xinte Energy (HK: 01799) will have a net profit loss of 3.905 billion yuan attributable to the parent company in 2024, a year-on-year decrease of 190%.

Another leading company, Daqo Energy (SH: 688303), will have a net profit loss of 2.718 billion yuan attributable to the parent company in 2024, a year-on-year decrease of 147.17%.

What is surprising is that GCL Technology (HK: 03800), which has a cost advantage in granular silicon, has lost more than Xinte and Daqo. According to the annual report, the annual loss attributable to the owners of GCL Technology in 2024 will be about 4.75 billion yuan, a year-on-year decrease of 289%.

The above three companies have a total loss of 11.813 billion yuan. Combined with Tongwei Co., Ltd. (SH:600438), which has a pre-loss of 7 billion to 7.5 billion yuan, the total loss of the four major polysilicon leaders is 18.813-19.313 billion yuan.

What are the common factors behind the huge losses of polysilicon leaders? With the sharp price fluctuations in the industry, all companies are stepping up their preparations, will a new round of war break out in the polysilicon sector?

Why did you lose so badly?

The leading enterprises pointed to the decline in the price of the industrial chain as the reason for the loss of the enterprise.

Daqo said that in 2024, the domestic polysilicon industry will still face the dilemma of supply and demand imbalance, the price of the industrial chain will continue to fall, and the price of products will even fall below the cash cost of enterprises, causing the industry as a whole to fall into a state of loss.

Xinte gave more clear data: polysilicon prices will fall irrationally in 2024, with the average price of dense material falling from 58,100 yuan/ton (tax included) at the beginning of January 2024 to 36,500 yuan/ton (tax included) at the end of December 2024, and polysilicon prices have fallen below enterprise costs since April 2024 and continue to run at a low level. In 2024, the average selling price of Xinte Energy's polysilicon will be 38,400 yuan/ton (excluding tax), a decrease of about 60% from the same period last year.

The price drop has caused the revenue and gross profit margin of each leading company to drop sharply.

Xinte, which adopted a contraction strategy and had an operating rate of less than 30% in the second half of the year, said that the revenue of its polysilicon segment decreased by 11.768 billion yuan compared with the same period last year, a decrease of more than 60%, the gross profit for the whole year decreased by 8.757 billion yuan, a decrease of nearly 90%, and the comprehensive gross profit margin was only 6.42%, a year-on-year decrease of 26.48 percentage points.

GCL Technology's polysilicon sales volume in 2024 will increase by 24.7% year-on-year, but the revenue from external customers in this segment will fall from 33.5 billion yuan in the previous year to 15 billion yuan, a year-on-year decrease of more than half. Not only that, but the gross profit margin of its photovoltaic materials will drop from 34.6% in 2023 to -16.9% in 2024.

In addition, affected by the decline in the price of the industrial chain, GCL's investment losses in associate companies such as Xuzhou Fund, Xuzhou Risheng, and Inner Mongolia Zhonghuan GCL were also as high as 12.82 billion yuan.

The price decline also led to inventory impairments and drove significant asset impairments due to the phase-out of old capacity.

Daqo said in its 2024 annual performance report that it has made provisions for inventory price declines and asset impairment provisions for long-term assets such as old equipment production lines, which has a greater impact on the performance of the reporting period. The full amount of the year has not been announced, and the asset impairment provision for the first three quarters of 2024 is about 582 million yuan.

The asset impairment of the other three polysilicon giants is not small. In 2024, Tongwei's long-term assets will be scrapped by about 1 billion yuan; Xinte is preparing to make a provision for the impairment of assets related to polysilicon and self-operated power station business totaling RMB3.416 billion, of which RMB1.474 billion is provided for the impairment of fixed assets due to the scrapping of polysilicon and by-product production lines and some of the replaced polysilicon production equipment, while GCL Technology has recognized an impairment loss of about RMB401 million due to the scrapping of certain properties, plants and equipment.

The decline in prices has also led to a sharp increase in the financing costs of enterprises and an increase in impairment losses on financial assets.

For example, GCL Technology's financing cost increased from 4.180 billion yuan in 2023 to 6.180 billion yuan in 2024, and the company's impairment loss on financial assets soared from 1.370 billion yuan in 2023 to 9.890 billion yuan in 2024 due to the increase in impairment losses on trade-related and non-trade-related receivables.

Who's going to be the first to get through?

After at least three quarters of consistent losses, the polysilicon industry shows no signs of coming out of the woods.

On the one hand, the prices of modules, wafers, and cells have all risen sharply under the current rush to install 430 and 531, while polysilicon prices have remained unchanged since February. On the other hand, the enthusiasm of downstream procurement is not high, and the inventory has been high.

Under the multiple pressures of huge performance losses, high inventories, and low prices, the industry is full of a sense of crisis.

The sense of crisis is first reflected in the fact that all companies are reducing their operating rates. According to the survey of the silicon industry branch, all the polysilicon enterprises in China are basically in a state of load reduction, and the monthly production capacity of the industry has been maintained below 100,000 tons since the beginning of this year.

Second, companies are improving their financial position in different ways, either by strengthening their capital reserves or by reducing their spending, especially recently.

The most representative is GCL Technology, which recently announced that the total remuneration of all executive directors in 2024 and 2025 will be reduced to 16.4 million yuan and about 16.3 million yuan, respectively. Compared with the total salary of 188 million yuan in 2023, the reduction is more than 90%.

Polysilicon boss Tongwei sold shares and introduced war investment to obtain blood transfusion support. Recently, it announced that its wholly-owned polysilicon subsidiary, Yongxiang Co., Ltd., plans to introduce strategic investors to obtain a capital increase investment of no more than 10 billion yuan, and the investors are expected to obtain a total equity ratio of no more than 27.03% after the company's capital increase.

After the failure of Xinte's A-share IPO, in order to improve its performance, the parent company TBEA did not hesitate to transfer 49% of the equity of Zhundong Energy, which owns high-quality thermal power assets, to Xinte at a price of 1.508 billion yuan far lower than the market.

Huaxia Energy has noticed that the four major polysilicon leaders are now facing significant pressure on cash flow.

In 2024, Xinte's net operating cash flow will decrease by 87.79% from 14.371 billion yuan in the previous year to 1.755 billion yuan.

By the end of the third quarter of 2024, Tongwei's net cash flow from operating activities was less than 3 billion yuan, a decrease of more than 85% compared with the same period in 2023.

Daqo Energy's cash and cash equivalents balance decreased from 19.564 billion yuan at the end of 2023 to 3.529 billion yuan at the end of the third quarter of 2024, a decrease of more than 80%.

GCL Technology's cash and cash equivalents balance will drop to 3.985 billion yuan by mid-2024, equivalent to a decrease of 40% in half a year.

It is worth mentioning that Daqo Energy has been in personnel turmoil, with at least 7 senior executives or core technical personnel leaving in the past two years, or because of excessive performance pressure, the financial and cash flow situation has not improved.

In addition, the total debt of Tongwei and Xinte is rising. By the end of the third quarter of 2024, Tongwei's total liabilities reached 136.6 billion yuan, an increase of 46.1 billion yuan from the end of 2023. By the end of the same year, Xinte's total liabilities reached about 46.4 billion yuan, an increase of 1.7 billion yuan year-on-year.

The great drought was followed by the great calamity, and the great calamity was followed by the great chaos. Polysilicon faucets need to stock up on as much grain and grass as possible to prepare for a possible reshuffle. Although it is not yet clear which leader has the strength to bring down the other leaders, the reality is so cruel - as long as one leader is out, the industry situation will be greatly improved.

The battle of costs is life and death

The

price of polysilicon will most directly determine the survival of polysilicon companies in the future. In the future, polysilicon prices are unlikely to rebound. At present, even though the entire industry chain is showing signs of price increases, the downstream procurement of polysilicon is not very active.

By the beginning of April, the industry's polysilicon inventory had even risen to 400,000 tons, and the impact of the earthquake in Myanmar on the production capacity of mono rods in Yunnan and Sichuan regions, and the delivery of some polysilicon orders were delayed, making polysilicon destocking in April expected to slow down.

"At this stage, the price of polysilicon is not gaining momentum, and unless there are other favorable factors, prices will be stable in the short term." Judgment of the Silicon Industry Branch.

This means that polysilicon may hover in the low price range of 30,000-40,000 yuan/mt for a long time. Polysilicon companies will face a brutal bottom cycle. The cost competition of each company will determine who can get the ticket to the future through the cycle!

Nowadays, the polysilicon industry is full of mountains and rains, and companies are flexing their muscles to carry out technology competitions to reduce the cost of polysilicon.

"If the capital is compared to the blood bar, then the cost reduction is the sharp edge, and the blood bar competition is only how long the enterprise can last in the face of blood loss, and the sharp blade is the key to determining the victory or defeat. In the end, the polysilicon war is about cost advantage. A senior practitioner told Huaxia Energy Network.

At the 2024 annual results briefing held on March 29, GCL has shown its sword - Lan Tianshi, co-CEO of GCL Technology, revealed that the current production cash cost of its granular silicon technology has been as low as 27.14 yuan/kg. The proportion of high-quality products has increased to more than 95%, the market share has exceeded 25%, and the proportion of applications by top customers has exceeded 40%.

That's incredible data. In the fourth quarter of 2024, GCL's granular silicon cost will still be 28.17 yuan/kg, and the cost per kilogram will drop by another 1 yuan in a short period of time. In addition, Lantianshi emphasized, "GCL Technology's granular silicon has almost zero inventory. ”

By August 2024, Tongwei, which takes the rod silicon route, has reduced its polysilicon cash cost to 35 yuan/kg, crushing similar companies. Now, Tongwei is trying granular silicon technology again, and its grandson company has added a 10,000 tons/year granular silicon pilot line in the "Yongxiang New Energy Phase II Technical Transformation Project", which will eventually form a polysilicon production capacity of 101,000 tons.

In this regard, Tongwei said that the granular silicon project is a research and development project to enhance the competitive advantage of rod silicon, and the core process, key parameters and quality control system have formed an independent technical path.

Both Daqo and Xinte have also promoted cost reduction and efficiency improvement through digital and intelligent transformation of production lines, and the cash cost of Daqo polysilicon has dropped to RMB 35.19/kg by the fourth quarter of 2024.

Under the cold winter of the industry, the polysilicon war has begun. Will this time be a life-and-death battle in the established rankings? The longer the winter, the colder the weather, and the sooner you will know.