China’s polysilicon sector is at a turning point after recent meetings with the government to address overcapacity, according to Daqo New Energy Corp.’s chief financial officer Ming Yang.
Major firms intend to establish a fund to purchase and shut down over 1 million tons of capacity to help fix the industry, with the plan being discussed and moving forward with government support.
The sector’s recovery is expected to drive “significantly” improved earnings from the third quarter, with Daqo’s chief financial officer saying the company should start to generate profitability within six months.
China’s polysilicon sector, which along with the rest of the solar supply chain has been grappling with severe overcapacity, is at a clear turning point after recent meetings with the government to address the issue, according to a major producer.
“I think the industry already marked a clear bottom, and it is already recovering,” said Ming Yang, chief financial officer of US-listed Daqo New Energy Corp., in a Bloomberg Television interview on Thursday.
Shares of solar companies jumped after his comments, accounting for seven of the top 10 risers on China’s CSI 300 index. Daqo’s Shanghai-listed stock surged as much as 14%.
The firm reported a net loss of $76.5 million in the second quarter, narrower than a year earlier. Ming said the sector’s recovery should drive “significantly” improved earnings from the third quarter. “Within six months, before the end of the year, we should start to generate profitability,” he said.
To help fix the industry, major firms intend to establish a fund of at least 50 billion yuan ($7 billion) this quarter to purchase and shut down over 1 million tons of capacity. Ming said the plan is being discussed, and is moving forward with the support of the government, although some details still need to be fleshed out. Those include how to fund the initiative and at what price capacity marked for closure will be purchased.
“The main concern is that obviously there’s this acquiring consortium of the major players, and there are the players about to be acquired,” said Ming. “So there is discussion on who is going to exit and who will remain.”
Solar-grade polysilicon, a key material in panels, is currently priced around 50 yuan a kilogram. Ming said a level of between 50 and 60 yuan is reasonable, given current production levels and costs.
