Wacker quoted ongoing consolidation as a factor for reduced volume sales. Some of the customers did not take on deliveries due to the financial crunch
WACKER Chemie AG released its Q2 results for the polysilicon segment of the business. Q2 revenues of €286M were 21.8% lower than the first quarter of the year, and 28% lower than in a year-over-year comparison to 2011. Wacker quoted ongoing consolidation as a factor for reduced volume sales. Some of the customers did not take on deliveries due to the financial crunch. In addition, the company had retained €20M in prepayments as a fee for cancelled contracts. Wacker is expecting business risk from the poor financial condition of its clients to continue in the near future.
Further, the company expects pricing to drop in Q3 versus the Q2 ASP. Quoting difficult conditions resulting from overcapacity, WACKER noted that other companies have halted their polysilicon expansions in the US and Asia, the most significant being South Korean OCI Chem. WACKER has spent €300M this year on construction of its poly plant in Charleston, Tennessee, which will become operational at the end of 2013 with full production in 2014. In late April, new “hyperpure” facilities went on stream in Nünchritz, Germany. The capacity of 15,000 metric tons per year was reached in Q2, bringing expected overall capacity by the end of 2012 to 52,000MT. The company is optimistic over the demand for solar and its leading role in the industry.
Last week, China started investigating polysilicon imports from the US and South Korean companies. Until yesterday, WACKER had been seen as the beneficiary. The investigation is expected to last until July 2013 and may require a six-month extension to complete; potentially the negative decision and enforcement could affect the US subsidiary. However, sources confirmed that SolarWorld had filed an anti-dumping petition with the EU Commission, which may have a detrimental effect on WACKER and the industry. Suntech Power Holdings Co., Ltd. (NYSE: STP) had already issued a statement regarding the allegations. If the EU takes a similar stand to that of the US, the effect on the Chinese companies and their operational relationships in Europe could be devastating.
While SolarWorld is struggling financially with its own high debt, in Q1 the company had lost 98% of its business in Asia and had found only an enclave of market share domestically and in the US, being the sole recipient of the “CASM” activities, an organization founded by the US solar manufacturers, of which SolarWorld USA is the most famous ambassador and enforcer. Since the inception, at least two founding fathers had stopped operations, and module ASP has been steadily falling despite duties. This condition is proving that ASP is a global mechanism; driven by Korean, Taiwanese and Japanese companies in the absence of the singled-out and chastised Chinese.
In fact, LDK Solar Co., Ltd (NYSE: LDK), which is faced with a financial crisis of its own, shows that Chinese companies are as vulnerable to market conditions, and as much as any other company susceptible to insolvency risk. While the jury is still out on LDK, 50 to 60% of Chinese enterprises had collapsed in polysilicon production, leaving only a handful producers like GCL Poly, ReneSola (NYSE: SOL) and Daqo New Energy Corp (NYSE: DQ). In another case, Chinese polysilicon plant, Fine Solar, managed by Yingli Green Energy Hold. Co. Ltd (NYSE: YGE), had been written off in full by the company and as far as SPVI knows remains dormant in current conditions.