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New article just out:

https://finance.yahoo.com/news/daqo-energy-begins-pilot-production-103000440.html

So here's the business case, according to the article:  production cost to decrease to $7.50/kg by end of Q1 19, to $6.80/kg by end of Q1 20.

Klothilde, what does your number-crunching say about profitability at these cost levels?

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50 minutes ago, solarpete said:

New article just out:

https://finance.yahoo.com/news/daqo-energy-begins-pilot-production-103000440.html

So here's the business case, according to the article:  production cost to decrease to $7.50/kg by end of Q1 19, to $6.80/kg by end of Q1 20.

Klothilde, what does your number-crunching say about profitability at these cost levels?

35KMT*7.5=$262.5M

70KMT*6.8=$476M

35KMT=$476-262.5=$213.5M

$213.5M/35KMT = $6.1/Kg production costs for new capacities.

I was hoping for lower costs for new capacities.

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On 10/15/2018 at 6:26 PM, solarpete said:

Klothilde, what does your number-crunching say about profitability at these cost levels?

At 7500 MT per quarter, $7.5/kg cost and $10/kg ASP they get a quarterly EPS of $0.5 at the most.  At $15/kg ASP the quarterly EPS goes up to nearly $3.  As you can see it all depends on the ASP.

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4 hours ago, Klothilde said:

At 7500 MT per quarter, $7.5/kg cost and $10/kg ASP they get a quarterly EPS of $0.5 at the most.  At $15/kg ASP the quarterly EPS goes up to nearly $3.  As you can see it all depends on the ASP.

Are you expecting only nameplate production of the initial 30KMT? They had been producing 20+% over nameplate for the past year. If they get similar results with the new capacity then EPS could easily be $0.75/qrtr  at $10/KG ASP. Debottlenecking  brings capacity to 35KMT by the end of June.  That would push earnings close to $1/qrtr at a $10ASP. Just in time for the next phase 4A to start ramping in Q4 2019.

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6 hours ago, SCSolar said:

Are you expecting only nameplate production of the initial 30KMT? They had been producing 20+% over nameplate for the past year. If they get similar results with the new capacity then EPS could easily be $0.75/qrtr  at $10/KG ASP. Debottlenecking  brings capacity to 35KMT by the end of June.  That would push earnings close to $1/qrtr at a $10ASP. Just in time for the next phase 4A to start ramping in Q4 2019.

You are right, they will probably exceed nameplate capacity.  My calcs were just "back of the envelop" to highlight the high sensitivity to different ASPs.

As a word of caution I used $10/kg just as an example and not as a forecast.  I see tremendous risk of the ASP eroding below $10.  The new capacities coming online in low-cost locations in China coupled with the fast reduction in poly consumption per watt (due to DWS adoption and mono migration) will result in an oversupply of biblical proportions imho.  DQ being a low-cost producer is attractive to look at, however I would really hang on and see where the re-adjustment of the industry is taking us before considering an entry.  jmho.

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Mono-grade polysilicon dropping to 85 RMB/kg this week both on energytrend and on PVInfolink you guys.  That's $10.6/kg after taking out the VAT.

Something is odd with the market you guys.  Q4 was supposed to bring some strength but the market seems broken somehow.

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2 hours ago, Klothilde said:

Mono-grade polysilicon dropping to 85 RMB/kg this week both on energytrend and on PVInfolink you guys.  That's $10.6/kg after taking out the VAT.

Something is odd with the market you guys.  Q4 was supposed to bring some strength but the market seems broken somehow.

Energy Trends appears to be an average ASP that is higher than PVInsights who has 9N at $10.16. PVInsights also has the high end slightly higher by $0.26/KG at $12.50. This is not significant in drops as of yet when you consider the old capacity that is back online after the sudden maintenance window and the new Capacity coming online.

 

I find the mono wafer / cell  / modules pricing more disturbing and so should you. Mono modules selling for $0.25 and Multi modules being sold for $0.21-$0.23. Perc modules being sold at $0.25-$0.28.

 

My oh my what is FSLR to do with modules ASP below the cost that FSLR can manufacture and at around the cost of a ramped S6 production?  I smell contract cancellations coming from foreign entities :)

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2 hours ago, SCSolar said:

Energy Trends appears to be an average ASP that is higher than PVInsights who has 9N at $10.16. PVInsights also has the high end slightly higher by $0.26/KG at $12.50. This is not significant in drops as of yet when you consider the old capacity that is back online after the sudden maintenance window and the new Capacity coming online.

The way I see it PVinsights and the other two index sites use different splits to report poly prices.  Energytrend and PVInfolink both report prices for each multi-grade and mono-grade polysilicon.  PVInsights, on the other hand, splits their reporting into 9N/9N+ and a 6N-8N purity categories.

My understanding is that these different splits are not equivalent and comparable.  As denoted in the footnotes of PVInsights 6N-8N purity polysilicon is not pure enough for PV purposes and needs to be blended with more pure silicon in order to be used.

So I assume the 9N/9N+ category describes a combined pricing range for both mono- and multi-grade polysilicon with the high end ($12.5) reflecting the highest mono-grade poly quotes and the low-end ($9) reflecting the lowest multi-grade quotes.

2 hours ago, SCSolar said:

I find the mono wafer / cell  / modules pricing more disturbing and so should you. Mono modules selling for $0.25 and Multi modules being sold for $0.21-$0.23. Perc modules being sold at $0.25-$0.28.

 

My oh my what is FSLR to do with modules ASP below the cost that FSLR can manufacture and at around the cost of a ramped S6 production?  I smell contract cancellations coming from foreign entities :)

I think the current price level is lethal (i.e. deadly) for every single CN PV manufacturer out there (including Longi) and that we're going to start seeing a lot of blood and casualties in the CN industry over the next quarters as the companies run out of cash and there's nobody to bail them out this time.  FSLR is in an enviable position during this massacre as it has 1) big cash reserves and 2) can sell at much higher prices than their CN peers thanks to the trumponian tariffs.  Think of FSLR and their CN peers being abandoned on a remote Siberian island with FSLR wearing a huge fur coat and the CNs all wearing bikinis.  Who will survive the longest?

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4 hours ago, Klothilde said:

The way I see it PVinsights and the other two index sites use different splits to report poly prices.  Energytrend and PVInfolink both report prices for each multi-grade and mono-grade polysilicon.  PVInsights, on the other hand, splits their reporting into 9N/9N+ and a 6N-8N purity categories.

My understanding is that these different splits are not equivalent and comparable.  As denoted in the footnotes of PVInsights 6N-8N purity polysilicon is not pure enough for PV purposes and needs to be blended with more pure silicon in order to be used.

So I assume the 9N/9N+ category describes a combined pricing range for both mono- and multi-grade polysilicon with the high end ($12.5) reflecting the highest mono-grade poly quotes and the low-end ($9) reflecting the lowest multi-grade quotes.

I think the current price level is lethal (i.e. deadly) for every single CN PV manufacturer out there (including Longi) and that we're going to start seeing a lot of blood and casualties in the CN industry over the next quarters as the companies run out of cash and there's nobody to bail them out this time.  FSLR is in an enviable position during this massacre as it has 1) big cash reserves and 2) can sell at much higher prices than their CN peers thanks to the trumponian tariffs.  Think of FSLR and their CN peers being abandoned on a remote Siberian island with FSLR wearing a huge fur coat and the CNs all wearing bikinis.  Who will survive the longest?

FSLR can only sell in the U.S. due to the Trumpian tariffs for the premium. That premium is quickly fallen. The ROW they are now not competitive. That is 20% of their shipments if I recall. 

 

As for the U.S.  There is also 2.5GW of tariff free that can be imported and Sunpower can import unlimited tariff free modules. They will be getting those modules on the cheap with the ASP collapse. Now as for the ASP collapse, here is a nice link that covers the impact on foreign pricing that you can now adjust for current ASPs.

https://news.energysage.com/2018-us-solar-tariff-impact-prices/

 

The first year was expected to have a 10-12 cent impact. based on module low and high prices.The second year it falls by 5% to a 25% tariff. It was expected that based on a 32 to 38 cent module ASP the impact would add 8-10 cents. Now the reality is that the module prices are now in the $0.24-$0.28. That places the impact at 7.2-8.5 cents for the rest of the year. Starting February 2019 the rate drops to 25% and the impact on the module drops to 6-7 cents. So the ASP will soon be $0.30-$0.35 for 2019 at most. 

 

In all probability with 2.5GW of tariff free modules to subisdize the profits, the ASP could be $0.28-$0.33 in 2019 especially when looking at  Sunpowers unlimited imports. Jinko and others are ramping U.S. module manufacturing as well. They will be importing solar cells at cost or $0.09-$0.013(multi Mono). With the tarrif impacts the cost is $0.115- $0.165. That means at 12-13 cents for module processing their costs for Multi will be around $0.245 and mono at $0.275. From that the ASP will stay in that upper $0.20s to low $0.30s for ASPs.

 

By the time the S6 lines are ramped come 2020, the tariff impact will only be 20% and if trends continue as China moves wafering to low energy regions of inner Mongolia and cheaper Si is abundant, then the cost for US manufactured will be in the $0.23-$0.26 range with an ASP under $0.30. Those Chinese imports will be almost as competitive.

 

There is not a lot of meat on the bone for FSLR at those ASPs.

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There seems to be a big assumption that all of these Chinese manufacturers are able to make to 2020. 

Also, I had understood Sunpower bought a facility in the USA. What is the point if they could just import at lower cost?

 

 

 

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3 hours ago, Usbstefan said:

There seems to be a big assumption that all of these Chinese manufacturers are able to make to 2020. 

Also, I had understood Sunpower bought a facility in the USA. What is the point if they could just import at lower cost?

 

 

 

The exemption is for IBC technology using tin plated copper backing. This is specific to Sunpower and their USTR filing exemption. The argument used was that profits from these modules would be used to fund the U.S. solar manufacturing(i,e Solar World acquisition).  I believe the P-Series modules uses the IBC backplane technology. Thus it is not just any low cost technology. I believe they have several GW of the capacity not in the U.S.

 

Other companies like LG petitioned as well indicating they were opening a 500MW facility in Alabama and their IBC technology was similar. They were not granted an exemption.

 

A U.S. based company was granted and exemption based on fine print technology.

 

https://www.solarpowerworldonline.com/2018/09/solar-panel-tariff-exclusions-finally-announced/

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45 minutes ago, Usbstefan said:

Thank you SC! I was not aware of the detail.

I have to make a slight correction on my comment

 

"I believe the P-Series modules uses the IBC backplane technology. "

 

The E and X series are IBC technology from Sunpower based on the Maxeon cells. The new manufacturing is for their P Series which is shingle based(not IBC).

 

https://us.sunpower.com/products/solar-panels/

 

Here is a nice overview link of the types of Shingles and they touch on IBC.

 

http://www.metallizationworkshop.info/fileadmin/metallizationworkshop/favicon/8.3_Beaucarne_Metallization_Workshop_2016_presentation_v2.pdf

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13 hours ago, SCSolar said:

There is not a lot of meat on the bone for FSLR at those ASPs.

As long as there's more meat on the bone for FSLR than for the CNs FSLR is in good shape in the long run imho.

Take Junkosolar's cost structure as benchmark.  How much meat on the bone is there for JKS right now and in two years?  Take Q2 total blended cost of $0.323 as starting point mmmmmwwwwahahahahahahaha (halloween laugh).

 

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3 hours ago, Klothilde said:

As long as there's more meat on the bone for FSLR than for the CNs FSLR is in good shape in the long run imho.

Take Junkosolar's cost structure as benchmark.  How much meat on the bone is there for JKS right now and in two years?  Take Q2 total blended cost of $0.323 as starting point mmmmmwwwwahahahahahahaha (halloween laugh).

 

Yes, take Jinko and others Q2 costs and compare them to the average ASP of upstream costs at the time.  I mean cells were going for $0.21-$0.28 for Multi and Mono Perc. Poly was going for $19-$21/KG. Now those costs are $0.09-$0.0145 and Poly at $10.15. That upstream supply costs having dropped 40-60% will lead to far lower production costs. And that was only for the major parts, all the minor parts of glass backplating etc has dropped significantly and most manufacturing is being moved to low energy areas to cut some of the soft costs.

bwahahahahahahahaha.

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5 hours ago, SCSolar said:

Yes, take Jinko and others Q2 costs and compare them to the average ASP of upstream costs at the time.  I mean cells were going for $0.21-$0.28 for Multi and Mono Perc. Poly was going for $19-$21/KG. Now those costs are $0.09-$0.0145 and Poly at $10.15. That upstream supply costs having dropped 40-60% will lead to far lower production costs. And that was only for the major parts, all the minor parts of glass backplating etc has dropped significantly and most manufacturing is being moved to low energy areas to cut some of the soft costs.

bwahahahahahahahaha.

I agree that polysilicon and 3rd party components have dropped massively in price but I doubt their in-house non-poly cost has dropped much.  Most of the materials employed (silver, eva, aluminum, glass) are global commodities with prices that are not affected by the PV market.

The way I see it the 531 disruption made module prices drop below their current in-house cost (e.g. negative GM).  For the OEM side the disruption initially was favorable since cells dropped earlier than modules, thereby widening the price spread and allowing for a larger OEM margin.  Since then the spread has narrowed again to unattractive levels (and is still contracting further) as you must have noticed.

In summary no meat left on the bone for JKS, neither in-house nor on OEM.  They are rapidly approaching 0 GM which is horrible when you have to pay over $100M in OPEX and NI per quarter.

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Nice article on the Si capacities costs and demand of new vs legacy Poly plants.


 It also covers some demand/price suggestions a bottoming near especially based on wether GCL winds up shuttering the older capacity. 


It is suggesting that Si/watt is falling to 3.27grams for 2019 due to moving to more efficient mono, thinner diamond wires black silicon etc.

http://guangfu.bjx.com.cn/news/20181019/935243.shtml


Due to the production capacity of 60,000 tons of domestic Tongwei shares and 50,000 tons of Xinjiang GCL in November and December, even if all the current three types of capacity are 90,000 tons, the total amount is increased, so for those high For enterprises with electricity costs, the current industry situation is already very clear: the price of silicon materials will not pick up in the future, and continuing to maintain production will only increase losses. The early withdrawal of such capacity is a responsibility for protecting themselves and investors, and is a wise decision to judge the situation.


The amount of silicon produced by the number of components will continue to decrease. Even assuming a global PV demand of 110 GW in 2019, the demand for silicon is only 360,000 tons. After understanding the total demand and supply, we can make a balance between supply and demand based on these data:

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1 hour ago, SCSolar said:

Nice article on the Si capacities costs and demand of new vs legacy Poly plants.

Thanks for sharing.  Imho this is the best analysis so far supporting the thesis of a polysilicon re-adjustment to lower price levels.

The article points to a price level of $8.5/kg supporting a run-rate of 110GW of installation at the end of 2019.  The supply stack suggests this price can easily fall to near $7/kg for a slightly lower demand of around 100GW.

No point in regurgitating the implications for DQ EPS and PPS based on the above, you guys know my opinion.

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Tongwei update:
http://guangfu.bjx.com.cn/news/20181022/935582.shtml

25KMT of their 50KMT new capacity is completed and in trial production.  Rest will follow from Nov-Jan.  Once ramped the new capacity will produce at 120% of nameplate, i.e. 60KMT.  Production cost of new capacity estimated at 40000 yuan/ton or $5.8/kg.

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15 hours ago, Klothilde said:

REC Silicon reporting tomorrow...

https://pv-magazine-usa.com/2018/10/24/rec-silicon-struggles-with-even-lower-demand-chinese-tariffs/

"...Much of the difficulty faced by REC Silicon comes from its solar materials segment, which saw $6.2 million in revenue in the latest reporting period, for an EBITDA loss of $9.9 million..."

I.e. selling polysilicon way below cash cost...

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2 hours ago, Klothilde said:

https://pv-magazine-usa.com/2018/10/24/rec-silicon-struggles-with-even-lower-demand-chinese-tariffs/

"...Much of the difficulty faced by REC Silicon comes from its solar materials segment, which saw $6.2 million in revenue in the latest reporting period, for an EBITDA loss of $9.9 million..."

I.e. selling polysilicon way below cash cost...

If my numbers are correct, the ASP was $9.42/KG on 658MT sold for 6.2M. They are claiming a good portion of the loss is from under utilization from running the plant at 25% capacity. hey had production costs earlier this year of $11/KG.That was with depreciation. My guess is that their cash cost is close to the ASP.

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Three points:

1.  The article also says they've been struggling with costs for years, which is certainly not the case for DQ.  So these guys are a high-cost producer, not a low-cost one, and yes, they're struggling mightily because of that.  But that doesn't mean other lower-cost producers will fare as badly.

2.  The article says they saw selling prices fall by 20% from the previous quarter.  I don't have time to check the numbers, but it shouldn't be too difficult to look up DQ's average selling cost last quarter, subtract 20%, and see what profits, if any, that yields given DQ's costs.

3.  Lastly, the article says REC is blocked from the Chinese market because of the trade war.  That's actually GOOD for DQ--one less competitor for them (isn't China their main market?).

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On 10/23/2018 at 11:11 PM, Klothilde said:

...and Wacker the day after.  There will be blood.

Wacker Polysilicon Division EBITDA down 95% yoy to €4M.  EBIT at -78.8M(-45%).  Means they are hugely unprofitable but not burning cash yet it seems.
https://www.wacker.com/cms/media/documents/investor-relations/q3_18/q3_2018ConfCall_Slides.pdf
https://www.wacker.com/cms/media/de/documents/investor-relations/quarterly_report_1803.pdf

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2 hours ago, Klothilde said:

PVTech on Wacker's numbers.  Nice charts that show that Wacker is toast.  The logical thing for them to do is to shut down their poly business immediately.  However they won't have the balls to do it.
https://www.pv-tech.org/news/wacker-delivers-worst-quarterly-polysilicon-financial-results

Interesting note about REC selling below cost.  Hey, isn't that dumping?  Where are the screams for sanctions against REC?

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Dual updates on GCL and Tongwei.
http://guangfu.bjx.com.cn/news/20181030/937717.shtml
https://www.digitimes.com/news/a20181029PD219.html

They each have started trial production at a 30kT plant and they each plan to commission another 30 kT plant in December.  Means that from now until approx. February, when all plants are ramped, we will have 120kT of new active capacity online in China with production cost under $6/kg.  To put things into perspective 10kT output per month is roughly 50% of the average monthly output in China which was around 20kT over tha last several months:
http://guangfu.bjx.com.cn/news/20181019/935243.shtml

Unfortunately the ramp of this capacity also coincides with a period of low global demand (Q1), thus I expect poly prices to test a rock bottom in Q1.  My guess is anywhere from $6-$8/kg.

 

 

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