Daqo New Energy Corp. (NYSE:DQ) Q1 2024 Earnings Call Transcript

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Philip Shen: Got it. Thanks Ming. And can you talk about the amount of channel inventory that’s in the market now? And then do you expect that to continue to grow for the near-term? And then when do you think that peaks? Thanks.

Ming Yang: We’ve heard various amounts of — you call it, statistics or a number — we’ve heard it is somewhere in the range of 150,000 to 180,000 metric tons right now of channel inventory and we’re very insignificant part of that and some of our peers. A main period actually have a lot of inventory currently. So we will see how that works.

Philip Shen: Okay. And then you talked about 70% to 80% of losing money. What’s your guess as to what percentage of the industry could be shut down by the end of the year? I mean do you think it could be as much as [a-quarter] (ph) of the industry could be shed like — well, what percentage of the business could of the industry could go out of business and maybe go away? Or what are your thoughts on that? Thanks.

Ming Yang: This is a very ballpark. I think about half would shut down. Yes. I mean, yes — I think capacity that’s kind of [such that] (ph) it’s definitely not competitive. The capacity [indiscernible] not competitive at the current market. And then even some capacity in Inner Mongolia [isn’t competitive] (ph) at the current price.

Philip Shen: Okay. What are your thoughts on the Chinese government stepping in to influence or regulate maybe setting price caps or something like that. We were reading and seeing some potential for that for the module industry. Do you think there could be something like that for poly where the government steps in to avoid this overcapacity in the future?

Ming Yang: We haven’t heard about that at all. We haven’t seen any government actions related to that.

Philip Shen: Okay, thank you very much. I’ll pass the line.

Ming Yang : Okay, thank you.

Operator: The next question comes from Alan Hon with JPMorgan.

Alan Hon: This is Alan from JPMorgan. I have questions on the amount of capacity in the system right now? And also like the outlook in the next one or two quarters, I mean other than who else would be adding capacity. That would be my first question.

Ming Yang: Understanding of capacity in the system is around maybe 1.8 million to 2 million tons per year.

Alan Hon: Got it. And my second question is like — what do you expect your cost structure will be with the new plant management in second quarter? Or for the new plant, what do you expect the new plant’s cost structure will be?

Ming Yang: Okay. I think — at least as of today, okay so we are expecting our costs to continue to decline. So I think preliminarily, because we are ramping up Inner Mongolia Phase 2. So cost for Q2 is probably similar to slightly less than in Q1. And then we think costs will continue to trend down for Q3 and Q4.

Alan Hon: Well, I guess like one driver of the cost down with the combination of the new plant in second quarter, that will be fully ramped up in Q3, right? So do you have like a target for the cost structure of the new plant?

Ming Yang: Okay. So I don’t think we’ve discussed this earlier. So for the first time, Inner Mongolia cost is now below our Xinjiang cost, right? I don’t know if you remember. So the Inner Mongolia cost design was to be below Xinjiang, but was higher than Xinjiang in Q3, Q4 until this quarter. Also we had very significant improvements in quality as well. So I think, that gave us further confidence that once Inner Mongolia Phase 2 starts, it should be able to see similar or even better trajectory in terms of cost reduction and quality improvement, right? Because now we’ve done this once already, so we know where all the issues are –.

Alan Hon: Got it. Thanks and [indiscernible] my questions.

Ming Yang: Okay, thank you Alan.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Anita Zhu for any closing remarks.

Anita Zhu: Thank you, everyone, again for participating in today’s conference call. If you have any further questions, please don’t hesitate to contact us. Thank you and have an awesome day. Goodbye.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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