REC Silicon blames China trade dispute for suppressed Q3 revenue, job losses

The Norwegian-based polysilicon maker posts third quarter revenue of $50.9 million and cites disruption of China trade spat with U.S., plus expiration of the Chinese FIT, as reasons for lowered margins.

November 2, 2016 Ian Clover

Image: REC Silicon

Norway’s REC Silicon has today announced that 70 jobs are to be cut in the U.S. following a difficult third quarter (Q3) in which revenues fell to $50.9 million, down from $71.1 million in the second quarter.

The polysilicon producer pulled no punches when explaining the reasons behind the revenue contraction, stating that the “ongoing solar trade war between the U.S. and China” continues to restrict the firm’s access to polysilicon markets in China.

Another main driver for the reduced revenues is the continued disruption of the solar grade polysilicon market, which has been exacerbated by the expiration of the 2015 FIT in China. This has negatively affected the entire value chain and largely explains why REC Silicon posted Q3 EBITDA at minus $7.9 million.

Earlier this year REC Silicon was forced to shut down its remaining Fluidized Bed Reactor (FBR) polysilicon production lines in Washington, having earlier severely scaled back production of the technology. Capacity utilization at the site is now just 50%.

Now, further cost-cutting measures are afoot, not least the 70 job loses confirmed at Washington’s Moses Lake facility.

“We have been successful in maintaining sufficient liquidity during this period of market disruption,” said REC Silicon CEO Tore Torvund. “Because of our efforts to control costs, I expect REC Silicon to remain a low cost leader in the polysilicon industry, even at reduced prices.”

However, despite such relatively naked optimism, the CEO’s additional comments cast a pall over the Q3 report. Torvund remarked that he sees no end in sight for the U.S.-China solar silicon trade row, which levies a 25% tariff on polysilicon products from U.S. producers. “It is difficult to find a solution with so many parties involved, and the U.S. election coming up. We are not very optimistic to find a solution to the trade war in the short term but we are working on it.”

The CEO added that REC Silicon is planning for there “not to be a resolution” to the trade war, stressing that around 80% of the company’s market is affected.

Over Q3 REC Silicon’s polysilicon sales were 1,775 MT, which was in line with guidance given in September. Its finished goods inventory increased by 2,132 MT during Q3, with the company’s cash balance reported as $86.8 million.

Torvund said that REC Silicon’s guidance for FBR production in Q4 has been cut from 4,710 MT in July to just 2,260 MT. Polysilicon production for next quarter is also expected to fall sharply to 3,280 MT, compared to July’s projection of 5,520 MT.

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