You have to ask what is competative? LDK is targeting $20/KG costs. Competitors are looking at $16-$18/. If poly is at $25/kg, LDK makes $5/kg. competitors make $7-$9/kg. LDK debt payments on Poly plant is around $100M per year. That puts Cost+ Opex around $24//kg and basically no profits.
Competitors have lower Interest as they built at lower costs than LDK and with less debt. So ths companies make $7/kg-$2/kg = $4-$5/kg.
LDK basically has indicated it needs Poly at $30/KG for this to be a profitable venture for their third party owners.
you have next year or any insight would be appreciated? Thanks.
Jack Lai - CFO and EVP
Aaron, certainly this is a very important action for the Company. We still are working on the fundamentals, because we just discussed about the production cost, which we try to aim at reaching $20 better or better than $20 per kilogram and our the focus for this year has been put on the processing improvement, especially the hydrochlorination improvement, so until we can get that done that maybe take, say, through year-end or beginning of next year.
If we don't get to this $20 level, I think that, that gross margin expectation for our polysilicon business will be very challenging, and that could have a very difficult IPO theme, and I think that in the near-term that one to two quarters from today that we’re still working on this operational improvements and hopefully by that time that we can – ramping up our production and lower our cost to the $20 level and hopefully at that time, that the global market will recover from this crazy price of low-20s and that’ll give us a reasonable gross margin,
According to Chinese news sources, the poly plant's hydrogenation add-on is supposed to bring down the cost of poly to under $20/kg. Having said that, it is likely that LDK would need to be working at close to 100% capacity to meet that goal.
Given the VAT tax and the likely dumping tariff, non-Chinese poly would be selling at around $30 to $35/kg. So, LDK and GCL would definitely be competitive with those types of interventions and still make money.