Good day, and welcome to the Daqo New Energy fourth quarter and fiscal year 2021 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you need to press star then one on your touch-tone phone. To withdraw from the question queue, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.
Hello, everyone. I'm Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the fourth quarter and fiscal year of 2021, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we also have prepared a PPT presentation for your reference. Today attending the conference call we have Mr. Longgen Zhang, our Chief Executive Officer, and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the quarter and the year. After that, we will open the floor to Q&A from the audience.
Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those containing any forward-looking statement. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary views as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties.
All information provided in today's conference call is as of today, and we undertake no duty to update such information except as required in the applicable law. Also, during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience of the audience. Without further ado, I now turn the call over to our CEO, Mr. Zhang. Please.
Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We had an excellent year with great operational and financial performance. We produced 86,587 metric tons of polysilicon in 2021, exceeding our guidance of 83,000-85,000 metric tons, and 12% higher than 77,288 metric tons produced in 2020. In 2021, approximately 99% of our production was mono-grade polysilicon, which had the highest pricing in the market and was the product most sought after by wafer customers. The year 2021 saw strong global policies supporting carbon neutrality and the decarbonization of the energy sector that led to strong demand for solar energy products and resulted in high polysilicon prices.
We delivered a strong financial performance for the full year, with a gross margin of 65% and net income attributable to our shareholders of $756 million, representing a 485.3% increase compared to 2020. Daqo New Energy also achieved two additional major milestones in 2021. We successfully listed our subsidiary, Xinjiang Daqo, on the Shanghai Stock Exchange in China in July 2021, which will significantly amplify our future growth with access to a robust capital market in China. We also successfully completed the construction of our Phase 4B project and started pilot production in December 2021 with better than anticipated results.
As such, we believe that we will continue to be one of the world's best operators in the polysilicon industry and a market leader in many aspects, including production throughput, production quality, profit margin, cost structure, capital structure, and balance sheet. In the fourth quarter of 2021, we produced 23,616 metric tons of polysilicon, including 1,111 metric tons from our newly built Phase 4B facility, and we sold 11,642 metric tons. End-of-year seasonality impact, combined with downstream inventory adjustments, led to a temporary reduction in demand. When our customers in the wafer sector reduce their own raw material and product inventory levels and temporarily lower their utilization rate.
After extensive analysis of long-term supply and demand dynamics, we believe that the lower utilization level in the wafer sector was due to seasonality impact and temporary in nature. Therefore, we expect conditions to resume to normal once the solar value chain achieves a new balance when the market demand bounces back. In January 2022, the solar market did see a strong pickup in the end market orders, and the wafer sector utilization and demand quickly resumed normal levels. As a result, polysilicon ASP started to recover meaningfully. Our inventory also quickly returned to a normal level by the end of January. In the fourth quarter, our production cost was $14.11 per kg. The increase in production cost as compared to the third quarter was primarily due to the increase in the cost of raw material of silicon powder.
The average procurement cost of silicon powder increased from $2.50 per kilogram in the third quarter to $8.68 per kg in the fourth quarter. Start-up costs related to our new Phase 4B facility also had a temporary impact on our costs in the fourth quarter. Despite the strong increase in raw material costs during the fourth quarter, most of this cost increase was passed to our downstream customers as ASPs for the fourth quarter increased to $33.91 per kg compared to $27.55 per kg in the third quarter. Moreover, the price of silicon powder started to decline quickly in January 2022, and the current market price of silicon powder is approximately $3.50-$3.60 per kg.
We expect our production cost to decrease meaningfully in the first quarter of 2022 as a result of lower silicon powder prices and a better operational efficiency in our Phase 4B facility. In terms of our new Phase 4B facility, we completed the project ahead of schedule, despite significant difficulties and challenges resulting from the resurgence of COVID-19. We commenced the construction of Phase 4B in 2021 and harvested in the first batch of polysilicon from the brand-new CVD furnaces in early December 2021. Within the same year, this has been a new milestone in our company's history in terms of building new capacity and has also set a new benchmark for the industry.
We produced approximately 1,411 metric tons and 2,825 metric tons of polysilicon from our Phase 4B facility in December 2021 and January 2022, respectively. We expect to reach more optimized output in February and March 2022, and to produce approximately 9,500 metric tons from our Phase 4B facility in the first quarter of 2022. Polysilicon production from this new facility has already been delivered to our mono wafer customers and met their quality standards. Our Inner Mongolia polysilicon projects consisting of 100,000 metric ton polysilicon for the solar industry and 1,000 metric tons polysilicon for the semiconductor industry are expected to commence in March 2022, and to be completed by the end of the second quarter of next year.
We have already obtained the energy consumption approval and plan to partially use renewable energy to power these projects in the future. We also plan to expand the silicon powder production in Inner Mongolia in the future, which will allow us to further enhance our cost structure and improve our supply chain stability. Global solar PV installations were approximately 160 GW in 2021, representing a 23% increase compared to approximately 130 GW in 2020. The 2021 global PV market size was limited by the availability of polysilicon. In addition, solar module pricing increased by more than 20% during 2021. The increases both in volume and price in 2021 demonstrated a very strong market demand as solar broadly achieved grid parity in major power markets around the world.
The development and use of new energy, renewable energy has become a global consensus to meet the urgency of global climate challenges. We believe the strong momentum in the solar PV industry will continue to provide a huge market with a significant growth potential in the future. In the solar PV industry, polysilicon production has the highest entry barrier, requiring substantial capital, complex and difficult-to-manage process and equipment, stringent product quality requirements, and long lead times. We are confident that our advantages and competitive positioning with first-class quality and competitive cost structure will enable us to continuously increase our market share and enhance our global leadership in the polysilicon industry. For the outlook and the guidance for the coming.
For this quarter, the Q1 2022, the company expects to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon during the first quarter of 2022. For the year, the company expects to produce approximately 120,000 metric tons to 125,000 metric tons of polysilicon for the full year of this year, inclusive of the impact of the company's annual facility maintenance. Now, I would like to turn the call to our CFO, Mr. Ming. Please.
Thank you, Longgen, and good day, everyone. Thank you for joining our news conference call today. Now I will discuss our financial performance for the fourth quarter and fiscal year of 2021. We will begin with a review of our fourth quarter 2021 results. Revenues were $395.5 million, compared to $585.8 million in the third quarter of 2021, and $247.7 million in the fourth quarter of 2020. As Longgen discussed earlier, the decrease in revenue as compared to the third quarter of 2021 was primarily due to lower polysilicon sales volume as a result of year-end market seasonality impacts, combined with downstream inventory adjustments. With strong downstream demand and customer orders since the beginning of this year, our inventory level has returned to normal by the end of January.
Gross profit was CNY 239.8 million, compared to CNY 435.2 million in the third quarter of 2021, and CNY 109.5 million in the fourth quarter of 2020. Gross margin was 60.6%, compared to 74.3% in the third quarter of 2021, and 44.2% in the fourth quarter of 2020. The decrease in gross profit as compared to the third quarter of 2021 was primarily due to lower sales volume. The decrease in gross margin compared to the third quarter of 2021 was primarily due to the impact of higher cost of raw materials. As Longgen Zhang indicated earlier, silicon powder cost has declined in Q1 2022 as compared to Q4 2021, and we expect our polysilicon production cost to decline as a result.
Selling, general, and administrative expenses were $10.2 million, compared to $11.4 million in the third quarter of 2021 and $11.2 million in the fourth quarter of 2020. SG&A expenses during the quarter included $2 million in non-cash share-based compensation costs related to the company's share incentives plan. R&D expenses were $1.3 million, compared to $1.9 million in the third quarter of 2021, and $1.5 million in the fourth quarter of 2020. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. R&D projects for the quarter includes technology developments related to impurity removal and manufacturing efficiency gains.
As a result of the foregoing, income from operations was $228 million, compared to $421.7 million in the third quarter of 2021, and $98 million in the fourth quarter of 2020. Operating margin was 57.7%, compared to 72% in the third quarter of 2021, and 39.6% in the fourth quarter of 2020. Net interest expense was $2 million, compared to $4.5 million in the third quarter of 2021, and $8.1 million in the fourth quarter of 2020. The decrease was primarily due to lower balance of bank loans. EBITDA was $251.1 million, compared to $441.8 million in the third quarter of 2021, and $115.1 million in the fourth quarter of 2020.
EBITDA margin was 63.5%, compared to 75.4% in the third quarter of 2021, and 46.5% in the fourth quarter of 2020. Net income attributable to Daqo New Energy shareholders was $148.6 million, compared to $292.3 million in the third quarter of 2021, and $72.8 million in the fourth quarter of 2020. Earnings per basic ADS was $2, compared to $3.95 in the third quarter of 2021, and $1.01 in the fourth quarter of 2020. Now on to our full year 2021 results. Revenue for the year was $1.68 billion, compared to $675.6 million in 2020.
The increase was primarily due to higher polysilicon average selling prices and higher sales volume. Gross profit was $1.1 billion, compared to $234 million in 2020. Gross margin was 65% compared to 34.6% in 2020. The increase was primarily due to higher polysilicon sales price. SG&A expenses were $39.9 million, compared to $39.5 million in 2020. R&D expenses was $6.5 million, compared to $6.9 million in 2020. Income from operations for the year was $1.05 billion, compared to $188 million in 2020. Operating margin was 62.6%, compared to 27.8% in 2020. Net interest expense was $20.5 million, compared to $25.7 million in 2020. The decrease was primarily due to lower bank loan balance.
Income tax expense was CNY 162.8 million, compared to CNY 28.2 million in 2020. Net income attributable to Daqo New Energy shareholders for the year was CNY 756 million, compared to CNY 129 million in 2020. Earnings per basic ADS was $10.24, compared to $1.82 in 2020. Adjusted net income attributable to Daqo New Energy shareholders was CNY 766.3 million, compared to CNY 147.1 million in 2020. Adjusted earnings per basic ADS was $10.37, compared to $2.07 in 2020. Now on the company's financial condition.
As of December 31st, 2021, the company had $724 million in cash and cash equivalents, compared to $661 million as of September 30th, 2021, and $118.4 million as of December 31st, 2020. As of December 31st, 2021, the bank notes receivable balance was $366 million, compared to $353 million as of September 30th, 2021, and $0.2 million as of December 31st, 2020. Our inventory balance at the end of the year was $327.7 million. This compares to inventory balance of $46.2 million at the end of the third quarter.
The increased inventory balance was due to higher polysilicon finished goods inventory as a result of lower cell volume in Q4, as well as higher raw material prices related to silicon powder price increase and raw material and work in process inventory related to the startup of our new Phase 4B facility. As of December 31st, 2021, we have no bank borrowings, as all of our bank borrowings have been repaid during the year of 2021. This compares to total bank borrowings of CNY 193.7 million as of December 31st, 2020. Now on to the company's cash flows. For the 12 months ended December 31st, 2021, net cash provided by operating activities was CNY 639.1 million, compared to CNY 209.7 million in the same period of 2020.
The increase was primarily due to higher revenues and higher gross margin. For the twelve months ended December 31st, 2021, net cash used in investing activities was $782 million, compared to $118.5 million in the same period of 2020. The net cash used in investing activities in 2021 and 2020 was primarily related to the capital expenditures on the company's Phase 4B and Phase 4A projects. Total capital expenditures for the year 2021 was approximately $508 million. For the twelve months ended December 31st, 2021, net cash provided by financing activities was $736.2 million, compared to net cash used in financing activities of $95.5 million in the same period of 2020.
The net cash provided by finance activities in 2021 was primarily related to the net proceeds of $935 million contributed by Xinjiang Daqo's IPO in China. That concludes our prepared remarks. Operator, we will now open the call for questions from the audience.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. Our first question today comes from Philip Shen with Roth Capital Partners. Please go ahead.
Hi, everyone. Thanks for taking my questions. Just a quick one on the guidance for Q1. Given your expectation that inventory has returned to normal at the end of January, I think you got to 31,000 metric tons in Q1. Does that suggest sales of maybe more than 40,000 metric tons in Q1 2022?
Philip, I think, basically, you know, today, I think our production volume is high. You see, each quarter, first quarter guidance is 31,000 metric tons. If you look our end of December, I think our inventory is around 13,500 metric tons. Add together, you see, I think goods for sale, I think almost 43,000 metric tons, 44,000. Basically, you know, we should have like five days, you know, merchandise in the shipments.
Yes, I think, you know, should be around 40,000 tons, you know, in sales.
Great. Thanks. Thanks, Longgen. That's great color. Thanks. As it relates to the Inner Mongolia facility, was wondering if you could provide a little bit more details on the total CapEx expected, but also a breakdown between the CapEx for the polysilicon for solar and then the silicon for semiconductors, and then silicon metal capacity. Is it possible to break that down? Can you talk about for the polysilicon production for solar, how do you think that cost structure will compare with your existing Xinjiang cost structure?
Okay. I think, you know, first of all, I think we already announced, I think, total investments, I think, CNY 32.5 billion for Xinjiang the whole year, next, you know, three to five years strategic investments. Basically, I think, you know, we were in Inner Mongolia total single project for the solar silicon is 200,000 tons. For the semiconductor is 21,000 tons. For the silicon metal, I think, is 300,000 tons. Then, I think, silicon, right? Is around 200,000 tons. But we definitely, I think, put a priority. At this moment, because we are in the, you know, offering, I think, follow-on offering in A-shares, as you see that, I think total is CNY 11 billion.
That is used to, I think, purely, the first project we will do is 100,000 tons polysilicon projects, plus 1,000 tons semiconductor in our polysilicon. I think for the 1,000 tons of solar polysilicon projects, total investments around the capital, CapEx around CNY 8 billion. Then we raised CNY 11 billion. CNY 3 billion is for the working capital. For the 1,000 metric tons of semiconductor-grade polysilicon projects, we already raised the money through our IPO. That's CNY 500 million. So for that, I think, you know, we have enough cash to cover those two projects. For the next step, what we'll do is, I think, in the proceeding, 200,000 metric tons silicon metal.
I think that's the next, I think, priority. For the furthermore, I think, when we're gonna do the next, you know, 100,000 tons polysilicon for the solar and also 20,000 metric tons for semiconductor, it depends on market and also the capital condition. Anyway, I think today, if you look our balance sheets, and we, I think, by the end of December, we're sitting there almost around at CNY 9 billion is sitting in the balance sheets without any banking loans and also without any accounts receivable. Basically, I think this year definitely is a good year. We see the price right now is very strong, and for the Q1, and the cash flow can, you know, I think, projectable. If can.
Our follow-on offering can be successful or without follow-on, you know, offering, the money proceeds, we still can, I think, implement it, I think, or execute the one in Mongolia, the 100 metric tons polysilicon for the solar projects. Ming, do you have any comments?
Philip.
Yes. Thank you. Can you also talk about the cost structure expected for the Inner Mongolia 100,000 metric ton polysilicon facility for solar? Like, how it compares to-
100,000?
to Xinjiang. Yeah. How does your expected cost structure
Oh, the cost, yeah.
Yeah.
Okay.
Production cost structure. Thanks.
The cost structure should be, I think, comparable to our, you know, I think, Xinjiang definitely will be, you know, by 3%-4%, I think, down. The reason is scalability. I think 100,000 tons by the two production lines, and because Xinjiang right now, our output, I think we already given you this year, is around 120,000-125,000 tons. That comprises, I think, of six production lines. I think definitely, you know, for the efficiency, I think for the conversion rate, I think from silicon powder to silicon, all were improved.
Definitely, I think for example, for per kg solar silicon produced will consume electricity. I think it should reduce to total around, I think, 52 kWh. Compared to right now in January, I think we are around 60, you know, kWh. All these, I think, definitely will be, I think, a significant improvement. Most important, I think, you know, the quality, the products, you know, will produce the quality for the Inner Mongolia projects will be better than Xinjiang projects. For example, Mongolia projects we can produce more than 80%-90% N-type polysilicon. For the, I think, Xinjiang project right now, if we didn't do any, I think, technology improvements, we can maybe do is around 70%-80%.
The quality is most of what we forecast, yeah, for the future, especially I think next generation for the cell from P to N. That demand and challenge we have to meet.
Okay. Thank you, Longgen. In terms of the outlook for pricing, you know, there's a lot of announcements of capacity expansion and, you know, with that capacity expansion and extra supply, one would think that pricing would be coming down later this year. Was wondering if you could talk through your latest outlook for how polysilicon pricing evolves as we get through the year, and how much production you expect from these new facilities.
I think, you know, the polysilicon price is determined by, you know, both, I think, supply and demand, the quality and the quantity. I think from, you know, the quantity, I think today polysilicon, you need to compare the end market. For example, you know, how much we're gonna install the PV, I think, you know, the module. Also, you have to compare, you know, the wafer capacity right now. Expansion in China is very quickly, so the demand also is hot. Anyway, if you look last year, China produced, I think, 420,000 tons polysilicon, solar polysilicon, plus the import around more than, I think around like 120,000 tons.
Altogether is around 540,000 tons. If you look at compare, you see that can support, I think the end market around 160-165 GW. But finally, I think, because you have to look in all those wafer, the furnaces, you see, have to running. That's why exactly happened in December. A lot of wafer producer reduced the capacity, okay? They're almost selling their silicon in the furnaces, you see. For example, there's some bigger one reduce their wafer capacity utilization rate even to 12%, 15%, 20%. That's why I think we have inventory December, you know, delay because we don't want to, you know, selling cheaper, you know.
Basically we sell, I think, in January we sold I think contract around 16,000 tons. In February we sold I think 13,300 tons. I think the inventory back to normal. This year, I think, you know, if you look, you know, how much, you know, the we call how much supply is available, we say you see the usable supply. We think maybe we increase around 250,000 tons, of which I think Daqo will provide I think around 45,000 tons. Tongwei will provide maybe 80,000 tons. Asia Silicon I think maybe will provide I think 20,000- 30,000 tons.
The rest of them come from, you know, technology improvements from, I think, Tongwei, also the New Horizon. We estimated this year total adding supply, you know, the supply side, the quantity, maybe around 250,000 tons, plus, you know, last year. Total is around 750-800,000 tons that will support the end market, maybe around 220-230. We don't see the price will dramatically go down because, you know, we see right now the selling price, I think our ASP is around $32-$33 per kg right now.
We think, you know, second half of the year will continue, will evolve, I think, around like 28-30. So the tricky is maybe next year. The next year because you know a lot of new coming, but I don't think the new coming will immediately, you know, come out the, you know, the good quality product supplier. Especially I think, you know, a lot of the rush in guys, just like a certain example, like, you know, New Horizon, taking four years, you know, to produce the polysilicon. But the quality, for example, the electronic-grade quality, still, or we call P grade, still below, I think, 75%. So basically all is quality. Then considering right now the cell technology from P-type to N-type, that demand high quality of polysilicon.
That means, you know, even today some supply, the quality may be not in demand. They not, you know, a useful supply. Basically I think it all depends next year whether, you know, the P to N will dramatically transfer. Second is whether, you know, those kind of newcomers will, you know, produce the high quality products. We are ready. But I think at Daqo, our forecast is first of all, we will, I think, you know, continue to invest money in the silicon metal. Because silicon metal, if we can produce, you know, stabilize our supply, reduce our cost, and guarantee our quality. That's the one. Secondly is we will focus to make efforts in working on the semiconductor segments, polysilicon.
We think, you know, some revenue will come from semiconductor silicon, at least to replace import, you know, in the year 2024. That's our, I think, next two to three years strategy, you know. We are upstream, downstream integrated, then horizontally expanding our products from solar polysilicon to semiconductor silicon.
Great. Thanks for all the color. I'll pass it on.
The next question comes from Gary Zhou with Credit Suisse. Please go ahead.
Yeah. Hello, management. Thank you for taking my questions. I've got two questions. Firstly, I would like to ask to understand our A-share subsidiary has a dividend policy to pay no less than 30% of the profits. Just wondering, can management provide us kind of a guidance or a timeline on when the U.S. ADR may receive such dividends in cash, and what is our plan to how to use that cash? And the second quick question on the. Does the management can provide us any cost estimate for first quarter this year? Thank you.
Hello, Gary. Hi, this is Ming Yang. I'm the CFO. Regarding your first question on the A-share subsidiary dividend policy. Our subsidiary, Xinjiang Daqo, has provided a commitment letter to its shareholders in China, and it's committed to pay cash dividend on the three-year period from 2021 to 2023 of no less than 30% of the average annual net profit in this three-year period. You can say that it's committed to pay at the minimum of 10% of every year's net profit. As the shareholder of Xinjiang Daqo, we are considering to propose a plan with higher than that percentage of dividend for this year. However, we also need to consider the CapEx requirements and the related uncertainty of Xinjiang Daqo's private offering in China.
We would need to balance between long-term and short-term shareholders interest. However, I would say that the dividend plan of Xinjiang Daqo in 2021 will need to be approved by the board of directors and the shareholders meeting of Xinjiang Daqo. The actual amount will be announced by then, and we expect that to be around mid-March of this year. On your second question of cost estimate, let me give you a little bit more color. I think as you see, our cost of goods sold for Q4 was $14.11 in US dollars. This translates to roughly CNY 90 per kg in cost, and is really due to the significantly higher cost of silicon powder.
I would say since January of this year, silicon powder cost has declined to roughly $3.50 per kg or roughly 25 RMB or so per kg in RMB. I would say overall for Q1 without higher cost inventory impact, cost would be somewhere in the range of 50-55 RMB per kg or I would say roughly $8-$8.50 per kg. Because we do have the higher cost inventory at the end of the year, I would say cost will be somewhere within that range. Between $8-$14, somewhere in the middle, maybe $10-$11, something like that for Q1, and then reverting to the lower end of roughly $8-$8.50 in Q2.
Yeah. Thank you for answering my questions. If I may, just a very quick follow-up on the first question. So am I right that so basically for the U.S. ADR, the earliest time that we may pay dividends is for the FY 2022 results? And secondly, before that, is it possible that so at US ADR level, we may consider to use the dividends received from A-share to do some A-share buybacks at the U.S. level? Thank you.
I think basically, you know, it's A-share regulations. I think we will determine the dividends by the annual meeting. I think a board meeting make a decision. Usually, the dividends would declare, release maybe in June, July. Basically, you know, then also considering, say, the Daqo is a major holder, so we need to exchange the RMB profit, you know, to foreign exchange. It takes time, some time. You know, basically, what do we need to do is either we continue to just release the dividend to the U.S. shareholders, or we just buy back. So far, we're not making decisions so far, okay? We will let you know.
Okay. Yeah. This is very helpful. Thanks. Thank you. Now I'll pass it back.
The next question comes from Alan Lau with Jefferies. Please go ahead.
Thanks a lot for taking my questions and also congratulations to management on the good results. Most of the questions was addressed, and I have a couple of minor questions. First of all, I would like to know in terms of net profit in first quarter, given that the cost is coming down and while the polysilicon price stays strong, do you expect the per unit gross profit to stay similar or even better compared to Q4 last year?
He's talking about cost, right? You're talking about cost, right? The unit cost, right?
The unit cost profit.
Profit.
Unit cost profit. Let me answer this question for you, okay? I would say if you look at where ASP is right now in a like long indicator, I think somewhere in the $32-$33 range, while we believe that the cost, based on current trends, is probably around $10-$11. We're looking at more than $20 per kg in terms of contribution per kg, right? I think this is probably, you know, one of the best or better periods for the company, and definitely we think it's better than our Q4 level.
Thanks a lot. Considering the sales volume is high as well. I would like to check on the A-share issuance progress because given the amount is relatively huge, we are talking about CNY 11 billion. Would like to know, is there any interest received so far, like any cornerstone investor or any major funds showing interest on this front?
Okay, I think the follow-on offering right now is just accepted by Shanghai Stock Exchange. Still in the process of, I think, auditing, we call checking the materials. I think follow-on offering procedures will be simpler than the IPO. Basically, just inside Shanghai Stock Exchange inside and check all data, and the question I think is just one time or two times, then they have the conclusion, then we just go to the China CSRC for the registration. The timing, I think, you know, maybe we'll finish by middle of July. Talking about, you know, potential investments, I think we already did some of the roadshow.
I think so far I think we send our roadshow to 400 quality institutional investors right now. So far almost I think around 200 institutions very interested. Including some big name and also some you know sovereign funds. Yes we are working on some. I think we'll let you know. Some core investors may be taking I think a bigger chunk maybe around $2 billion-$3 billion. The rest of them I think you know other investors have. Because the total I think qualified investors should be limited by lower than 35 investors. We're working on that. We will let you know.
Thanks a lot. Thanks a lot for managing. I've no more further questions.
Great. Thank you, Alan.
The next question comes from Colin Yang with Daiwa Securities. Please go ahead.
Thank you, management. This is Colin from Daiwa. My first question regarding the demand-supply dynamic. As you may know, the polysilicon demand supply has remained largely balanced after Tongwei's 100 and the Daqo 35 standard tons commenced operation in last quarter last year. We cannot see any new capacities coming out during the first three quarters this year. My question is which quarter you think we will see the most imbalanced demand and supply of polysilicon? My second question is regarding the N-type and the P-type polysilicon. What is the cost difference between the N-type and the P-type polysilicon? Is there any difference between the conversion ratios, you know, for the polysilicon conversion to 1 gigawatt of mono wafer? Thank you.
I think it's a good question. I think for the first question, when is the new supply come in? I'm not crystal ball, okay? I'm not fortune teller. At least you see, we can say because, you know, polysilicon produce, it take a long time from design to equipment, you know, procurements. It take time. Even let's say, you know, like Tongwei today, I think, they're still climbing. I think ramping their production, I think, in Baotou, as you know that. It take time, at least I think 18 months.
I don't believe, I think, the newcomers will supply good quality products are starting a production running by first half next year, or even, you know, second half of next year, maybe some coming. Basically, I don't think, you know, the or any big change this year, but definitely next year you will see some players will come. But definitely, I will say, in the future, I think, Tongwei and Daqo will take the market share more than 50%, then the rest of them taking another 50%. Even though, let's say the newcomers come in, you see the market may be, I think, depressed or go to another cycle, then the quality is a big issue. I think I like your second question.
From P to N, that mean they demand high quality products, okay? Even today, let's say for example, if we use our Xinjiang facility right now, with all production, you know, produce the P level silicon, we can produce around, I think, 130,000 tons, let's say that. Okay? If we going to produce 70% N type, the quantity definitely will go down. Maybe, you know, will go down to 120,000 tons. The output maybe will reduce by 10% or 5%. The cost also will go up because, you know, the furnaces may be taking longer. The deposition may be taking a little longer time. You maybe will consume more electricity.
I think, you know, for the conversion rate, I don't think it will change too much. For the, you know, for other processing, you need more, I think, technology and know-how to do that. To answer your question, from P-type to N-type, I think the quality, not only from purity, but also from, you know, the other, I think, technology, data, you see, you have to improve. Basically, I think, you know, today, in China, there's not too many players can produce N-type. We are right now also recognized. I think,
Qualification.
Huh?
Qualification.
A qualification, I think, by the major, I think, wafer producer. I think downstream wafer producer.
Okay. Do you have any quantitative data like what is roughly cost difference from P to N?
Okay. Actually there is slightly higher cost for N-type poly compared to P-type poly. You're talking about production costs, right, of the different types? Okay.
That's right.
I would say this would be similar to, for example, when multi-type poly initially was the dominant market and when people started to enter into mono type of poly. Because initially when we grew mono type of poly, we had to grow it slower, using more electricity and also with a different process. It had maybe 10%-15% higher cost. I would say as time go on, we continue to optimize our production to the extent that, I mean, now all of our production is really P-type mono, right? Production costs would go down over time. We'd say similarly for N-type.
Initially, N-type would also require us to grow the silicon slower with the optimized process, and then using more energy and maybe the more other raw materials as well, and also for impurity removal. Maybe 5%-10% higher cost. I would say over time, you know, when we start to ramp up the production mix, then the cost would go down further.
I see. Thank you.
Yeah. Okay. I think the key is that.
Yeah, I just.
I think within the industry, very few players can do N-type currently, and I think that would continue going forward, especially for the new entrants.
Cool. I see. Can I have another question? Do you have any color to share with us about any privatization plan for the U.S. ADR?
What?
Can you repeat your question one second? I'm sorry. We didn't hear that very well.
Sure. I mean, do you have any plan, you know, to take the U.S. ADR privately?
No. At least right now, we're not energy and focus on any privatization. We are working on, you know, I think, the Asian company, I think, operation side. You know, we're not considering anywhere now so far.
Got you. Thank you so much. That's all my question.
Great. Thank you.
The next question comes from Joe Ji with Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question. Can I ask about what's your view on how the metallurgical silicon powder prices are evolving throughout the year? As you mentioned before, you see very strong results this year, and also there are incremental new capacity of the polysilicon. Recently there has been some meaningful reductions of the silicon powder prices, but how do you see the price are evolving or trending in the future quarters? Thank you.
I think last year the silicon powder price go up because I think the first half of the year in the southern China, I think, you know, because the government, I think, you know, emphasis on the policy, high consumption, high conversion, you know, production elimination. I think it caused the silicon metal price go up, especially in September, October, you know, to the peak. Later, I think the government, I think, recognized the problem. I think, you know, especially solar industry is the key industry for China.
I think they reopened the small and medium silicon metal plant, you know, starting the production. We see December, the silicon metal price, you know, dramatically go down from 90,000 RMB per ton, drop to, I think, 440-450. In February right now, the metal price, I think you see the. I think online, you see that is around like 23,000 RMB per tons. I think definitely, I think because the mineral price go up, the coal price go up, I think the cost to produce silicon metal also go up from, I think of history, maybe around 8,000, 7,000 per tons to right now around 13,000-14,000 per tons.
We think the price will be in the future around, I think, the metal, maybe around like 20,000 tons. The silicon powder, maybe around, you know, 20,000-23,000 tons. If we're going to do that, you know, in Inner Mongolia, I think, we will first do the 200,000 metric tons to match our production. I think it definitely will reduce our cost. I think, you know, bring our cash cost back to maybe CNY 30, you know, if we can produce, you know, our own silicon metal, you see. Definitely, I think it's a competitive edge for us to compete with other players.
Understood. Thank you so much.
Great. Thank you.
This concludes our question and answer session. I would now like to turn the call back over to management for any closing remarks.
Hi. Thank you everyone for participating in today's conference call. Should you have any further questions, please don't hesitate to contact the company. Thank you. Bye-bye.
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