On the evening of December 24, a significant announcement rippled through the markets as Xinte Energy, a major player in the silicon material industry, declared its decision to withdraw its application for an A-share issuanceThis move has been officially sanctioned by the Shanghai Stock ExchangeThe announcement marks the culmination of a four-year endeavor aimed at expanding their operations and securing funding through a dual listing on both the A-share and Hong Kong markets.

On the same day, Xinte's majority shareholder, Tebian Electric Apparatus, publicly stated that the decision to abandon its A-share listing was made after carefully evaluating the industry’s current circumstances alongside the company’s specific needs and challenges.

The timeline of Xinte Energy's ambition shows a stark contrast to its present stateInitially, in early 2021, Xinte began laying the groundwork for its long-desired A-share listing amidst a bullish market for silicon materials, fueled by a significant increase in product prices towards the end of 2020. However, after suffering losses totaling 1.4 billion yuan, the company’s aspiration for financial injection through public equity has been reinforced as a lost opportunity.

The quest to return to the domestic market, commonly referred to as "back to A," was considered a likely pathway for growth

Xinters' peers—Tongwei, GCL Technology, and Daqo New Energy—have benefited significantly from similar strategies, with their robust performance during a rewarding cycle; collectively, these companies reported profits soaring to 74.1 billion yuan in 2022, driven by soaring multigrade silicon prices.

However, Xinters’ path took a drastic turn in the last months of 2022 as prices fell sharply, plunging more than 20 percent in November and DecemberDespite an initial rally in 2023, prices continued to plummet, resulting in a cumulative decline of over 75 percent by year’s endThis collapse severely undermined Xinters' profitability, resulting in a staggering 67 percent drop in net income and pushing it into the red with a loss exceeding 1.4 billion yuan in the first three quarters of 2024. This financial strife raised questions about Xinters’ long-term survival, prompting the parent company, Tebian Electric, to transfer a 49 percent stake of its subsidiary, Zhundong Energy to Xinters for 1.5 billion yuan—an apparent lifeline for the foundering entity.

As the company grappled with its financial woes, the broader industry faced a perplexing scenario; amidst soaring production rates and reduced end-market demand, the silicon material market became drastically oversaturated

Recognizing the need to bolster profitability, Xinters, alongside others in the sector, began exploring production cuts as a potential solution to stabilize cheaper raw material prices and maintain sustainable marginsRecently, both Tongwei and Daqo announced plans to reduce output in response to market conditions, a sentiment echoed by Xinters as it navigates an oversupplied market.

It is crucial to note that Xinters had ambitious plans to raise 8.8 billion yuan to construct a green low-carbon high-end electronic grade polysilicon production facilityHowever, the halt of the A-share issuance effectively closes a critical funding avenue, compounding operational risksThe company’s first phase had successfully commenced production in August 2023, utilizing available internal resources, but further stages significantly depend on external capital influx now jeopardized by the scrapped A-share listing.

The mounting pressures have initiated a wave of operational adjustments across the industry

As capacity expansions ramped up, many companies found themselves with an imbalance between supply and demandFor instance, major players like Tongwei and Daqo have strategically adjusted their production lines, indicating the necessity for recalibration in the face of decreasing demand for silicon as the photovoltaic installation growth appears to slow.

The production adjustments are not just reactive but also part of a more profound strategy to stabilize the marketAccording to recent reports, as of 2024, companies like Tongwei, GCL Technology, Daqo, and Xinters will have silicon production capacities of 900,000 tons, 500,000 tons, 305,000 tons, and 300,000 tons, respectivelyThe figures reflect a hyper-competitive market seeking equilibrium amidst drastic fluctuations in commodity pricing.

Strategizing to reduce production amid such market conditions signals a critical moment for the silicon material manufacturers

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