Daqo New Energy (NYSE:DQ) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Daqo New Energy reported a net loss of $88.4 million in Q1 2026, compared to a net loss of $7.3 million in Q4 2025, primarily due to decreased sales volumes and increased provisions for inventory impairment.
The company maintained a strong balance sheet with cash and equivalents totaling $559.4 million and zero debt, providing liquidity to navigate market challenges.
Production exceeded guidance with 43,402 metric tons of polysilicon produced, though sales volume declined due to low market prices.
Daqo New Energy expects Q2 2026 polysilicon production to be between 35,000 and 40,000 metric tons, with full-year guidance remaining at 140,000 to 170,000 metric tons.
Management is optimistic about future market recovery and aims to maintain competitive advantage through technology and cost optimization, despite current industry overcapacity and geopolitical tensions.
Full Transcript
OPERATOR
Good day and welcome to the Dawnergy first quarter 2026 results conference call all participants will be in 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 may press star then one on a touchtone phone. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Jesse Zhao, Director of Investor Relations. Please go ahead.
Jesse Zhao (Director of Investor Relations)
Hello everyone. I'm Jesse Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daco New Energy just issued its financial results for the first quarter of 2026 which can be found on our website at www.daqosolar.com. today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Mingyang and myself. Our Chairman and CEO, Mr. Xiang Xu is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Mr. Xu on market conditions and company operations and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q and 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 led 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 contained in any forward looking statement. Further information regarding this 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 view 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 call is as of today and we undertake no duty to update such information except as required on the applicable rule. Also during the call, we will occasionally reference monetary amounts in US dollar terms. Please keep in mind that our 5 functional currency is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience. Now I will turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Hsu, please go ahead.
Anita Xu (Deputy CEO)
Thank you, Jesse. Hello everyone, this is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xiang Xu in the first quarter of 2026, market sentiment across the solar PV industry remained cautious amid seasonal softness and elevated inventory levels. It was further exacerbated by rising module prices driven by higher silver, aluminum and glass costs, which led to market slowdown in China. Geopolitical tensions in the Middle east also weighed on end market demand in the region. Against this backdrop, persistent industry overcapacity continued to exert downward pressure on polysilicon prices, resulting in quarterly operating and net losses. Notwithstanding these headwinds, we continue to maintain a robust and healthy balance sheet with zero debt. As of March 31, 2026, we held a cash balance of US$559.4 million, short term investments of US$288.3 million, bank notes receivable of 20.8 million, held-to-maturity investment of 50.3 million and a fixed term bank deposit balance of US$1.1 billion. In total, these assets that can be converted into cash stood at US$2 billion, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices. With name plate capacity utilization rate operating at about approximately 57%, total production volume at our two Polysilicon facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons. With market prices for polysilicon experiencing a notable decline to be below production costs during the quarter, we adhered to the Chinese Authority self regulation guidelines but declining to increase engaged in below cost sales, we adopted a disciplined wait and see approach pending further implementation of the national anti evolution policies we highlighted last quarter. As a result, our sales volume dropped to 4,482 metric tons while average selling price increased 2.3% sequentially to 5.96 US dollar per kg. On the cost side, total production and cash cost increased marginally by 2% and 3% respectively on a sequential basis primarily driven by exchange rate movements. However, despite higher silicon metal costs, manufacturing costs in R and B terms actually declined slightly on a sequential basis, reflecting our continued improvements in manufacturing efficiency. In light of the current market dynamics, we expect total polysilicon production volume in the second quarter of 2026 to be approximately 35,000 metric ton to 40,000 metric tons. For the full year of 2026, we expect production volume to remain in the range of 140,000 to 170,000 metric tons with the solar market impacted by seasonality surrounding the Chinese New Year holiday and the absence of concrete updates, capacity rationalization policies, capacity transactions and shipment volumes remained low during the quarter. Intact Polysilicon prices dropped from 48 to 55 RMB per kg at the end of 2025 to 35 to 37 RMB per kg by the end of the first quarter. However, Polsicum prices heading into the second quarter are showing signs of bottoming out with weekly declines gradually easing. While producers awaited clear guidance guidelines from authorities to tackle the capacity, a weak demand outlook and industry inventory buildup and financial pressure forced several peers to adjust their production pricing strategies toward a more market oriented approach. As a result, industry level policy monthly supply fell to approximately 93,000 metric times in the quarter, representing an industry average utilization rate of just 39%. Looking ahead, we expect government authorities to strengthen the anti evolution policies necessary to address these industry wide overcapacity issues. As an encouraging move April 17, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration and other key national departments showing you how the symposium on regulating market competition within the solar PV sector, reinforcing the urgent need to address irrational competition and curb destructive evolution. Additionally, all relevant authorities are not required to deploy concerted measures to strengthen industry governance and promote the high quality development of the solar PV industry, including in respect of capacity regulations, standards, guidelines.
OPERATOR
Pardon me, ladies and gentlemen, it's appeared we've lost connection to our speakers. Please stand by while we reconnect. Pardon me, this is the operator. We have reconnected the speakers and will continue. Please proceed.
Anita Xu (Deputy CEO)
Okay, okay, thank you. Sorry, apologies, my line got disconnected. So, continuing with the April 17 symposium, all relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high quality development of the solar PV industry, including in respect of capacity, regulation, standards guidance, innovation driven development, price, law enforcement, quality supervision, mergers and acquisitions and intellectual property rights protection. More broadly, the solar PV industry continues to exhibit compelling long term growth prospects. Growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security in which the solar PV and renewable energy sectors can play a crucial role. As one of the world's lowest cost producers of the highest quality N type pulse silicon, backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well positioned to capitalize on the anticipated market recovery and long term growth opportunities. We'll continue to strengthen our competitive edge through advancements in high efficiency N type technologies and cost optimization via digital transformation AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in shaping that future. So now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter min. Please go ahead.
Ming Yang (Chief Financial Officer)
Thank you Anita and hello everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter 2026 financial performance. Revenues were 26.7 million compared to 221.7 million in the fourth quarter of 2025 and 124 million in the first quarter of 2025. The decreasing revenue compared to the fourth quarter of 2025 was primarily due to a decrease in sales volumes. The company reduced sales in light of the relatively low selling prices. Gross loss was 139.4 million compared to a gross profit of 15.4 million in the fourth quarter of 2025 and gross loss of 81.5 million in the first quarter of 2025. Gross margin was negative 521% compared to 7% in the fourth quarter of 2025 and negative.65 point in the first quarter of 2025. The decrease in gross margin compared to the fourth quarter of 2025 was primarily due to an increasing provision for inventory impairment. Cost of revenue for the first quarter of 2026 includes 98.4 million of provisions for inventory impairment due to end of quarter market promotion. Polysilicon pricing that is below production cost. Selling general and administrative expenses were 12.2 million compared to 18.7 million in the fourth quarter of 2025 and 35 million in the first quarter of 2025. The sequential decrease of HGA was primarily due to lower sales volume in the first quarter of 2026. The year over year decrease was also due to the company recognizing $18.6 million in non cash share based compensation costs related to the company's share incentive Plan in the first quarter of 2025. R&D expenses were $0.8 million compared to $0.7 million in the fourth quarter of 2025 and $0.5 million in the first quarter of 2025.R&D expenses can vary from period to period and reflect R and D activities that take place during the quarter. Loss from operations was 150.8 million compared to 20.9 million in the fourth quarter of 2025 and 114 million in the first quarter of 2025. Operating margin was negative 564% compared to negative 9.4% in the fourth quarter of 2025 and negative 92% in the first quarter of 2025. Net loss attributable to Daqo New Energy shareholders was 88.4 million compared to 7.3 million in the fourth quarter of 2025 71.8 million in the first quarter of 2025. Loss per basic ADS was $1.31 compared to $0.11 in the fourth quarter of 2025 and $1.07 in the first quarter of 2025. Adjusted net loss attributable to Dr. New Energy shareholders excluding non cashier based Compensation costs was 88.4 million compared to 7.3 million in the fourth quarter of 2025 and 53.2 million in the first quarter of 2025. Adjusted loss per basic ADS was $1.31 compared to $0.11 in the fourth quarter of 2025 and $0.80 in first quarter of 2025. EBITDA was a negative 83 million compared to 52.5 million in the fourth quarter of 2025 negative 48 million in the first quarter of 2025. EBITDA margin was negative 311% compared to 23.7% in the fourth quarter of 2025 and negative 39% in the first quarter of 2025 and now. The company's financial condition as of March 31, 2026, the company had $559.4 million in cash, cash equivalents and restricted cash compared to $980 million as of December 31, 2025 and $792 million as of March 31, 2025 and as of March 31, 2026. Short term investments was 288 million compared to 114 million as of December 31, 2025 168 million as of March 31, 2025. As of March 31, 2026, the notes receivable balance was 20.8 million compared to 135.5 million as of December 31, 2025 AND 62.7 million as of March 31, 2020 25. Note receivables represent bank notes with maturity within six months and as of March 31, 2026 held to maturity. Investment was 50.3 million compared to nil as of December 31, 2025 and nil as of March 31, 2025. AS of March 31, 2026, the balance of fixed term deposit within one year was $1 billion compared to $972 million as of December 31, 2025, or $1.1 billion as of March 31, 2025. Now the company's cash flow for three months ended March 31, 2026, net cash used in operating activities was $147.5 million compared to $38.9 million in the same period of 2025. And for three months ended March 31, 20 26, net cash used in investing activities was $275.8 million compared to $211 million in the same period of 2025. Net cash used in investment activities in 2026 was primarily due to the purchase of short term investments and fixed term deposits. For the three month ended March 31, 2026, net cash used in financing activities was 7.8 million compared to nil in the same period of time. 2025 Net cash used in financing activities in 2026 was primarily to $7.8 million of stock share repurchases made by the company's subsidiary Xinjiang Dakou, from its minority shareholders. And that concludes our prepared remarks. We will now open the call to Q and A from the audience operator.
OPERATOR
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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Philip Shen with Roth Capital Partners. Please go ahead.
Philip Shen (Equity Analyst)
Hey guys, thanks for taking my questions. First one is on the State Administration for Market Regulation Tier 1 Manufacturers submitted formal correction proposals. Can you walk us through how these specific proposals are practically shifting or may practically shift competitive dynamics on the ground today? Ultimately, do these commitments accelerate or delay the necessary industry consolidation needed to stabilize average selling prices (ASPs)? Thanks guys.
Ming Yang (Chief Financial Officer)
So you're kind of breaking up on our end. Can you repeat your question?
Philip Shen (Equity Analyst)
Yeah, sure. Hey Ming, so, just wanted to understand what the submissions to the State Administration for Market Regulation, those proposals, how could they practically improve the competitive dynamics to accelerate or delay the necessary industry consolidation needed to stabilize average selling prices (ASPs)?
Ming Yang (Chief Financial Officer)
Anita, do you want to start first and I can add to that. Or let me just start by Our understanding is I think that the government, especially at the most recent industry meeting with the Ministry of Industry Information Technology and NDRC and NEA and then The Market Regulation Agency. So basically there is consensus from the government that at the minimum, while maintaining some market competition, there's a need to enforce the price law. Now, there is some details to be determined in terms of, for example, how to measure cost for all the different manufacturers. And our understanding is they're doing a new round of price determination. So this should come out, say in the next two months or so. Our understanding is around mid year. So once that new cost determination is being done, and then there will be a renewed guidance on where the minimum price would be. And then at the same time, we're still monitoring in terms of how the enforcement can be done. There may be some enforcement actions that's being discussed, but that hasn't taken place yet. So at least for us. Right. So we're in observation mode in terms of how whether enforcement happens. I mean, if there's no enforcement, then we may be need to sell wherever the market is. Right. I mean, at least right now we're enforcing the price on these in our sales efforts. Right. But obviously that's having a negative impact on our sales volume. Right. So we're waiting for that to happen. But our expectation is that once the new cost determination comes out and manufacturers are now required to sell above production costs, and then the market price should recover. So that's at least our. Yeah.
Philip Shen (Equity Analyst)
Okay. Thanks, Ming. In terms of enforcement actions, what could that look like and what kind of timing could that be? Do you think the probability of enforcement action is higher or lower or like greater than 50% or less than 50%?
Ming Yang (Chief Financial Officer)
Thanks. Okay. Our understanding is rather than depending on the company's own reported costs. Right. So the government is trying to have a cost model that is consistent across all the manufacturers in terms of material cost, depreciation, labor and things like that. Right. So once nice done, then we don't know if it's going to be one general price or there could be different price for manufacturers. So that's to be determined. And then once that is done, then I think there will be enforcement or at least they will communicate how enforcement will be done previously. This would be in the form of a fairly significant penalty or in terms of, in the worst case scenario, you could revoke your manufacturing license or shut down your electricity. So there are many ways that the government could enforce, but we're yet to see that right now.
Philip Shen (Equity Analyst)
Okay, got it. And then final question for me. So given all that and with, you know, the reality is you guys still need to operate and participate in the market. And so what do you think is A practical outlook for average selling prices (ASPs) for, you know, Q2, Q3 and what do you think your utilization rate might be in those quarters?
Ming Yang (Chief Financial Officer)
Okay. I mean for Q2 then it will be optimistic. Right. So I mean cash prices is kind of in the 35 to 37 range. I think some producers, if they're have cash issues, they might sell a little bit discount to that. And then there are opportunities in the futures market, for example, where you might be able to sell a little bit higher, maybe in the 38 to 40, 41 RMB depending on the contract period. So we're looking at that as well. So let's say if there's no price guidance enforcement action, I think then the price range is maybe 35 to 40. Understanding if price guidance has come out, you should be in the range of 40 to 45 or maybe even higher. And these are inclusive of vats.
Philip Shen (Equity Analyst)
Okay. Okay. Yeah, great. So yeah. Okay, thank you. And then the utilization rate. Do you have a sense for Q2 and Q3 yet? Thanks.
Ming Yang (Chief Financial Officer)
For us or for the industry? For us it will be at roughly 50 to 55%. Yeah, we're maintaining utilization for now because we're kind of at a fairly optimal operating condition in terms of both quality and cost and production volume and adjustments will generally our experiences will bring short term volatility to both quality and cost. So at least we're in the short term and we're maintaining the current production level. And obviously if the new either new price guidance or production or enforcement, if it stays below expectation, below what we would expect and price remain low, then we would make further adjustments in the second half and subject to demand environment as well. Q1 was a really fairly negative demand environment overall. Okay, Ming, thanks very much. I'll pass it on. Great, thank you.
OPERATOR
Our next question comes from Alan Lau with Jefferies. Please go ahead.
Alan Lau (Equity Analyst)
Yeah, thanks for taking my question. I think in terms of the sales volume and the revenue in first quarter is a bit, a bit of a surprise. We'd like to know if I do the math and back. The ASP in first quarter seems to be at around 41 or 42, so X VAT. So does it mean that the company didn't sell anything maybe after February?
Ming Yang (Chief Financial Officer)
I think that is the right, the right way to look at this in terms of. Yeah, we did sell volume in January at the high 40s inclusive VAT. Right. I think actually our Q1 recognized ASP is higher than Q4 while you look at market AASP is actually on average is much lower than Q4 and I think the biggest change is really around Chinese New Year, especially after Chinese New Year where with you know, the new policy from the state administration of market regulators was that, you know, the anti evolution policy that was counted on previously to reduce capacity capacity and enforced price was kind of disrupted. Right. So that's when we saw start to see price to come down fairly quickly and significantly. Right. So once price fell below production cost then we stopped selling to the market. And the market generally in the first quarter was really characterized by fairly high uncertainty. Right. You have a number of things happening. The war in the Middle east, high silver prices that led to a lot of uncertainty for the downstream actually where they were seeing fairly significant increase in their production costs. At the same time it was difficult for them to pass through all that increase while that's having a fairly negative impact to the Chinese end market as well. So these combined really led to a fairly low industry transaction volume for polysilicon in the first quarter.
Anita Xu (Deputy CEO)
Mr. But I recall before March, let me add a little. Sorry. Okay Anita, go ahead. Oh no, no, I was just going to say let me add a little bit more to that. So in terms of the industry level inventory it has accumulated to a relatively high level. So I would say in the first quarter has been above 500,000 metric tons and it's now nearly 600,000 metric tons. So I would say tier one manufacturers held roughly at least three months of stock. So that's why that led to a wait and see attitude from the downstream buyers. And for us especially we wanted to adhere to the Chinese authority self regulation guidelines. So we were relatively reluctant to engage in below cost sales. So we took this wait and see approach to see further implementation from the national policies level.
Alan Lau (Equity Analyst)
Understood. So sorry, how much did the tier one producers are holding in terms of inventory? Is it 500,000 like in total total is 100,000 around that. So how much is in, how much is in tier one including, including the downstreams as well, including wafer players. Okay, so, So I recall actually in January and February actually demand was quite good because downstream players are having rush export because to catch the vat. So wonder if why the company didn't sell more in January or February. Maybe because 4010 seems to be just 10% of the production.
Ming Yang (Chief Financial Officer)
Right, Okay, I think let me add more color and then maybe Anita can feel free to add more. So I think what happened was there's fairly strong demand for the modules, especially for the European market. But what happened was these integrated manufacturers especially were selling mostly their existing inventory of modules and then they were also producing, but primarily I would call it using their own inventory. Right. They had some inventory poly materials. I think the uncertainty in cost actually, especially after Chinese New Year, led them to really hold off or delay their procurement of polysilicon. I think because of especially uncertainty related to demand after April 1st. Right. And then with the war, that made even a little bit worse. Yeah. So I would say the market probably had reasonable amount of transactions in January, but really February and March was lower. And then you have, you know, this expectation of falling prices, especially for polysilicon because of the inventory issues. So that made it even, even worse. So a little bit worse in terms of the customers. They buy when prices are rising, but
Alan Lau (Equity Analyst)
they delay purchase when prices are falling. Understood. So in terms of the price outlook, I think I just want to have a follow up on Phil's question. So approximately when you think there will be a guideline coming from the authority, like when you think like, is it within a month or a quarter that price will start to rebound? Or like what is the timeline there and is there regular meetings with the authority to discuss the details on the enforcement or what is the status now?
Ming Yang (Chief Financial Officer)
Understanding should be around June and then right now they're redoing their. The cost model for all the different producers and then trying to make an alignment. So why is that cost. The term is done and then the next step would be updated price guidance.
Alan Lau (Equity Analyst)
So to my understanding, that will be more like an enforcement of the price law, which means everyone should sell above their cost. But the previous acquisition incentives are. Is it basically rejected or it's still.
Ming Yang (Chief Financial Officer)
Yeah. Or it's still alive or like, what's the. Any update on that? There's no update to that as of now. There's no new guidance on development. They don't say you can't do that.
Alan Lau (Equity Analyst)
I think we're open to different. Yeah, I would say we're open to different kinds of proposals, but we're not 100% sure how that might unfold. But we're engaging in conversations now to discover or to test different sorts of solutions. So anything that would benefit the industry as a whole and for manufacturers as well, we're willing to try it out or at least try to come to a solution with concerted efforts toward that.
Ming Yang (Chief Financial Officer)
I would say that the general policy, the government is positive in promoting mergers acquisition to call it for more consolidation. Right. But in terms of how that might lead to actual policies or actions, that's still yet to be seen. wonder if you are seeing any uptick of demand recently. Because demand I think was quite poor in past couple of months. But wonder if you are seeing any recovery in demand. I would say on the modules and end market. Certainly right now Q2 is actually trending to look better than Q1. So we shall see. And then definitely I think downstream inventory is coming down. So that's also a good sign.
Alan Lau (Equity Analyst)
Polysilicon prices are also bottoming too. And so we'd like to know if the company like because the sales was very low at first quarter, not sure if the strategy is the same in second quarter. If that's the case then we'd like to know if has the company considered maintaining an even lower utilization rate? Because the company was also running at more than 50% but I recall company used to run at 30%. So any consideration behind that like running the utilization rate at a relatively high level?
Ming Yang (Chief Financial Officer)
I would say that the general framework for the company is we're monitoring the developments of the price law especially so the companies do follow the price law and all are required to sell above production cost. And we're fairly confident on where we are in terms of industry positioning. Right. And then we should regain market share. So. And it will be a function of demand as well. So if that's the case, then we might maintain the current utilization level. But let's say if it turns out to be more negative in terms of especially if prices remain where it is right now and then we would consider a lower utilization rate. Okay, understood. So yeah, I'll stop and thank you. Thank you for taking my question. I need to make. Okay. Okay. Okay. Thanks Alan.
OPERATOR
Our next question comes from Mengwyn Wang with Goldman Sachs. Please go ahead.
Mengwyn Wang (Equity Analyst)
Hello. Thanks for taking my question. My question is about utilization as well. So my understanding now is that our current strategy is to maintain over 50% utilization and stop selling to external customers at below cost pricing. So this is based on the assumption of potential for the regulation to drive poly price higher to 40 renminbi per kilo and above, is that correct?
Ming Yang (Chief Financial Officer)
That's generally the right thinking. So it's kind of a scenario, Right. So the two major scenarios where if the government does what it says, right. Enforce price law, right penalties and all that, and then have the manufacturer sell above cost, then we would maintain at the current utilization. On the other hand, if unfortunately price law hasn't been enforced for whatever reason, right. And the manufacturers continue to sell below cost, then we will lower our utilization.
Mengwyn Wang (Equity Analyst)
So if we assume a scenario like no policy kicking and pricing is likely to stay at the current level, then what's our sales Strategy and production strategy in Q and in second half. Say, say what's. Is there any guidance on the utilization rate in this scenario? And on top of the utilization guidance, will we follow the rest of the industry to sell product at below cost pricing or we will continue to stop selling at the lower pricing level and continue to pile up the inventory and then wait for the sector turn around.
Ming Yang (Chief Financial Officer)
Okay, so right. So I mean if we assume right the government, despite all their rhetoric, nothing happens. Right. And I think that's unlikely because I mean there's a lot of pressure on MIT right now as well. So anyway, let's assume that happens and then obviously we would lower utilization and then start to sell at close to market pricing. Right. Whatever it takes to move on. So I mean then we would compete with our peers. Right. And then obviously we have a strong balance sheet. So I mean we expect we would be one of the last survivors, not the last survivor. Random. We would actually in say two or three years we will see fairly significant exit of the industry where then we have a market based, call it capacity exit or consolidation.
Mengwyn Wang (Equity Analyst)
Right. And then the company will do fairly well after that. So it's a trade off. Yeah,
Ming Yang (Chief Financial Officer)
that's clear. So I recall you just mentioned like you expect the policy will kick in in June and that's the month where we would expect a potential price hike. So if to reconcile your expectations, can we assume like we will Keep utilization at 50, 50% above Q June and then start selling at close to market pricing if no policy kicking? I think that's the right assumption, yes. So there's no policy. Right. If price remain low, then we would be able to reduce utilization and if the government does enforce price law and then we would maintain at least the current utilization. So. So June is the month we are waiting for any policy to kick in. Right. And if not we'll switch our strategy as in terms of communication with the government. Go ahead Nina. Oh, no worries. No, no, that's fine. Yeah, I understand June is the timeline of the new government policy. Sure, that's clear. And my final question is about cash costs. Is there any guidance about our cash cost in second quarter and in the second half of 2026? I think based on our current utilization production level and the current slick and metal cost and material costs, for example, we're expecting our cash cost to be in line with Q2 in terms of RMB terms and trending slightly lower over the next quarters. So a fairly steady cost structure.
Mengwyn Wang (Equity Analyst)
Yeah, sure. Thanks. That's all from me. I will pass it on. Thank you. Okay. Thank you.
OPERATOR
This concludes our question and answer session. I would like to turn the conference back over to Jesse Zhao for any closing remarks.
Jesse Zhao (Director of Investor Relations)
Thank you, everyone again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and have an awesome day. Goodbye.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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