Under the trend of industry capacity expansion, new silicon metal capacities from 2022 to 2024 have been gradually put into operation. The new capacities, mainly from East Hoshine, GCL (Xinjiang and Inner Mongolia), and East Hope (Ningxia and Gansu), have been successively released. The supply of silicon metal from northern China has significantly increased its share in the national silicon metal supply, weakening the original seasonal supply fluctuations. Additionally, since northern capacities are not restricted by the rainy season, they can operate normally throughout the year. Against the backdrop of slowing downstream demand growth and a relatively loose industry supply, the significant production reduction in Sichuan and Yunnan during the dry season, which previously created supply gaps and led to inventory reduction, has now shifted to a stage where the supply gap has significantly narrowed or even balanced. In other words, with ample supply and abundant northern capacity, the impact of rising costs in Sichuan and Yunnan during the transition between rainy and dry seasons on the industry's average cost has been diminishing.
According to SMM data, from January to May 2024, the silicon metal supply in Sichuan and Yunnan was 265,000 mt (accounting for 15%), down 4 percentage points from the same period in 2023, while the supply outside Sichuan and Yunnan was 1.559 million mt (accounting for 85%), up 4 percentage points from the same period in 2023. From June to July 2024, the silicon metal supply in Sichuan and Yunnan was 273,000 mt (accounting for 29%), down 8 percentage points from the same period in 2023, while the supply outside Sichuan and Yunnan was 668,000 mt (accounting for 71%), up 8 percentage points from the same period in 2023.
On the supply side, new silicon metal capacities from companies like Xinte, Baofeng, and Xinyutong in the north are being ignited in Q3-Q4, with future projects like Tongwei in Inner Mongolia also awaiting launch. In the south, there are also projects like Tongwei in Sichuan and Xinan Chemical awaiting launch. Overall, northern capacities account for the majority, indicating that the concentration of silicon metal capacity in northern China will further increase in the future. According to SMM silicon supply-demand balance (including silicon metal (Si≥97%) and recycled silicon), the supply surplus in June was 92,000 mt, and in July, it was around 120,000 mt. Currently, the growth rate of downstream consumption of silicon metal is not keeping pace with the increase in upstream supply, and the industry has entered a "capacity clearing out stage." The relatively stable industry costs in the north throughout the year are rapidly increasing their influence during the dry season.
