Disturbance from Expectations for Production Cuts on Supply Side Intensifies, Silicon Metal Prices Continue Strengthening [SMM Silicon Industry Weekly Review]

SMM August 20 News:Silicon Metal:This week, spot silicon metal prices continued to edge up. As of August 20, SMM East China oxygen-blown #553 silicon was at 9,300-9,400 yuan/mt, up 200 yuan/mt WoW; #441 silicon at 9,400-9,600 yuan/mt, up 200 yuan/mt WoW; #3303 silicon at 10,100-10,200 yuan/mt, up 50 yuan/mt WoW. In the futures market, the SI2611 contract consolidated around 8,650-8,850 yuan/mt during the week, closing at 8,755 yuan/mt on Thursday's tail session, up 145 yuan/mt WoW. In terms of market quotes and transactions, influenced by expectations for production cuts at large plants in Xinjiang at month-end, silicon enterprises generally held a strong sentiment to hold prices firm, and their quotes increased WoW. Arbitrageurs also raised their quotes following the futures price increase, and there were hardly any low-priced cargoes in the market. Suppliers generally adjusted their quote centers upward, but downstream users in China and end-users outside China showed little willingness to rush to buy amid continuous price rise. Some downstream users had poor acceptance of high prices, mainly placing orders on demand for restocking.

Demand side, the polysilicon weekly operating rate was basically stable WoW, and polysilicon enterprises' production schedule had no significant adjustment temporarily, keeping silicon metal consumption stable. On a monthly basis, silicon metal consumption from polysilicon sector increased in August. Silicone weekly operating rate edged lower, mainly due to some monomer plants cutting production in late August affecting the short term. The industry operating rate hovered around 60%, with limited changes. Operating rates of aluminum-silicon alloy enterprises were basically stable. As the high-temperature season gradually ended, end-user operating rates increased, coupled with downstream essential demand orders support, the aluminum alloy industry operating rate is expected to edge up later.

This week, the market mainly traded on expectations of whether large plants in Xinjiang could cut production. According to SMM, large plants in Xinjiang plan to cut production on 32 electric arc furnaces at month-end, and the impact of the reduction is expected to mainly reflect in September. According to the balance sheet, there will be no major variables on the demand side in September. If large plants' production cuts on the supply side materialize, even if the silicon metal capacity that cut production in early August in Gansu and other regions resumes production, supply in September may be expected to be tight. Therefore, the market pays high attention to whether large plants' production cuts can materialize. Overall, based on the fact that fundamentals have already improved in early August due to supply-side production cuts and increased polysilicon demand, coupled with expectations for large plants' production cuts at month-end, silicon metal prices have strong downside support. Pay attention to the materialization of production cuts at large plants in Xinjiang at month-end and the impact of silicon enterprises' shipment pace on prices.

Polysilicon:This week, the polysilicon price index was 40.73 yuan/kg, N-type recharging polysilicon was quoted at 38.7-42.7 yuan/kg, and granular polysilicon was quoted at 39-40 yuan/kg. This week, mainstream polysilicon producers basically resumed quoting prices, with top producers concentrating quotes at 43 yuan/kg. However, downstream acceptance was low, and transactions were only individual deals or dual distribution. Downstream producers began to mostly buy from period merchants, while trader shipments increased. The market is currently focusing on watching the batch transaction prices downstream.

Wafer:This week, wafer prices were raised significantly, with N-type 183 wafers priced at 1.115-1.138 yuan/piece, 210R wafers quoted at 1.151-1.153 yuan/piece, and 210mm wafers quoted at 1.211-1.255 yuan/piece. This week, 183 wafers saw a notable price hike due to supply deficit, and quotes have already reached 1.15 yuan/piece. 210N followed the rise but saw a pullback in demand, resulting in a slight pullback in price, while 210R remained in a stalemate. This round of price increases is undoubted in the short term, but whether it will last until end-September or mid-October depends on the support from China's centralized projects and related policies.

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