Silicon Metal Prices to Regain Upward Momentum in March When Demand Recovers

SHANGHAI, Feb 16 (SMM) - SMM data showed that China's industrial silicon output stood at 273,800 mt in January 2022, down 8.97% month-on-month, but up 10.44% year-on-year.

In January 2023, prices of above-standard #553 silicon fell to 17,300 yuan/mt in east China, with the ex-works price of some plants falling below 16,500 yuan/mt. Affected by the sluggish consumption of downstream aluminium alloys and silicone as Well as the gloomy export market, silicon plants saw poor shipments and orders. The average electricity price in Xinjiang was 0.32 yuan/kWh, and that in north-China was generally above 0.5 yuan/kwh. For silicon plants in south China, the full cost was mostly above 17,500 yuan/mt. The losses and market pessimism forced the plants to cut or halt the production. The output declined the most sharply in Yunnan and Sichuan with a drop of 10,000-12,000 mt, followed by Hunan and Guizhou where the output fell by some 4,000 mt. New capacity accounted for the output growth in Xinjiang, and the output in Inner Mongolia and Gansu grew only marginally due to maintenance and gradual commissioning of new capacity.

In February, the operating rates during the dry season in Yunnan and Sichuan, the main producing areas, will change little compared to January. The overall output in Xinjiang, Inner Mongolia and Gansu will continue to increase thanks to the commissioning of new capacity. The Silicon supply in north-west China will outperform that in south-west China. Driven by the new capacity, industrial silicon output in February is likely to exceed 280,000 mt.

Demand: According to SMM statistics, China's polysilicon production in January was 102,800 mt. It is expected that the output in February will maintain an increase and stand at around 105,000 mt, and the demand for silicon metal will remain strong. Polysilicon enterprises have basically completed their bidding for silicon metal powder in mid-February, and the next round of centralized inquiry and bidding is expected to be in early March. Silicon metal powder companies mainly purchase silicon metal in small quantities at greater frequencies. According to SMM's statistics, China's silicone production in January was 163,900 mt. After the CNY holiday, the operating rate of silicone idnsutry ushered in the traditional peak season, rising to about 80%, an increase of nearly 5 percentage points from pre-CNY level. DMC producers made inquiries for 421# silicon, with mainstream transaction prices at 19,000-19,300 yuan/mt on a delivery to factory basis. Aluminium alloy plants basically resumed normal production after the Lantern Festival.

Bullish factors: improving downstream demand; rising DMC prices

Bearish factors: inventory pressure in the spot market, weak price of carbonaceous reducing agents

Slow transmission from improving demand and inventory pressure prevented silicon prices from sustaining gains. Yet, cost support means that silicon prices will see little downside room. Silicon prices may rise again in March when demand recovers further.    

China’s automobile production and sales fell on bot MoM and YoY basis in January after favourable policies (tax cuts for gasoline cars and subsidies for new energy vehicles) expired and following efforts to achieve full-year targets at year-end.

Data from China Association of Automobile Manufacturers showed that China’s automobile production and sales were 1.59 million units and 1.65 million units respectively in January, down 33.1% and 35.5% month-on-month, and 34.3% and 35% year-on-year. NEV production and sales were 425,000 units and 408,000 units respectively, down 46.6% and 49.9% month-on-month, and 6.9% and 6.3% year-on-year.