Spot silicon metal prices gradually stopped falling in early April, and moved sideways by early May amid a standoff between upstream and downstream. These are silicon metal prices (by type) as of May 16, and their MoM changes: above-standard #553 silicon metal (13,100-13,300 yuan/mt, -50 yuan/mt), 441# silicon metal (13,500-13,600 yuan/mt, -100 yuan/mt); 421# silicon metal used in silicone (13,900-14,000 yuan/mt, -150 yuan/mt). Despite the fact that silicon metal prices dropped below the break-even level of most small and medium-sized plants, buyers still lowered purchase prices in early April, while silicon metal plants mostly kept prices strong amid little inventory pressure. Purchases aimed to meet rigid demand. Trade momentum grew thinner after the Labour Day holiday. In addition, with upcoming rainy season, leading silicon metal plants lifted operating rates. Under this circumstance, silicon metal suppliers’ prices showed signed of a drop in mid-May.
China’s output of silicon metal was 358,700 mt in April, down 8,000 mt or 2.1% MoM but up 23.2% YoY. The output totalled 1.4159 million mt in January-April, up 257,100 mt or 22.2% YoY. The spot price of silicon metal accelerated declines in March. Although the drop narrowed in April, the market maintained procurement based on demand amid a bearish outlook. Some small silicon companies with weak risk resistance cut production in April amid losses, mainly in Yunnan, Gansu and Shaanxi. With advantages in the industrial chain and corporate strategies, leading silicon enterprises maintained stable operating rates. Specifically, large factories in Xinjiang gradually ramped up production in April. Their output hit a historical high in early May after technical upgrading.
In May, few companies resumed production in Sichuan, restricted by costs and profits. Some took a wait-and-see stance, waiting for the rainy season. The restarting manufacturers in Yunnan were concentrated in Baoshan, while silicon companies in Dehong Prefecture and other places had no plans to resume or increase production in May. Most medium and large-scale silicon companies in north China maintained normal production. As leading companies ramp up production, silicon metal output is expected to increase to 370,000 mt in May.
Demand: Silicon metal demand from polysilicon plants ticked down. According to SMM data, polysilicon output was up 5.8% MoM at 181,200 mt in April, mainly due to continuous ramp-up of new capacity, and may dip by 2,000 mt in May, with maintenance against climbing capacity of Yunnan Tongwei. Scheduled silicon wafer production slip and piling-up of polysilicon and silicon wafer stocks are expected to make a further dent in polysilicon production in June, which will likely tamp down silicon metal demand. DMC plants may have stable-to-higher silicon metal demand in the short term. According to SMM data, China's DMC production was down 4.7% MoM at 186,300 mt in April, largely pinned on maintenance of some plants, but may rise in May due to restart from maintenance and no new maintenance plans. Despite this, slim profits of DMC and downstream deep processing products will lead DMC plants to purchase raw materials only as needed. Aluminium alloy plants had stable silicon metal demand. Operating rates of primary aluminium alloy industry were 51%, up nearly 4 percentage points MoM, and those of secondary aluminium alloy plants were 55%, down almost 2 percentage points MoM. Price spread between aluminium and silicon metal widened. However, fabrication charges appeared weak. Therefore, profits of aluminium alloy plants stood low.
Bullish: low downstream stocks
Bearish: High silicon metal stocks; rising supply amid upcoming rainy season in Sichuan and Yunnan, and falling costs; higher likelihood of maintenance of polysilicon plants
Summary: According to SMM calculations, silicon metal market saw a supply deficit of about 2,000 mt in April, but it exerted less impact on silicon metal industry. This is because of high stocks. SMM data showed that social stocks were 370,000 mt, stocks at silicon metal producers in Xinjiang, Yunnan and Sichuan in SMM’s survey sample were 200,000 mt. After taking into account stocks that were not covered by SMM statistics, total stocks were over 600,000 mt. In May, supply will still increase, while demand will basically be stable. Supply-demand fundamentals will be balanced. Silicon metal stocks are mainly held by leading plants or stored in social delivery warehouses. Silicon metal prices may move downwards.
According to CAAM data, in April, automobile production reached 2.406 million units, a MoM decrease of 10.5% and a YoY increase of 12.8%. Automobile sales reached 2.359 million units, a MoM decrease of 12.5% and a YoY increase of 9.3%. From January to April, automobile production and sales reached 9.012 million and 9.079 million units respectively, with YoY increases of 7.9% and 10.2%. The production growth rate increased by 1.5 percentage points compared to January-March, while the sales growth rate decreased by 0.3 percentage points compared to January-March.
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