[concern] stocks related to the skyrocketing silicon price are rife with breach of contract in the lower reaches of the sky.

The recent sharp rise in silicon prices has driven the stocks of relevant listed companies to soar into the sky, but in the lower reaches of the industrial chain in sharp contrast, under the sudden surge in raw material costs, some enterprises have been overwhelmed to break their contracts!

Today, the organosilicon plate continued to pull up in the morning, and divine materials rose by the daily limit. Many stocks such as Hesheng Silicon Industry, Jiangsu Cathay Pacific, Sanyou Chemical and so on led the gains. Since August, the organosilicon plate has continued to strengthen, and the stock prices of individual stocks, such as Tianci Materials, Hesheng Silicon Industry, Jiangsu Cathay Pacific, Dongyue Silicon, and so on, have set new record highs today. Recently, the tight situation of domestic DMC supply has intensified, and prices have risen again. Since August, the spot price of organosilicon has risen sharply. As of today, the daily average price of SMM spot DMC was 33750 yuan / ton, up 2650 yuan / ton, or 8.5%, compared with 31100 yuan / ton on August 13.

"Click to view the spot price of SMM metal

There is a lot of disruption in the lower reaches.

At the same time, the sharp rise in silicon prices has led to a breach of contracts in the market. according to SMM research, the sharp rise in prices has repeatedly caused silicon factories and traders to break their contracts in the domestic and foreign trade markets. among them, some silicon factories keep delaying the delivery of low-price orders, while others simply break their contracts directly, and downstream customers cannot get the goods, and those with rigid demand can only find another source of goods at a high price. In addition to the breach of the contract caused by the non-delivery of the silicon plant, the serious upside-down profit of receiving the order and then replenishing the goods is also a major reason for the breach of the contract.

SMM recently pointed out in the article "Metal Silicon rising steadily in recent days, supply constraints strong Silicon Price rise", from the supply side, due to raw material clean coal problems, chemical grade 42m silicon product rate is low, chemical grade 42m silicon supply is particularly tight, in the first echelon of price rise, driving metallurgical grade metal silicon prices up, the overall market performance supply is tight. From the demand side point of view, this week 44 million, 330 million silicon prices have been flat or exceeded aluminum prices, in the future there will be more specifications of metal silicon and aluminum prices upside down, aluminum alloy enterprise costs rose sharply, coupled with the downstream consumption slump, some aluminum alloy enterprises temporarily suspend procurement. In particular, the original aluminum alloy factory has suffered a loss in processing fees this week, has begun to reduce production, and plans to only guarantee the supply of long-term customers to give up individual customers in the near future. Organic silicon and polysilicon enterprises mostly maintain normal procurement.

In terms of transactions in the spot market of silicon metal, according to SMM research, the average daily price of SMM oxygenated 55 silicon (East China) was 21100 yuan / ton today, up 7150 yuan / ton, or 51.3%, compared with 13950 yuan / ton on July 20. In the spot market, high-grade metal silicon led the rise, driving the overall market to continue to rise. There are sporadic high-price orders on the market, and other silicon factories will follow in raising their quotations. The rapid increase is the characteristic of this price increase, and the market fluctuation is too fast to widen the actual trading range. The orders in the hands of the silicon factory are OK, and there is basically no spot to come out, not to mention the backlog of inventory, so even if there is no new order, it does not affect the silicon factory to raise the quotation, the price increase mentality is more determined, the downstream and trade inquiry orders are more active, and the wait-and-see market is in the majority.

"Click to view the spot price of SMM metal

Outlook for the future

In the recently issued "barometer on the achievement of dual control targets for energy consumption in various regions in the first half of 2021," the provinces whose energy intensity increased instead of decreasing in the first half of the year include Xinjiang and Yunnan, two major silicon supply provinces, which means that the two provinces may implement more stringent double control policies on energy consumption in the second half of the year, the form of power supply is not optimistic, and the start-up of silicon plants in the second half of the year may be challenged. As for the new supply in the second half of the year, as the existing profits of silicon plants are rare, some dusty silicon factories want to resume production. According to SMM, if all production resumes as planned, the new supply is expected to be around 20, 000 tons in the second half of the year, which has a limited impact on the overall metal silicon supply market.

For future expectations, SMM believes that at the beginning of the second half of the year, due to supply problems such as raw materials, silicon and coal, the rate of finished products of chemical grade metal silicon plummeted, and the situation of superimposed silicon plants occurred frequently, resulting in a shortage of supply of some brands, especially 42 silicon, and downstream enterprises of semi-metallic silicon during the flood season have not yet established a good safety inventory, and the national energy consumption double control policy is still not optimistic in the second half of the year, which directly affects the operation of metal silicon plants. In addition to a small number of conditional zombie production plans to resume production in the second half of the year, the operating rate of existing metal silicon plants cannot continue to rise. In addition to the risk of short-term pullback and consolidation, the metal silicon market is expected to maintain an upward trend in the second half of the year and constantly refresh new historical high prices.

Related Reading: [SMM Analysis] 2021H1 Review of China's Silicon Metal Market and Price Forecast in the second half of the year