SHANGHAI, Jun. 10 -- News concerning electricity price adjustment was frequently heard in the market, and cargo-holders' willingness to move goods increased due to high cost pressure. In this context, domestic spot silicon metal prices ceased to decline and climbed mildly from this week. However, overall trading sentiment was moderate, and downstream consumption has not improved significantly yet. According to latest SMM mainstream offers at Huangpu port, prices were between RMB 11,400-11,700/mt fro #553 silicon metal, between RMB 12,200-12,600/mt for #441 silicon metal, between RMB 12,700-13,100/mt for #3303 silicon metal and between RMB 13,500-13,900/mt for #22020 silicon metal.
Recently, it is rumored that electricity prices will be lifted from RMB 0.315/ kWh, or up 64% to RMB 0.517/kWh in Dechang region of Sichuan province. SMM contacted with local producers with confirm whether the rumor is true or not. One producer told that the rumour was true, and the price will become effective from June 20th, but most producers said that they hadn't received the notice yet. If such news is true, Dechang region will come next to Huaihua in Huanan province as the region experiencing the significant electricity price hike, and producers may also face the challenge of production suspension. In this context, local producers began to show unwillingness to move goods, and they deliberately quoted higher offers to retain goods.
According to SMM sources, supply of goods was relatively tight in Hunan province. Although operating rates recovered significantly in that region, and are expected to grow from 15% in April to more than 50% in late-May and early June, impact from the severe drought on Yunnan hasn't totally eased yet, as supply of electricity and output were both unstable in Yunnan. In this context, prices of #3303 and #2202 silicon metal ceased to decline and began to have upward momentum from previous downward track in early June.
The Chinese government will put their focus on electricity price adjustment in June, and production at mills with backward capacity and excessive energy-consuming and pollutant emission will be negatively affected, with the intensified adjustment of electricity prices. SMM believes that silicon metal prices will more likely be affected by producers' sentiment than market fundamentals over the short term, and prices are expected to move up before the uncertainties from electricity price adjustment diffuse.
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