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SMM Weekly Review on China’s Domestic Silicon Market
Aug 27, 2010 19:25CST
Source:SMM

SHANGHAI, Aug. 27 (SMM) --

Supply

Overall operating rates at domestic silicon metal producers during the high-water period are obviously lower than previous years. Orders received by some silicon metal producers have been booked at even to mid-September. In this context, spot inventories at silicon metal producers were extremely tight, and smelters still kept offers firm and were unwilling to move goods. Average operating rates at Yunnan during July and August were less than 60%. Currently, more and more drying furnaces are put into operation at present, so output from newly added capacity may increase significantly in mid and late September.

Demand

Consumption of silicon metal export is still relatively brisker in domestic market than that in overseas market, but domestic purchases’ purchasing interest lowered significantly and they only make purchases on an as-needed basis due to high price level.  Downstream aluminum alloy industry is expected to step out of traditional low-demand period from September, and operating rates at aluminum alloy producers are expected to recover significantly. In this context, demand for silicon metal will also grow to certain extent. However, price acceptance is low by overseas consumers and wait-and-see sentiment was strong.

Analysis

High-priced silicon metal curbed domestic and overseas demand. Operating rates at silicon metal producers may hard to reach peak level by virtue that the traditional high-water period will last for less than two months. Previously, inventory at silicon metal producers were usually overstock, a tight inventory level during high-water period in this year in rarely seen. If operating rates climbs above 70-80%, tight supply is expected to ease to certain extent, but if operating rates still remains below 70%, any room for silicon metal prices fall during the high-water period will be limited. 

Forecast

SMM believes that mainstream traded prices of silicon metal at Huangpu port will be around RMB 12,400/kg for #553 silicon metal, will be around RMB 13,200/mt for #441 silicon metal, will be around RMB 13,700/mt for #3303 silicon metal and around RMB 14,300 for #2202 silicon metal in the following week.

 

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