SHANGHAI, Apr. 20 (SMM) --
Operating rate at silicon metal producers hovered around 23% in March, and is expected to move lower in April given sluggish demand and relatively low silicon prices. Silicon metal inventories across domestic warehouses remain high, with downstream enterprises purchasing in small quantities. Production costs at most silicon metal producers are higher than selling prices of silicon metal, so just a very small number of producers are conducting production for the time being, regardless of large manufactures in Yunnan, as well as producers in Guizhou which enjoys electricity subsidies and in Hunan where electricity prices are high for many years. Overall silicon metal supply is stable this week but will likely decrease in May.
Silicon metal demand is mainly concentrated in the aluminum alloy industry. Due to limited volume in the use of silicon metal and less requirements for quality, aluminum alloy producers can buy low-priced silicon metal. Aluminum alloy prices have fallen but demand for silicon metal is unlikely to decrease sharply for this industry. As polysilicon and organic silicon prices trend lower, demand for chemical-grade silicon metal is also going down.
Electricity prices are due in the coming week, the end of the month. According to SMM survey, some silicon metal producers do have cash flow problems in some regions of Hunan, Guizhou, and Yunnan, so the number of producers conducting production will continue to fall in May. However, silicon metal prices are unlikely to increase even if demand remains sluggish and producers scale back operation. The downside room for low-quality silicon metal is comparatively limited.
Mainstream traded prices at Huangput port will fall to around RMB 11,800/mt for #553 silicon metal, RMB 12,600/mt for #441 silicon metal, RMB 13,300/mt for #3303 silicon metal and 15,000/mt for #2202 silicon metal in the following week.