SHANGHAI, Jul 11 (SMM) – Operating rates across domestic silicon producers in June gained 8 percentage points from May and stood at 47.1% as the rainy season arrived. The figure inched down 0.2 percentage point from a year ago, SMM data showed. 

China's production of silicon metal came in at 242,800 mt in June, up 18.2% on the month and up 4.1% on the year. This brought total output in the first six months of the year to 1.23 million mt, up 23.3% from the same period last year.

Silicon plants in Yunnan and Sichuan provinces stepped up operation in the rainy season on lower costs of electricity, and this accounted for the rise in operating rate. In Yunnan province, a major producer of silicon metal, the annual rainy season begins in June and ends in December. June's operating rates in three major producing areas of Xinjiang, Yunnan and Sichuan stood lower from a year ago. This lead to a year-on-year drop in the overall operating rate. However, the actual output grew from last year due to expansion of capacity.

Prices of silicon began to fall from March this year. Slow consumption of stocks, which accumulated between December 2017 and the Chinese New Year holiday in February 2018, and the release of much new capacity in Xinjiang accounted for the decline. Pessimistic expectations during the rainy season further weighed on prices and depressed enthusiasm across producers. Higher prices of electricity in Yunnan, Sichuan, Hunan, and Fujian provinces also affected the release of capacity, SMM learned. 

The operating rate is likely to rise further to 52% in July, SMM forecasts. A supporting power plant at a large silicon mill in Xinjiang, with 11 operating furnaces, was put into operation this month. The mill is scheduled to expand production further in the near term, SMM learned. Most producers in Sichuan and Yunnan will reach full capacity in July. If silicon prices continue to decline in July, some producers with high costs will cut production, while others are unlikely to lower output given the high cost of starting furnaces and the short rainy period.