Silicon prices extend decline in Jun on supply growth, weak demand

SHANGHAI, Jul 11 (SMM) – Silicon prices extended their losses in June, down 3.8-5% from May, due to supply growth and weak downstream demand, SMM believes.

The most commonly traded product, 553# non-oxygen silicon, led the declines. Plants with higher costs were already running in the red.

In June, silicon supply grew after plants in Yunnan and Sichuan provinces stepped up production. Meanwhile, demand from three major downstream consumers weakened. Consumption of aluminium alloy entered the low season and environmental probes affected organosilicon production. The central government's restrictions on solar power capacity growth and subsidy cuts affected the production of polysilicon.

Producers of high-grade silicon did not plan to cut production given relatively high profits. Inventories of finished products were high as the supply of high-grade resources exceeded demand.

The shutdown of obsolete capacity across China will accelerate this year as environmental requirements and reviews of corporate loans intensify.

Silicon prices are likely to rebound when high season for consumption approaches in the third and fourth quarters. SMM does not expect much upward room in silicon prices as the supply glut is likely to worsen in the second half of this year after new capacity in the north is commissioned.