SHANGHAI, Oct 15 (SMM) – Metallurgical-grade, low-grade silicon metal started to retreat 3 working days before the National Day holiday, and continued such correction trend after the holiday. In particular, #553 oxygen-free silicon declined sharply as holders lowered inventory to collect funds main downstream aluminium alloy plants reduced production. East China #553 oxygen-free silicon prices have declined 60% within one week and returned to the prices of 40,000 yuan/mt. Under such context, bearish sentiment spread. SMM believes that silicon metal prices are unlikely to fall significantly based on the following reasons.
The supply of silicon metal tightens throughout the whole year. There are almost no new production capacity. Meanwhile, the capacity that has been built lacked flexibility. On the other hand, the domestic and overseas demand rose sharply on the year. The capacity of organic silicon and polysilicon is likely to commission in Q4.
2. The impact of dual-control energy consumption on the supply side is more obvious. Yunnan, Xinjiang, and Sichuan, the main producing areas of silicon metal, are all facing pressure to reduce emissions. It is difficult for silicon metal manufacturers to release output normally in September-November. At the same time, insufficient power supply also restricted the release of production capacity in the main production areas. Although downstream producers in east and south China, the main consumption regions, have reduced demand due to power rationing, most of them have resumed operation after short-term production restrictions. The sharp rise and fall are not conducive to the healthy development of the industrial chain. The stable prices is the common goal of upstream and downstream enterprises. SMM recommends that investors operate rationally according to the actual supply and demand conditions of the market.