SMM analysis of drivers for rising low-grade silicon prices

Standard and above-standard 553# silicon metal market have improved starting the end of November. Actual transaction prices gradually increased amid silicon plants’ price firmness and tight supply. In terms of high-grade 421# silicon, weak futures prices and abundant deliverable goods led high-grade 421# silicon plants to keep offers stable or refrain from selling. Secondary silicon prices saw the largest price increase after sharp decline in mid-to-early November.

Drivers for good performance of low-grade silicon price boiled down to the following factors:
As for standard 553# silicon, its main producing areas are located in Sichuan, Chongqing, Yunnan, Shaanxi and Henan, with Sichuan holding the biggest share. The southwest China was in a dry season in November-December. Standard 553# silicon plants who had difficulty in making profits amid current low silicon price turned to more production cuts and halts. Therefore, standard 553# silicon output slumped. In addition, the shutdown will last for a long time. Under this circumstance, some silicon plants with inventory were not in a hurry to sell. Silicon plants kept prices firm.
In terms of low-grade above-standard 553# silicon, its main suppliers were in northern China. The operating rate of silicon plants in northern China stood high, but why the spot market was “undersupplied”?
On the one hand, Xinjiang-based major above-standard 553# silicon plants increased offers to 16,000 yuan/mt on October 19, boosted by a slew of orders received from the end of September to October. Demand from silicon powder and polysilicon also left silicon plants with no inventory pressure in December. Buyers such as aluminium alloy plants and some grinding plants purchased cheaper goods from other suppliers.
On the other hand, demand from silicon powder remained robust. In spite of price slip, rising silicon demand from polysilicon was felt. According to SMM data, polysilicon production in November was 150,500 mt, up 5% MoM. According to scheduled production of polysilicon plants, polysilicon production in December is expected to be 158,000 mt. Demand for low-grade silicon lumps, such as Xinjiang 99 and 521#, boomed, especially for low-phosphorus boron whose supply was tighter due to difficulty of cleaning silica in winter.
Tight supply and rising costs pushed silicon prices up. The strength will linger in a near future, and there will still be a slight upward momentum. DMC and aluminium alloys markets are in a slack season, while polysilicon producers mainly purchased silicon on a need-to basis amid price erosions. Moreover, 421# silicon products increased market supply to a certain extent. It is expected that silicon prices will own small upward space and will rise slowly.