Silicon metal spot price hiked steadily in December amid bigger-than-expected supply cut, but may stabilise in January

Silicon market firmed up in December. Low-grade ore price shot up amid a supply and demand mismatch, while high-grade ore price had limited room to make gains amid weak demand mismatch and falling futures price. Therefore, the price difference between the two narrowed significantly, and meanwhile no price difference between the two for a small number of goods also existed. As of January 4, in East China, above-standard #553 silicon metal price was 15,500- 15,700 yuan/mt, up 900 yuan/mt or 6% MoM. 421# silicon metal price stood at 15,800- 15,900 yuan/mt, up 300 yuan/mt or 2% MoM. 421# silicon metal price (for silicone) stood at 16,300- 16,400 yuan/mt, up 550 yuan/mt or 3% MoM. Silicon demand from polysilicon producers in December increased by more than 60% MoM. Demand for low-grade silicon such as 99# mounted, while that for low-phosphorus boron 99# and 521# also appeared strong. At present, low-phosphorus borosilicate was mainly supplied from Xinjiang, Northeast and South China. Owing to low operating rate in the dry season in south China and environmental protection-related production restrictions in Xinjiang, low-phosphorus borosilicate supply in the market was limited, making it difficult for downstream buyers to make procurement.

Supply: Larger-than-expected operating rate slip fed into a large silicon inventory meltdown in December. According to SMM data, silicon production in November was 403,400 mt. In late November, rising electricity prices in the dry season tipped a slew of silicon plants into shutdown in Sichuan and Yunnan. The operating rate of silicon plants in the regions stood low in December. In Xinjiang, there was an original expectation of production uptick, but leading silicon plants and some Yili-based silicon plants suddenly cut production amid environmental protection-related production limits and power rationing, thereby lowering the average operating rate of silicon plants in China. In a word, silicon metal production in December is expected to be 340,000-350,000 mt.

Demand: Polysilicon producers had rising silicon demand. According to SMM data, polysilicon production in December was 154,900 mt, up 3% MoM, and will keep increasing in January, judging from the operating rate. DMC output increased by 5% in December amid restart of some capacities from maintenance and capacity ramp-up. Judging from the operating rate of DMC plants, there will be maintenance of partial capacity in January. It is expected that silicon demand from DMC plants in January 2024 will be basically the same as November 2023. On January 4, 2023, DMC price was 14,200-14,500 yuan/mt. The periodic supply surplus left a limited driver for DMC price increase. Leading DMC plants suffered losses. The operating rate of aluminium alloy industry declined. On the one hand, high aluminium price, tight aluminium scrap supply and environmental protection-related production limits in north China lowered the operating rate of secondary aluminium alloy producers. On the other hand, some aluminium alloy plants reported poor alloy shipments amid no downstream orders. As some small and medium-sized secondary aluminium alloy plants may slash or suspend production, the operating rate is expected to remain weak in January.

Silicon supply decreased from high level from December to January. From the perspective of downstream demand, some users’ silicon demand was met in late December. Price of 99# silicon powder orders was gradually confirmed. In addition, downstream buyers showed limited acceptance of sustained silicon price gain, given their own profits. If there is no new bullish news, silicon spot price is unlikely to make gains. It is expected that silicon spot prices will mainly stabilize in January.