According to SMM data, China’s industrial silicon production in 2023 was 3.801 million mt, a year-on-year increase of 8.5%. After counting in silicon metal with Si content>97% and recycled silicon, the total silicon supply in 2023 would be 4.282 million mt, a year-on-year increase of 10.0%. Domestic demand increased, while exports decreased. Domestic silicon consumption in 2023 was 3.814 million mt, a year-on-year increase of 29%. Among the three major downstream sectors, that is polysilicon, silicone, and aluminum-silicon alloys, silicon consumption in polysilicon sector continued to show significant growth rate. In 2023, the polysilicon sector consumed 1.806 million mt of silicon, up 78% YoY, and the year-on-year growth rate has exceeded 68% for two consecutive years. In 2024, over 1 million mt of new polysilicon production capacity is planned to be put into operation, and the sector will remain a powerful driver of silicon consumption.
In 2023, silicon consumption in silicone sector was 1.169 million mt, a year-on-year increase of 6%. New silicone capacity in 2023 was 350,000 mt (including technological transformation and expansion projects). Affected by sluggish terminal consumption and the general losses of DMC factories, the progress of new production capacity in 2023 was far less than expected, and a handful of expansion projects have been postponed to 2024.
Customs data showed the cumulative export volume of silicon metal in 2023 was 573,000 mt, a year-on-year decrease of 12%. Imports totalled 6,500 mt, down 78% YoY. The downturn in Japan's automobile and other consumer sectors, the reduction in overseas silicone demand, as well as competition from other countries caused silicon exports to decline at a rate of more than 10% for two consecutive years.
In early 2023, under the background of oversupply, the price of industrial silicon kept falling, which in turn forced some high-cost production capacity to be suspended, allowing the industry to start a process of destocking. The launch of industrial silicon futures contract has prompted stock transfers from factories and warehouses to delivery warehouses. Polysilicon, the main downstream consumer of silicon, has also entered a stage of overcapacity in the wake of rapid expansions. All downstream sectors of silicon are in the "low profitability" stage. There will be new production capacity layouts in both the upstream and downstream sectors in 2024. However, meagre profits or even losses will heighten the risk of new projects being unable to be put into operation as scheduled. As of February 1, 2024, the industrial silicon futures warehouse receipt inventory announced by Guangzhou Futures Exchange was 225,000 mt, which could alleviate the ongoing supply gap in the short term. In the short term, the industry is slowly destocking from January to March. Most of the new industrial silicon capacity will be put into operation in the second quarter or later. After the Spring Festival, downstream intensive replenishment will drive short-term demand to increase. From late February to March, the price of industrial silicon may go up.