Market Review: Semi-Annual Supply and Demand of Silicon Metal [SMM Analysis]

With half of 2024 already behind us, a review of the H1 silicon metal market brings a sense of melancholy. Taking SMM standard #553 silicon metal in East China as an example, the average price as of July 31 was 11,750 yuan/mt, down 3,850 yuan/mt from early January, a 25% drop for the year. Prices of silicon metal and downstream products like polysilicon and silicone have all declined, squeezing industry profits and even turning them negative. The long-pressured market urgently needs new vitality. Below is a summary of the H1 2024 silicon metal market supply and demand situation.

Raw Material Market: In H1, the sluggish silicon metal market led to continuous price suppression on upstream raw materials. Prices of raw materials for silicon metal, such as silica, carbon electrodes, graphite electrodes, silicon coal, petroleum coke, and charcoal, all showed varying degrees of decline. However, the drop in production costs was still slower than that of silicon metal.

Supply: According to SMM data, China's silicon metal output in H1 2024 was 2.277 million mt, with total supply including silicon metal (Si≥97)and secondary silicon reaching 2.655 million mt, up 657,000 mt YoY (+33% YoY). Under the pressure of supply and warrants, increased capacity utilization rates of leading companies and the partial commissioning of silicon metal capacity supporting polysilicon, silicon prices weakened. The profits of silicon metal producers were continuously squeezed, with most companies, except for leading ones and those conducting hedging, operating at a loss. Some new silicon metal projects also faced delays in commissioning.

Demand:

Polysilicon: SMM data shows that polysilicon output in H1 2024 was 1.002 million mt, up 337,000 mt YoY (+51% YoY). The polysilicon sector faced intense competition, leading to production cuts in April and May amid inventory and loss pressures. Polysilicon monthly output saw a downward turning point in May and further declined in June. In July and August, the industry is expected to see both production increases and decreases, with no significant new reductions, stabilizing demand for silicon metal.

Silicone: SMM data indicates that domestic DMC output in H1 2024 was 1.165 million mt, up 175,000 mt YoY (+18% YoY). With weak supply and demand, DMC plants continuously suppressed raw material prices. In April and May, the industry's average profit turned negative, but in June, as silicon metal prices continued to fall, DMC profits recovered and turned positive. Overall, new capacity or capacity under technical renovation and expansion was partially realized, increasing operating capacity and maintaining positive demand growth for silicon metal, which is expected to be maintained in H2.

Aluminum-Silicon Alloy: The demand for silicon metal in the aluminum-silicon alloy industry held relatively stable. In February, aluminum-silicon alloy output saw a sharp decline mainly due to the Spring Festival holiday. In 2024, the price spread between aluminum and silicon widened, leading to a reduction in processing fees for alloy enterprises.

Import and Export: Customs data shows that in H1 2024, cumulative silicon metal exports were 364,900 mt, up 27% YoY. Imports were 13,600 mt, up 986% YoY.

Monthly Balance: According to SMM supply-demand balance calculations, H1 silicon supply surplus was 43,000 mt. Downstream polysilicon producers cut production during the transition from dry to rainy season. In June-July, the supply from southwestern silicon producers significantly increased in the rainy season. Demand decreased, leading to a rapid shift to a wide surplus in June-July. Although there were minor production cuts due to losses from late July to August, the reduction was relatively limited and could not cover the surplus, so the recent industry inventory accumulation is likely to continue.