SMM Silicon Market August Brief: Silicon Prices Rose at the End of August, Market Sentiment Diverged, Can Prices Stabilize?

In August, spot silicon metal prices fluctuated rangebound. Prices slightly declined at the beginning of August, and after about two weeks of price stagnation in late August, the spot prices of multiple grades increased by 100-200 yuan/mt, followed by a period of price stagnation and consolidation. As of September 13, the price of standard #553 silicon metal in east China was 11,400-11,500 yuan/mt, down 50 yuan/mt MoM; above-standard #553 silicon metal was 11,700-11,800 yuan/mt, up 150 yuan/mt MoM; and #421 silicon metal was 12,000-12,200 yuan/mt, down 50 yuan/mt MoM.

Supply: Supply side, SMM data showed that China's silicon metal production in August decreased by 13,000 mt MoM, a decline of 2.7%, but increased by 153,000 mt YoY, a rise of 47.8%. The MoM decrease in silicon metal production in August was mainly due to slight production cuts by some silicon companies in regions such as Sichuan, Xinjiang, north-east China, and Qinghai, with Sichuan and Xinjiang leading the reductions. In September, silicon companies in north-west China maintained normal operations, and a few silicon companies in Inner Mongolia had production resumption plans for September-October. In Sichuan and Yunnan, marginal production was affected by slight reductions from August to early September. Most silicon companies continued production while observing the situation, considering whether to reduce or halt production by the end of October. Overall, the reduction in silicon metal supply in September was limited.

Demand: Polysilicon, SMM data showed that polysilicon production in August was 128,000 mt, down 15% MoM, with a monthly silicon consumption of 154,000 mt. In September, Tongwei Baotou's new capacity of 200,000 mt was expected to start production, and some previously halted polysilicon capacities might resume production. The demand for silicon metal from the polysilicon sector was expected to gradually recover in September-October. Silicone, SMM data showed that silicone DMC production in August was 216,900 mt, up 7% MoM, with a monthly silicon consumption of around 120,000 mt. The high production in August was mainly due to the ramp-up of new capacities in Hubei and Jiangxi, coupled with the postponement of maintenance plans by monomer plants due to market recovery. In September, about half of the monomer plants were expected to undergo maintenance and reduce loads, with an estimated silicon consumption of 114,000 mt. Aluminum-silicon alloy, the industry's operating rate in August remained stable, with a slight increase in the operating rate of primary aluminum-silicon alloy and a slight decrease in the operating rate of secondary aluminum-silicon alloy. The "September peak season" consumption recovery, coupled with news that the implementation of the Fair Competition Review Regulations in regions such as Anhui and Jiangxi might be delayed, could boost the operating enthusiasm of secondary aluminum alloy plants, promoting an increase in the industry's operating rate.

Bullish Factors: Low inventory levels at leading silicon companies, some companies switching to new standard #553 silicon metal, potential tightening of low-grade spot silicon metal liquidity, and the traditional peak consumption season for silicone and alloy industries in September-October.

Bearish Factors: Unresolved warehouse warrant issues, industry inventory not being reduced, and the commissioning of supporting capacities by polysilicon companies.

SMM View: Overall supply and demand, from July to September, supply continuously showed a wide accumulation of inventory, with limited supply reductions and insufficient demand increases. However, some goods, such as those held in inventory by silicon companies and hedged sources, would not flow to downstream users in bulk for the time being, limiting the liquidity of these goods. Therefore, short-term supply should not be overly pessimistic.