Supply Reduction and Weak Demand Keep Silicon Metal Prices Consolidated at Low Levels

SMM, Nov 22: In October and November, spot silicon metal prices remained in a stagnant range after slightly increasing by 100-200 yuan/mt. In mid-November, the most-traded silicon futures contract fluctuated downward to below 12,500 yuan/mt, with both futures and spot cargoes flowing to downstream markets, putting pressure on silicon metal prices. As of November 15, above-standard #553 silicon metal in east China was priced at 11,700-12,000 yuan/mt, up 50 yuan/mt MoM; #441 silicon metal was at 12,000-12,200 yuan/mt, up 100 yuan/mt MoM; and #3,303 silicon metal was at 12,800-12,900 yuan/mt, up 150 yuan/mt MoM.

Supply: According to SMM data, China's silicon metal production in October was 469,800 mt, up 15,700 mt or 3.5% MoM, and up 77,300 mt or 19.7% YoY. In October, north China maintained a high operating rate, with some capacity resuming production and new capacity being released. In south China, Sichuan's operating rate was basically stable, while Yunnan's operating rate began to weaken. Entering November, Sichuan and Yunnan officially entered the dry season, significantly reducing operating rates, while production in north China remained stable. Silicon metal production in November is expected to decrease to 400,000-410,000 mt.

Demand: According to SMM data, polysilicon production in October was 131,500 mt, with a MoM increase of only 1%. In November and December, polysilicon capacity in Sichuan and Yunnan is also expected to be affected by rising electricity prices, leading to production cuts or suspensions. In Q4, overall demand for silicon metal from the polysilicon sector is expected to weaken, with November polysilicon production expected to decrease to around 120,000 mt and further decline anticipated in December. According to SMM data, silicone DMC production in October was 199,800 mt. The operating rate of silicone monomer plants decreased in September and October due to concentrated maintenance. In November, production gradually returned to normal, with DMC production expected to rebound to around 210,000 mt, positively impacting silicon metal demand. On the other hand, as the peak season for downstream demand ended, DMC prices fell, and monomer plants shifted from profitability to breakeven. In the aluminum-silicon alloy sector, the operating rate of the secondary aluminum-silicon alloy industry increased by nearly 2 percentage points MoM in October, while the operating rate of primary aluminum-silicon alloy slightly decreased by 1 percentage point. Overall, demand for silicon metal remained positive.

Positive Factors: Increased costs and reduced operating rates during the dry season in Sichuan and Yunnan, with low prices providing relative cost support.

Negative Factors: Decreased operating rates in the polysilicon sector, falling downstream silicon product prices, and a loose supply side.

SMM View: From the supply-demand balance data, October showed strong supply with a monthly surplus of around 120,000 mt. In November, reduced supply and declining demand are expected to narrow the surplus to around 50,000 mt. Overall, the industry is expected to maintain an inventory buildup pace in Q4, but the buildup rate will significantly slow in November and December. Recently, especially in north China, some factories have been producing new standard silicon metal for delivery, easing the pressure of high inventory on the spot market. While the downside space for silicon metal prices is limited, due to the current supply-demand situation and lack of new external positive news, spot silicon metal prices are unlikely to rise.