Silicon Coal Prices Experience Another General Decline, Short-Term Market Pressure Intensifies [SMM Analysis]

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Since May, the domestic silicon coal market has once again witnessed a wave of price reductions, with the price decline of silicon coal showing a coordinated trend across multiple regions. WoW, the price of non-caking silicon coal in Xinjiang has dropped significantly, with a decrease of 170 yuan/mt, bringing the average price to 710 yuan/mt. In Gansu, the price of silicon coal has decreased by 50 yuan/mt, with the average price of blended coal reaching 970 yuan/mt and that of granular coal reaching 1,130 yuan/mt. In Ningxia, the price of silicon coal has decreased by 80 yuan/mt, with the average price of blended coal reaching 960 yuan/mt and that of granular coal reaching 1,200 yuan/mt. In other regions, the price reduction is approximately 80-100 yuan/mt, with the average price of silicon coal in Shaanxi reaching 710 yuan/mt and that in Inner Mongolia reaching 950 yuan/mt.

The price adjustments are mainly influenced by the following three factors: shrinking demand, falling raw material prices, and intensified competition.

Firstly, downstream demand is shrinking, and there is a strong sentiment to drive down prices. Affected by the recent prolonged downturn in the silicon metal market, silicon plants are facing dual pressures on sales and profit margins. As a result, the operating rates of various silicon plants have remained low. As of the end of April, the operating rate of the silicon metal industry was only about 51%. Against this backdrop, the demand for silicon coal has further contracted, and there is a strong sentiment among silicon plants to drive down prices during procurement, increasing the pressure on silicon coal plants. They have adjusted prices to adapt to market changes.

Secondly, there has been a slight decrease in coking coal prices. As one of the mainstays of the entire coal market, changes in coking coal prices affect price expectations and trading sentiment in the coal market, thereby influencing price fluctuations in raw materials, which in turn affect the silicon coal market. Recently, coking coal prices have slightly decreased in some regions, leading to a reduction in silicon coal costs. The decrease in costs has driven down market prices.

Thirdly, market competition has intensified. Currently, the operating rates of silicon plants remain low, at around 51%. To maintain and expand sales channels, competition among regions has intensified. Therefore, by reducing silicon coal prices and offering concessions, they aim to maintain a certain market share.

This price reduction in silicon coal is the result of multiple factors, including the supply-demand relationship in the silicon metal market, changes in its own market, and market competition. In the short term, although the price reduction of silicon coal helps silicon plants reduce production costs, the current silicon coal prices are approaching the cost line. If there are no further downward changes in the silicon coal market itself, even if there is no substantial improvement in the demand for silicon metal, the room for further price reductions in silicon coal will be relatively small.