On the macro front strong, fundamentals weak, silicon metal market stalemate and volatile [SMM Silicon Industry Weekly Review]

SMM Jan. 15: Silicon Metal: Spot silicon metal prices continued to hold steady and consolidate this week, while futures prices fluctuated near 8,600-8,800 yuan/mt. As of Jan. 15, SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, #441 silicon at 9,300-9,500 yuan/mt, and #421 silicon at 9,500-9,800 yuan/mt, flat WoW. In the futures market, the most-traded contract closed at 8,730 yuan/mt this Thursday, down 25 yuan/mt from Monday. The silicon metal fundamentals remained weak, with both supply and demand declining. Supply side, there were additional production cuts at some silicon furnaces in Sichuan and Inner Mongolia this week. Among them, a major plant in Sichuan completed its production cut, reducing the local operating rate for silicon metal to 0%. The overall operating rate trend for silicon metal was weak. The expected demand reduction was mainly in the polysilicon sector. Affected by poor downstream demand expectations, coupled with the continuous accumulation of in-factory inventories at silicon enterprises, market sentiment in the silicon metal market was neutral or slightly negative, and the downstream procurement and transaction atmosphere was moderate.

Demand side, the polysilicon operating rate was weak this week, mainly driven by gradual production cuts at polysilicon capacities in Inner Mongolia and Yunnan. The decline in the polysilicon operating rate led to weaker demand for silicon metal. The silicone operating rate remained stable during the week, with the current industry operating rate around 66%, down about 6 percentage points MoM. The silicone industry operating rate is expected to hold steady or be slightly weaker than 66% before the Chinese New Year. The current DMC price is at 13,700-14,000 yuan/mt. Looking back to early November, the DMC price was at 11,150 yuan/mt. Driven by monomer plants holding prices firm and the decline in the silicone industry operating rate, the DMC price has continued to improve over the past two months. Cost side, the prices of silicon metal #521 and #421 showed insignificant fluctuations, and the profits of silicone monomer enterprises have significantly improved compared to early November. The operating rate trend in the aluminum alloy industry was weak. Strong aluminum prices continued to suppress downstream demand. Prices of primary and secondary aluminum alloy ingots followed the rise in aluminum prices, but downstream die-casting enterprises were cautious of high prices and had limited acceptance. Coupled with the industry transitioning into a slack season, orders at alloy enterprises shrank, and the expected operating rate was also revised downward.

Overall, the silicon metal fundamentals were weak recently, with both supply and demand decreasing, and no significant consumption increase expected on the demand side. Macro front was strong. The investigation into Powell sparked market concerns about the US Fed's independence, the US dollar index weakened, and the price centers of precious metals and nonferrous metals priced in US dollars moved upward, providing support for futures prices. Spot silicon metal prices maintained narrow fluctuations and sideways consolidation recently.

Polysilicon: The polysilicon price index was 54.58 yuan/kg this week, with N-type recharging polysilicon quoted at 51-58.5 yuan/kg and granular polysilicon at 50-58.5 yuan/kg. Polysilicon transactions were limited this week, with top-tier polysilicon enterprises continuing to hold prices firm at high levels, with some high prices reaching 63 yuan/kg. However, downstream acceptance willingness was low, and there were almost no new signed transactions in the market. Market factors such as anti-monopoly measures and export tax rebates created a mix of long and short positions, leading to a strong wait-and-see sentiment. Currently, some top-tier enterprises have planned production halts, which are expected to be completed by month-end. February production may see a significant decline.

Wafer: Overall wafer prices remained stable this week, with N-type 183 wafer prices at 1.38-1.4 yuan/piece, 210R wafer offers at 1.48-1.5 yuan/piece, and 210mm wafer offers at 1.68-1.7 yuan/piece. The main reason for the stability in wafer prices was the intensification of back-and-forth negotiations between upstream and downstream, with demand transmission beginning to show. Recent wild swings in futures prices, coupled with the approaching concentrated transaction deadline, heightened the bargaining mentality among wafer enterprises. On the other hand, influenced by the "cancellation of export tax rebates" event, domestic battery and module enterprises significantly increased production. Additionally, the sharp rise in prices of bulk metal raw materials led to a simultaneous increase in both the volume and price of modules. However, transmitting this upward to wafers still requires time, so wafer prices remain in a stable bargaining phase in the short term.
 

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