Market Sentiment Cautious, Spot Silicon Metal Prices Hold Steady [SMM Silicon Industry Weekly Review]

SMM Jan. 22: Silicon Metal: Spot silicon metal prices remained stable this week, with the most-traded futures contract fluctuating within the range of 8,600-8,900 yuan/mt. As of Jan. 22, SMM oxygen-blown #553 silicon in east China was quoted 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, all flat WoW. In the futures market, the most-traded contract closed at 8,825 yuan/mt on Thursday, down 20 yuan/mt from Monday but up 220 yuan/mt from last Friday. News about production cuts at large plants in Xinjiang by the end of January fermented at the beginning of the week. Downstream feedback was generally tepid, with sentiment leaning cautious. Seasonal demand off-season, coupled with year-end end-use demand decline, led to scattered release of pre-holiday stockpiling orders, resulting in an overall lukewarm market trading atmosphere.

On the demand side, the polysilicon operating rate showed a weakening trend during the week, mainly affected by the subsequent reduction in capacity from previous polysilicon production cuts. Some silicon powder orders were released and concluded recently. The spot polysilicon price center shifted down significantly during the week, warranting attention to its impact on silicon metal market sentiment. The silicone operating rate remained stable around 66% during the week and is expected to stay largely stable next week. The weekly operating rate of aluminum-silicon alloy enterprises held steady WoW. Weakening aluminum prices during the week marginally improved purchasing sentiment from downstream die-casting, supporting alloy plants' operating rates this week. However, actual demand remained sluggish, and some secondary aluminum alloy enterprises might enter the Chinese New Year holiday early. Medium and long-term, the operating rate in the aluminum alloy industry is expected to show weakness.

On the supply side, the operating rate center declined due to reduced operations or halts at some furnaces in Inner Mongolia and other regions, combined with expectations for production cuts at large plants in Xinjiang by the end of January. The downward trend in the silicon metal operating rate remained unchanged. The fundamental situation of simultaneous supply and demand reduction in silicon metal persisted. The balance expectation for February shifted towards destocking. Assuming no additional supply cuts, the destocking magnitude is expected to be relatively limited, around 30,000 mt. February includes the Chinese New Year holiday, leading to reduced road transport capacity and lower spot transaction volumes. Coupled with high industry inventory levels, although an improvement in fundamentals is expected, the momentum for a significant spot price increase in silicon metal remains limited. Prices are expected to maintain a fluctuating and narrowly consolidating trend in the near term.

Polysilicon: The polysilicon price index was 53.46 yuan/kg this week. N-type recharging polysilicon was quoted at 49.5-58.5 yuan/kg, and granular polysilicon at 50-51 yuan/kg. Market transactions for polysilicon remained weak this week. Price expectations from both polysilicon producers and downstream players began to weaken, with some expected prices already falling to the 40-yuan range. Some polysilicon plants began to proactively lower their quoted prices to downstream customers. The procurement enthusiasm of crystal pulling plants remained relatively weak, and subsequent transactions are expected to potentially weaken further. There are expectations for significant production cuts in polysilicon output in February. Top-tier enterprises are anticipated to implement substantial production cuts.

Wafer:This week, overall wafer prices remained stable temporarily, with N-type 183 wafers priced at 1.3-1.4 yuan/piece, 210R wafers quoted at 1.4-1.5 yuan/piece, and 210mm wafers quoted at 1.6-1.7 yuan/piece. The wafer market this week exhibited a trend of "large manufacturers holding prices firm, while small manufacturers rushed to sell," leading to a noticeable decline in the average wafer price. This was mainly due to two reasons: first, the decrease in raw material costs. During recent polysilicon purchases by wafer enterprises, the average transaction price center saw a significant decline, causing wafer costs to follow a downward trend and leading to adjustments in selling prices. Second, the weakening demand for externally purchased batteries. The impact of the export tax rebate cancellation was not immediately reflected in January's battery production, resulting in a surplus of wafer supply compared to battery demand of approximately 4-5 GW. Additionally, battery enterprises themselves held over 7 days of raw material inventory, leading to a slowdown in the procurement pace and intensified bargaining, which prompted some small enterprises with tight cash flow to sell at low prices. Wafer prices are expected to struggle to stabilize quickly in the short term, while the medium-term outlook will depend on March's export demand and expectations for silver price fluctuations.

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