Silicon Metal and Downstream Industries Generally Implemented Production Cuts in February, Awaiting Post-Chinese New Year Resumption [SMM Silicon Holiday Review]

SMM February 23:

Silicon Metal and Downstream Markets Review During Chinese New Year Holiday

Silicon metal: The silicon metal market was basically closed during the Chinese New Year holiday. Looking back at the market before the holiday, futures prices fluctuated significantly in the last week before the holiday, with futures prices dropping. Before the holiday, the most-traded silicon metal futures contract closed at 8,395 yuan/mt, down more than 400 yuan/mt from early February. Some traders and downstream buyers took the opportunity to make low-price purchases for restocking. Logistics capacity decreased before the holiday, with some pre-holiday purchases scheduled for post-holiday cargo pick-up. Supply side, production cuts at large plants in Xinjiang, combined with marginal reductions in Inner Mongolia and Sichuan, as well as fewer production days, are expected to expand the MoM decline in silicon metal production in February to over 27%. Demand side, downstream silicone, polysilicon, and aluminum-silicon alloy all saw varying degrees of demand reduction. Both supply and demand contracted simultaneously in February, with the balance expected to show a tight balance or slight destocking. As the Chinese New Year holiday is about to end, post-holiday market activity is mainly characterized by tentative inquiries. Market participants will focus on the pace of production resumptions at large plants and changes in capital sentiment after the holiday.

Silicone: Price side, domestic silicone DMC market prices remained stable during the Chinese New Year holiday, with mainstream quotations holding steady at 13,800-14,000 yuan/mt, unchanged from pre-holiday levels. Regional quotations continued to show a divergent pattern, with monomer enterprises in Shandong quoting 13,800 yuan/mt, while mainstream monomer enterprises in other regions quoted 14,000 yuan/mt. Supply side, the industry continued the pre-holiday trend of reduced supply, with the overall operating rate around 60%, slightly lower than pre-holiday levels. Amid ongoing industry emission reduction strategies, most monomer enterprises in major production regions continue to implement shutdowns for maintenance, rotational maintenance, and production load reductions, leading to a further contraction in overall supply. Currently, most monomer enterprises are still primarily focused on fulfilling pre-sold orders from earlier periods, resulting in relatively low supply pressure. Demand side, market demand was stagnant during the holiday. Mid- and downstream enterprises producing 107 silicone rubber, MVQ, silicone oil, and end-user sealants had completed stockpiling before the holiday. Most of these enterprises halted operations for the holiday, with no new just-in-time procurement released. Coupled with the impact of logistics suspensions, the market entered a closed state. Looking ahead to the post-holiday market, supported by low operating rates on the supply side, relatively low industry inventory, and the gradual release of the first round of rigid restocking demand after downstream enterprises resume work and production, along with the silicone monomer industry conference scheduled to be held in Zhejiang from late February to early March, domestic silicone DMC market prices are expected to maintain further upside potential in the short term.

Polysilicon: The polysilicon market saw little change during the holiday, with transactions largely suspended. Polysilicon prices continued to hold steady during the holiday. The polysilicon price index stood at 52.37 yuan/kg, with N-type recharging polysilicon quoted at 48.5-58 yuan/kg and granular polysilicon at 49-51 yuan/kg. The main event before the holiday was the convening of PV-related industry conferences, where polysilicon prices were re-anchored based on cost, but transaction feedback was limited due to the Chinese New Year. After the holiday, some transactions are expected to genuinely commence, while downstream acceptance of prices may also become clearer. Currently, resistance to high-priced resources, particularly those around 60 yuan, is evident, and SMM anticipates a relatively small probability of transactions materializing. The positioning of prices in the 50-yuan range may still require observation, as some top-tier enterprises have limited willingness to sell below 50 yuan.