Production under pressure, supply side shows marginal reduction; structural trends diverge for silicon metal [SMM Silicon Industry Weekly Review]

SMM, July 30: **Silicon Metal:** **Silicon metal prices were in a weak stalemate this week, with open interest for the most-traded futures contract continuing to rise, amplifying the tug-of-war between longs and shorts.** As of Thursday, open interest for the most-traded 2609 contract stood at 290,000 lots, an increase of 21,000 lots WoW from last Friday. Futures price center continued to weaken during the week. The contract closed at 8,175 yuan/mt on Thursday afternoon, down 120 yuan/mt from last Friday. In the spot market, SMM #553 silicon (Tianjin) traded at 8,750-8,850 yuan/mt, down 100 yuan/mt WoW, while oxygen-blown #553 silicon was at 8,900-9,000 yuan/mt, down 50 yuan/mt WoW. Futures prices continued to trend lower. As losses for silicon enterprises widened further, their willingness to hold prices firm became stronger.

The current silicon metal industry chain is characterized by a clear gaming dynamic, with structural divergence between upstream and midstream segments. Supply side, silicon producers are facing negative cash flow, and a small number have entered maintenance or halted production. However, the limited reduction so far has not had a directional impact on market sentiment. Producers show strong sentiment to hold prices firm, unwilling to lower quotes to stimulate orders, leading to a steady accumulation of in-factory inventory across the industry. Midstream, social inventory has seen continuous destocking in recent weeks. Trading firms engaging in both spot and futures market reported favorable transaction volumes at low futures price levels, leading to a continuous drawdown of circulating inventory. The tightening of available cargoes drove the spot-futures price spread stronger, with spot prices showing more resilience to declines than futures. Demand side, purchasing activity largely remained on an as-needed basis, with buyers adopting a low-price purchase mentality.

Demand side, polysilicon weekly production this week increased WoW. Driven by production ramp-ups in Sichuan and Inner Mongolia, polysilicon output is set to see significant growth in August, providing phased support for increased silicon metal demand. Silicone weekly production also increased WoW. Silicone enterprises will hold another industry meeting in early August; the impact of the meeting's outcome on DMC prices and operating rates warrants attention. The operating rate at aluminum-silicon alloy enterprises remained weak, mainly pressured by insufficient order support during the high-temperature off-season. End-use demand improvement is expected to arrive during the traditional peak season from mid-to-late August through September.

Overall, silicon metal producers are holding prices firm and are reluctant to sell at low prices, while futures-based traders continue to sell actively and the spot-futures price spread strengthens. This, combined with downstream low-price purchasing mentality, weakens the liquidity of available spot cargoes and highlights structural contradictions in the market. The cost floor underpins spot prices, while weak macro sentiment and demand pressures cap the upside room. The tug-of-war between longs and shorts in silicon metal persists.

**Polysilicon:** This week, the polysilicon price index stood at 31.65 yuan/kg, with N-type recharging polysilicon quoted at 30.8-33 yuan/kg and granular polysilicon at 30.5-32 yuan/kg. Prices were relatively stable this week. The overall quoting atmosphere was sluggish, and the center of price quotes edged lower, mainly due to downstream price cuts and sentiment. Polysilicon manufacturers made no significant price adjustments. Early in the week, news emerged that a cost meeting would be held on Friday, causing market wait-and-see sentiment to increase markedly, with all waiting for the specific cost determination plan. August polysilicon production is expected to increase significantly due to production ramp-up in Sichuan and Inner Mongolia. Meanwhile, there were also reports of maintenance at some bases in Xinjiang.

Wafer: Wafer prices continued to fall this week, with N-type 183 wafers priced at 0.8-0.824 yuan/piece, 210R wafers quoted at 0.895-0.925 yuan/piece, and 210mm wafers at 1.099-1.125 yuan/piece. The main reason for the decline this week was that many enterprises, under inventory pressure, resorted to price cuts to offload inventory. As of now, except for two top-tier players still holding prices firm, most other enterprises have reduced their prices to near the low end of the range. Based on current wafer selling prices, wafers of all sizes are already incurring a cash cost loss of approximately 0.01-0.02 yuan/piece. However, even so, some enterprises still plan to ramp up production in August, and the overall production cut remains only about 2 GW. If enterprises rely too much on medium and long-term policy adjustments and neglect short-term supply-demand balance, wafer prices may still struggle to stop falling and stabilize.

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