【SMM Analysis】Off-Season Strain: Si-Mn Stocks Pile Up, Output Cuts to Stay

Since entering Q2 2026, the silicon manganese alloy market has remained under sustained pressure. Prices of upstream raw materials—including manganese ore and coke—have stayed elevated, while downstream steel consumption remains sluggish amid strong price-suppression efforts from mills. The industry is caught in a dual squeeze of “high costs and weak demand,” with losses spreading rapidly from isolated cases to a widespread trend. Consequently, alloy producers across major northern and southern production hubs have successively initiated production curtailments and maintenance schedules. Although the traditionally high operating rates in North China have shown clear signs of easing, the impact of new capacity ramp-ups this year has partially offset these cuts. As a result, the decline in total national output has been less pronounced than expected, leaving supply-side adjustments stuck in a phase characterized by “strong expectations but slow implementation.”

Distinct operational trends have emerged across key production regions:

Inner Mongolia:​ Cost support remains firm, and anticipated production cuts are materializing. Electricity settlement prices in June held steady overall; however, due to reduced wind and solar power generation during the minor wind lull season, factories widely anticipate upward pressure on July’s settlement rates, sustaining the cost floor. Most producers are now facing deep losses, leading to a marked decline in production enthusiasm. Since July, smelters have rolled out output cuts and load reductions. Market sentiment is cautious; most operators indicate they will await profit recovery signals before resuming full operations opportunistically ahead of the traditional “Golden September, Silver October” peak season. Overall, the Inner Mongolia market is in a stalemate between “firm cost support” and “sluggish demand,” with both upstream and downstream participants adopting a wait-and-see stance.

Ningxia:​ Losses have intensified, making supply contraction in this region the most pronounced nationwide. Suppressed by sustained deficits, the scale of production curtailments continues to deepen; current daily output has fallen to merely around one-third of total capacity, with little expectation of a short-term rebound in production enthusiasm. On the trading front, futures prices remain range-bound with a bearish bias, leaving producers without a viable window for hedging. Concurrently, basis traders have adopted a cautious approach to procurement, resulting in sluggish inventory digestion at plants and the gradual emergence of stockpiling pressure.

Southern Region:​ Performance is highly bifurcated. Yunnan stands out as relatively active, whereas Guangxi and Guizhou are clearly under pressure. The arrival of the abundant hydro season has highlighted Yunnan’s advantage in lower electricity costs, somewhat boosting local production morale. However, field surveys reveal that most plants are still hovering on the brink of profitability, leading to divergent production paces. Some enterprises are opting for load reductions and semi-operational schedules to mitigate risks. In contrast, high-cost regions like Guangxi and Guizhou are severely impacted by elevated power tariffs. Lacking any profit margin, firms in these areas are unable to initiate substantive production increases, resulting in notably low market activity.

Outlook:​ Currently, the domestic silicon manganese market is defined by a trio of characteristics: "order-based production, inventory accumulation, and load reduction." Against the backdrop of compressed margins at steel mills, tender pricing fails to provide smelters with reasonable profit buffers, while speculative demand from traders and basis merchants has simultaneously weakened. Given that the traditional consumption off-season is not yet over and a recovery in end-user demand will take time, both social and plant inventories are expected to remain elevated in the near term, with destocking progressing slowly. In this environment, alloy producers will likely maintain their strategy of low-load operations and output controls, biding their time until signals of marginal demand improvement emerge toward the end of Q3.