Count Down on the Listing of Industrial Silicon Futures

SHANGHAI, Feb 22 - Recently, the Guangzhou Futures Exchange has again announced to accelerate the research and listing of industrial silicon, polysilicon, lithium, rare earths, platinum and palladium and other metal futures varieties. It can be seen from the announcement that new varieties to be listed are highly correlated with the strong new energy sector, and the relevant products are the core raw materials for the upstream of the new energy industry chain.

News of the accelerated listing of industrial silicon and polysilicon futures has sparked market concern. The move is expected to enhance the international presence of China silicon industry and alleviate the serious imbalance in the development of the industry, and offer more means to the relatively weak mid and downstream manufacturers to cope with raw material price fluctuations.

Currently, the midstream and downstream manufacturers in the silicon industry chain mainly rely on inventory management to cope with cost volatility. The soaring raw material costs have put the earnings of midstream and downstream manufacturers under great pressure in 2021. Chengdu Guibao Science and Technology (300019), for example, presented sound performance with the release of new production capacity and the increase of finished product prices; however, the cost pressure lowered the company's gross margin by 12 percentage points year-on-year in the first three quarters of 2021, and the profitability was clearly under pressure.

The market data shows that the cost pressure in the silicon industry remains since the beginning of 2022. Among the main products, DMC prices rose sharply for three consecutive days to 35,000 yuan/mt as of February 22; industrial silicon showed a slight upward trend, with the latest offer of #421 silicon at 22,100-22,200 yuan/mt. Analysis shows that industrial silicon prices are still supported by the strong downstream DMC prices and there is still room for further growth.

It is worth noting that the Guangzhou Futures Exchange has not yet clarified the specific product specifications to be listed. In addition, in the case of limited capacity growth, whether the market dynamics can be supported by only a few specifications is also being tested. It is reported that the main specifications of industrial silicon include #553 and #441 for aluminium alloys, #421 for polysilicon and #411 for silicone.