Decline in Silicon Metal Prices Narrowed amid the Strong Cost Support

SHANGHAI, Dec 16 (SMM) - Silicon metal prices were still on the wane this week. Prices of above-standard #553 silicon in east China stood at 18,500-18,600 yuan/mt, down 100 yuan/mt on th eweek; those of standard #553 silicon at 18,800-19,100 yuan/mt, down 150 yuan/mt on the week; and those of #421 silicon at 20,100-20,200 yuan/mt, down 200 yuan/mt on the week. Market inquiries and transaction volume have increased slightly as downstream orders were slowly released. Actually, silicon metal prices have been weak for two months so far. Downstream enterprises, especially aluminium alloy producers and silicone producers, insisted on bargaining down the prices. At the same time, some silicon metal holders were inclined to sell at low prices when their need for cash flows increased at the year-end, in addition to the ample supply in the spot market. Therefore, the transaction prices of silicon metal continued to drop.

The operating rate of aluminium alloy enterprises seemed to slide further due to insufficient downstream demand, and meagre profits forced these enterprises to maintain procurement of metal silicon on rigid demand. Silicone monomer capacity utilisation rate was improved with the production resumption of silicone companies such as Zhongtian and Dow. The traded prices of DMC moved up slightly to 17,000 yuan/mt. However, the monomer enterprises were still under pressure as the transaction prices of #421 silicon declined. The operating capacity of polysilicon enterprises maintained a steady growth, which suggested that the demand for silicon metal would remain thriving in the long run. Yet, in the short term, the slow release of orders for metal silicon resulted in thin trades in the market. The profits of grinding plants were suppressed.

As silicon metal prices in Sichuan and Yunnan, where the production costs are high, gradually fell to near the cost line, local silicon metal companies became more firm to their prices. Since the sluggish downstream demand will prevent silicon metal prices from rebounding, it is expected that silicon metal prices will stabilise next week. SMM will pay attention to how the spot market responds to the upcoming listing of silicon metal futures contract at Guangzhou Futures Exchange next week.