Silicon Metal Trading Tug-of-War Intensifies; Focus on Supply-Side Operating Rate Changes [SMM Silicon Industry Weekly Review]

SMM, July 23: Silicon Metal: This week, the silicon metal market as a whole maintained a range-bound and stagnant trend, with spot prices edging slightly lower. On the futures side, open interest in the market as a whole rebounded. As of Thursday, the most-traded 2609 contract had open interest of 272,000 lots, up 26,000 lots from last Friday. The futures price center shifted slightly lower, and the tug-of-war between longs and shorts further intensified. On the spot side, as of July 23, SMM's east China oxygen-blown #553 silicon metal quotes were 9,000-9,100 yuan/mt, down 100 yuan/mt WoW; #441 quotes were 9,200-9,300 yuan/mt, with prices remaining flat during the week. With futures running at low levels for an extended period, silicon enterprises were generally experiencing negative cash flow, and their quoting levels were higher than those of trading firms engaging in both spot and futures markets. New order transactions for silicon enterprises were hindered, and some faced increased shipment pressure compared to earlier periods. In the spot-futures trade segment, affected by the decline in July futures, traders' earlier low-basis inventory destocking proceeded smoothly. However, with futures at low levels, there were no suitable restocking opportunities, and combined with persistently high transportation costs, the basis corresponding to traders' spot quotes edged up slightly. Downstream purchases remained need-based, with overall small-scale procurement mainly driven by demand.

On the demand side, this week's polysilicon weekly production edged up slightly WoW. Recently, polysilicon enterprises' production plans had no significant directional adjustments, and demand for silicon metal remained stable with a slight increase trend. Silicone production this week increased WoW, mainly because some monomer plants recently resumed production after maintenance shutdowns. The industry's coordinated production cuts and price-holding efforts failed. Currently, the silicone industry's operating rate is above 60%, providing positive support for silicon metal consumption. The operating rate of aluminum-silicon alloy enterprises was slightly weaker. On one hand, as summer begins, terminal markets like automobiles gradually entered high-temperature holidays, impacting order demand for aluminum alloy enterprises. On the other hand, the impact of reverse invoicing continued, keeping the operating rate of secondary aluminum alloys persistently under pressure.

The most-traded silicon metal 2609 futures contract had been hovering below 8,500 yuan/mt for a month. Enterprise pressure increased, and a few silicon enterprises planned to conduct rotational maintenance or production cuts. Marginal supply reductions had occurred, but the impact was limited in quantity and not enough to reverse the current pessimistic market sentiment. The heat of the silicon metal buy-sell game increased, but prices remained at the lower end of the range. On the supply side, Sichuan and Yunnan silicon enterprises had just resumed production during the rainy season for a short period, and even if there were production stoppages, they were sporadic. Recent reductions mainly came from northern production areas. Attention should be paid to subsequent changes in the supply-side operating rate.

Polysilicon: This week, the polysilicon price index was 31.56 yuan/kg. N-type recharging polysilicon quotes were 30.6-33 yuan/kg, and granular polysilicon quotes were 30.5-32 yuan/kg. Prices declined earlier and rebounded later this week. Subsequently, with the convening of relevant meetings, polysilicon enterprises began to take actions to hold quotes firm, and some producers with low inventories actively raised prices. Currently, there are strong policy expectations on both the energy consumption and cost sides. However, as some policy details remain unclear, enterprises, after comprehensive consideration, are slightly holding prices firm.

Wafer: This week, wafer prices continued to fall. Specifically, the price of N-type 183 wafers was in the range of 0.82-0.85 yuan/piece, the quotation for 210R wafers was 0.93-0.96 yuan/piece, and the quotation for 210mm wafers was 1.13-1.16 yuan/piece. Wafer prices saw a notable decline this week, with the lowest quotation for 210R wafers already reaching 0.9 yuan/piece, and the overall average price of 210R wafers was unable to cover cash costs. According to the survey, although recent meetings had a positive impact on market sentiment, the short-term supply-demand relationship has not undergone a fundamental reversal. If wafer enterprises do not proactively implement production cuts, especially the top two specialized wafer manufacturers, prices from August to September will still lack support.

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