Inventory drops, cost support to stem declines in silicon prices
Output growth and weak demand weighed on silicon prices across Chinese markets in recent months and the downtrend is likely to continue into the middle of December.
As of today, 553# silicon, which did not undergo oxygen-refining, traded at 11,300 CNY/MT at Huangpu port, flat from a previous low in July. Prices dropped 6.2%, some 750 CNY/MT.
Traded prices of 553# silicon, which underwent oxygen-refining, were heard at 11,200 CNY/MT at Tianjin port as of Tuesday, also near the lows recorded in July. Prices lost 800 CNY/MT, or 6.3%, from a month ago.
The new capacity in Xinjiang that was commissioned at the end of 2017 boosted China’s output of silicon metal in 2018. The output in January-October stood 13.1% higher than the same period last year. The supply surplus across markets further expanded after southern plants resumed operation in June when the rainy season arrived.
Huangpu port, the largest port of silicon export in China, saw sharp increases in arrivals in late September and stocks reached the maximum level in late October, which was more than a month earlier than previous years.
Most silicon producers in Sichuan and Yunnan began to cut output in late November as the rainy season ended. Market participants previously expected the broad-based output cuts to start at the beginning of November as rainy-season electricity tariffs were higher than last year.
High exiting inventories and potential output increases at plants in Xinjiang would limit upward momentum in silicon prices in the dry season.
Weak consumption across end-users kept downstream consumers operating at low levels. Prices of DMC fell to 20,000 CNY/MT as of November 27, as low as levels recorded in August 2017, compared to 35,000 CNY/MT in mid-July 2018. High stocks of finished goods and declining prices forced DMC producers to suspend for maintenance. Almost 50% of plants that operated in September shut in October-November.
Operating rates across aluminum alloy producers, another silicon consumer, were also low due to weak auto demand. Supply shortages of aluminum scrap following Beijing’s duty on such imports from the US also frustrated secondary aluminum alloy producers.
Prices of polysilicon fell after China announced in June that it will cap new solar projects and slashed subsidies to the industry.
Earlier this month, China’s National Energy Agency said that it is mulling raising the 2020 target for solar energy deployment to at least 210 GW. This grew confidence across the solar industry and slowed the declines in polysilicon prices.
Decreases in social inventories, cost support and a rush to finish orders by the end of the fourth quarter are likely to stem declines in silicon prices in the middle of December.
Port prices of 553# silicon, without being oxygen-refined, are expected to fall below 11,000 CNY/MT. Materials, which underwent oxygen-refining, are likely to see steeper losses with supply increases in the north, which would narrow their spreads with materials that did not undergo oxygen-refining to 200-300 CNY/MT. Chemical-grade silicon 421# are expected to hover at 13,400-14,500 CNY/MT for domestic sales and to dip to 13,200-13,400 CNY/MT for export orders.
