Silicon Industry Branch: Industrial silicon supply contraction continues to strengthen the market and enter the repair stage

The Zhitong Finance App learned that the Silicon Industry Branch said that the industrial silicon market is currently at the stage of “supply contraction continues to strengthen, and it has entered the stage of bottom building and repair.” Factories in the north and south have entered the maintenance and shutdown cycle due to continued losses, and the supply-side contraction trend continues to intensify. Although the overall demand side is weak, supply contraction brought about by production cuts is gradually hedging excess pressure, and the bottom price support is already quite clear. The short-term forecast is that the low level will continue to stabilize, and the bottom of the price is clearly supported. Later, we will focus on whether production cuts can be further expanded and when the downstream procurement mentality will improve.

The Silicon Industry Branch pointed out that the industrial silicon market showed a divergent trend of “futures fluctuated and rebounded, and spot prices stopped falling and stabilized” this week. Boosted by industry policy expectations and news of supply-side contraction, futures prices once soared to around 8,450 yuan/ton, with an overall rebound of more than 3% during the week; however, the spot market continued to rise and weaken. Prices remained stable this week, and the downward trend for several weeks came to an end. The supply-side contraction signal continues to strengthen, and the characteristics of the bottom of the market are gradually showing.

Market performance: futures fluctuated and rebounded, spot prices stopped falling and stabilized

In terms of futures, as of the close of August 6, the main 2,609 contract closed at 8,425 yuan/ton, up 255 yuan/ton from 8,170 yuan/ton last week (July 31), or about 3.12%. The market during the week was boosted by polysilicon policy expectations, and the shock intensified, hitting a high of around 8,450 yuan/ton. Meanwhile, news of production cuts in Xinjiang, Inner Mongolia, Gansu, Ningxia, Sichuan and other places continued to ferment, and supply-side contraction expectations provided some support for the market. However, the volume of positions has decreased. On August 6, the main contract position volume was about 202,200 lots, down about 29% from last week's 285,500 lots. Capital was mainly rebound by reduced positions, and the will to continue to push up is limited.

On the spot side, according to Antec's August 6 quotation statistics, the comprehensive price of industrial silicon nationwide was 8,723 yuan/ton, the same as last week. By specification, 553 #报8455元 /ton, 441 #报8797元 /ton, and 421 #报9257元 /ton were all the same as last week. Looking at the subregions, the comprehensive prices in Xinjiang, Yunnan, and Sichuan were 8,536 yuan/ton, 9,671 yuan/ton, and 9,600 yuan/ton respectively, all the same as last week. Prices for all export FOB specifications were the same as last week.

Judging from the transaction situation, as futures prices have recovered, market sentiment has improved slightly compared to the previous period, but actual transactions are still dominated by small orders that are just needed, and large-scale inventory replenishment has yet to occur.

Supply side: Both North and South supply contracted, and supply pressure gradually eased

There have been new changes on the supply side this week — both North and South have contracted supply to varying degrees. Currently, the southwest production area has entered a period of abundant water, hydropower prices in Yunnan and Sichuan are declining, and smelting costs have dropped significantly. However, the decline in industrial silicon prices is even more obvious. Profit improvements brought about by falling costs were completely offset by falling prices. The actual operating pressure on enterprises has not abated, and they are generally cautious about opening new plants. The number of kilns opened by Southwest enterprises has dropped below 70, and the operating rate is significantly lower than in the same period in history. Some enterprises that have resumed production in Sichuan have stopped and cut production one after another due to losses; the pace of resumption of production by enterprises in Yunnan has also slowed down, with increases and decreases, and some wait-and-see enterprises have postponed plans to resume production. In the main production areas in the northwest, the contraction in supply is even more obvious. After the Yili Electric Power maintenance in the Xinjiang region was completed, some enterprises resumed production, while other large silicon companies are still in a rotating state of maintenance. Some enterprises in Inner Mongolia stopped production and cut production due to losses or entered the maintenance cycle, and the opening rate dropped markedly. Gansu is being suppressed by high electricity prices, construction starts at a low level, and there are still expectations that production will be reduced. Some factories in Ningxia have also recently cut production. Overall, factories in the north and south have entered a maintenance or shutdown cycle due to continued losses, and the supply side showed a clear contraction trend, which underpins prices.

Demand side: polysilicon falls on the sidelines, silicones go to storage at high prices, aluminum alloys are under pressure in the off-season

Overall support on the demand side is insufficient, and various fields continue to be weak. On the polysilicon side, the market is at an impasse, and transactions have almost come to a standstill. In the context of the industry strengthening price self-discipline and maintaining orderly competition, the current price has fallen deep below corporate cash costs. Continued decline is not conducive to the healthy development of the industry. Mainstream enterprises have suspended quotations, and the market has entered a stage of directional wait-and-see. On the silicone side, market prices gradually recovered this week, and the supply side continued to shrink due to the industry's collaborative emission reduction and increase. Pre-sale orders from most individual manufacturers have been scheduled until late August. There are plenty of orders in hand, and the desire to raise prices is strong, but the downstream procurement mentality is cautious, mainly using as needed, and larger customers still mainly wait and see. The shrinking effect of silicone production cuts on industrial silicon demand continues to unleash. In terms of aluminum alloy, raw materials for scrap aluminum continue to be tight, and the cost side supports the price. However, downstream orders for traditional consumption shrank during the off-season, and the operating rate of enterprises declined slightly, and procurement of industrial silicon remained in demand. Overall, it is difficult for the demand side to provide flexible upward support in the short term, and there is not enough momentum for improving supply and demand.