Argus Media Limited

09/14/2021 | News release | Distributed by Public on 09/14/2021 05:55

China's Si prices near 15-year high on energy curbs

Chinese silicon metal prices have risen sharply this week, with market participants expecting them to continue their uptrend in the coming two weeks on an expected fall in supplies as energy consumption controls intensify in the major production hub of Yunnan province.

Argus assessed domestic prices for 5-5-3 grade metal at 28,000-28,300 yuan/t ($4,343-4,390/t) delivered to ports today, the highest since Argus launched this assessment in November 2006 and up by Yn3,300/t from 9 September.

Yunnan's development and reform commission imposed an energy consumption control policy on 11 September, aimed at cutting the province's average monthly production of silicon metal during September-December by 90pc from August output, which was estimated by market participants at around 60,000-70,000t.

China's August output reached 233,300t, up by 7.56pc from July, according to data from the China Nonferrous Metals Industry Association. Consumption by the aluminium alloy sector reached 35,000t, while organosilicon and polysilicon producers consumed 69,000t and 51,000t respectively in August.

Production in Yunnan rose to 60,000-70,000t in August from 56,000t in July, as more producers resumed output and were willing to operate at higher capacity rates in view of stronger demand from aluminium alloy, organosilicon and polysilicon producers, and increasing hydropower supplies during the monsoon season in south China.

Yunnan's silicon output is forecast to fall to around 6,000-7,000 t/month because of the energy consumption control policy, equivalent to 24,000-28,000t over the rest of this year, according to market participants. Local smelters may suspend production before the end of this month, after operating at high run rates during the first half of this month.

Most producers in Yunnan suspended price quotations in the past two days and were focusing on fulfilling orders while holding little-to-no inventories. A producer, with around 700 t/month of capacity for 3-3-0-3 grade metal, is holding limited stocks for new buyers and has begun limiting output because of the power rationing measures. It concluded deals for 3-3-0-3 grade metal at Yn33,300/t delivered to ports recently.

A second Yunnan-based producer with 1,400 t/month of capacity for 5-5-3 grade metal is downbeat about its production in the second half of this month. It is withholding material from spot sales and will refund some customer deposits in the coming two weeks.

A third Yunnan-based metal smelter with 100,000 t/yr of capacity for 4-2-1, 4-1-1 and 3-3-0-3 grade metals, told Argus that it has discussed output cuts with the Yunnan provincial development and reform commission, which said that local governments will implement the policy for the rest of this month. 'The details will likely come out after the mid-autumn festival during 19-21 September,' a company source said.

Similar power rationing measures in another key production hub, Chongqing, have also pressured production in the region. A Chongqing-based producer was ordered to suspend production for at least eight hours a day in the past two days, leaving limited stocks for new sales.

Producers in neighbouring Sichuan province are also concerned about possible energy consumption control measures. A Sichuan-based producer is holding only one truck of 5-5-3 grade metal and has raised offer prices sharply to Yn32,000/t ex-works today, but consumers remain reluctant to immediately accept the higher prices while monitoring the direction of the market.

Meanwhile, a resurgence of Covid-19 cases has affected silicon output and deliveries from Fujian province, another production region. A Fujian-based producer has failed to replenish petroleum coke feedstock inventories from Quanzhou port, which has been locked down because of a virus outbreak. The producer has also found it difficult to find a truck driver to make deliveries to Xiamen, where confirmed new Covid-19 cases reached 32 this morning.

A Hunan-based metal producer has suspended price quotations for deliveries this week in anticipation of a further rise in prices. Some market participants expect prices for 5-5-3 grade metal to reach Yn40,000/t in the short term.

The Yunnan government has also instructed aluminium producers to keep their monthly output during September-December below actual production in August. Combined production of major smelters, including Yunnan Aluminium, Yunnan Shenhuo Aluminium, Yunnan Hongtai New Materials and Yunnan Qiya Metal, is expected to fall to 3.21mn t this year compared with their total capacity of 4.48mn t/yr. Only 2.75mn t/yr of capacity at these smelters is currently in operation.