Global Silicon Metal Prices Remain at Lower Levels Amidst Sluggish Downstream Demand

During the second week of May, the global market for Silicon Metal experienced declining market sentiment. This was primarily attributed to lower operating rates of certain Silicon Metal companies, resulting in a slight reduction in supply. Sluggish consumption from downstream sectors such as aluminium alloys, silicone, and exports, along with higher inventory levels, continued to exert downward pressure on Silicon Metal prices. Market players noted that the demand for Silicon Metal from downstream polysilicon enterprises remained strong in April 2023. However, the polysilicon market has experienced a slight oversupply, leading to a gradual accumulation of inventories in May. In anticipation of falling polysilicon prices, some companies have planned to reduce their output. Furthermore, some Silicon Metal enterprises in the Chinese market have carried out maintenance activities, either due to sluggish market conditions or equipment failures.

In April, the average operating rate of downstream primary Aluminium Alloy producers decreased as compared to the previous month. Similarly, the operating rate at secondary Aluminium Alloy plants experienced a more significant decline. The sluggish demand for terminal automobile consumption and reduced orders for aluminium alloys have resulted in a slowdown in shipments of aluminium alloy ingots. This and cash flow challenges have compelled some enterprises to scale back their output or suspend production altogether.

In the Chinese market, several Silicon Metal industries have conducted maintenance activities either due to sluggish market conditions or equipment failures. This has led to a decline in output in regions such as Yunnan, Xinjiang, Fujian, and Shaanxi, with approximately 5,000 MT of industrial Silicon Metal being cut by companies in Xinjiang and Yunnan. Some Silicon Metal plants in northern China have actively sought sales opportunities under significant pressure. Meanwhile, factories of Silicon Metal in Sichuan are anticipated to resume production by the end of May or early June, and those in Yunnan are expected to restart production in June-July.

The US debt crisis has intensified in recent weeks, causing increased market panic, while Chinese macroeconomic data has fallen short of expectations. This has contributed to a pessimistic demand outlook for downstream Aluminium Alloy products in the Chinese market. Despite a decrease in social inventories of Aluminium Alloy in China, the overall demand for Silicon Metal remains subdued. Moreover, the output of Aluminium Alloy has continued to rise, leading to a lack of cost support for aluminium prices. In May, the operating rates of Silicon Metal companies are expected to decline as some enterprises have planned to reduce their production in the first twenty days of the month. Additionally, certain Chinese companies that suspended their production in mid-to-late April will adhere to their production cut plans.

In early May, the US Federal Reserve increased interest rates by 25 basis points to reach a range of 5%-5.25%, which is the highest level since mid-Q3 2007. Although this rate hike was in line with expectations, the slowdown in inflation has raised concerns among investors. On the one hand, it has instilled confidence in the market that the Federal Reserve may pause further rate hikes. On the other hand, investors have become worried that the economic slowdown could potentially indicate an impending recession. These factors have contributed to heightened market uncertainty and volatility.

Thus, ChemAnalyst anticipates that Silicon Metal companies may resume their operations by the end of May. As a result, Silicon Metal prices are expected to remain at their current levels until the following week. However, it is important to note that the Silicon Metal output for May is projected to decrease slightly compared to the previous month and fall below the levels observed during the same period last year.