Lower Profit Margin Restricts Silicon Metal Price Reductions in Europe

Silicon Metal prices in the European market remained stable in the week ending March 31 because of limited purchasing activity from the downstream Aluminium Alloy sector. Major players assert that the standstill movement in the price of European Silicon Metal was compelled by Chinese sellers, who are raising their quotation offers to protect profit margins. However, it is unclear whether margins alone will be sufficient to stabilize prices, given that Silicon Metal buyers are still largely out of the spot market. A trader from Europe noted that Chinese manufacturers of Silicon Metal were making efforts to stabilize the market after a recent downturn. Thus, the prices of Silicon Metal for the 5-5-3 grade remained stable between the range of USD 3050-3,250/MT as spot liquidity in domestic regions was hampered by a lack of buying interest from the downstream Aluminium Alloy sector.

According to our sources, Silicon Metal prices were severely pressed in the first quarter of 2023, not only because of a decline in the Chinese market but also due to a shift in trading tactics in the European market. Some suppliers offer discounts to the wider market to cash in and reduce their exposure. As a result, European Silicon Metal producers are in a difficult position, finding it difficult to compete with cheaper imports from distant nations and other local providers who are liquidating their positions. Following the volatility of the preceding two years, it is unclear whether Silicon Metal prices have reached or will reach a sustainable level.

According to traders, European Silicon Metal market participants have been dealing with extremely low liquidity for several months. Lower purchasing demand from the downstream Aluminium and Casting sectors has put pressure on the market, despite some improved indications from downstream businesses. The actual offtake of auto-grade materials, such as Aluminium Alloys, is trailing, despite ostensibly better signals from the car industry. Many manufacturers still have adequate stocks, despite having overbought in the second and third quarters of 2022 as the Russia-Ukraine war worsened. Additionally, the secondary Aluminium producers in this region are depleting their supplies of Silicon at a slower-than-anticipated rate. Secondary Aluminium players claim they are unlikely to enter the market to replenish until the last minute.

As a ripple effect, ChemAnalyst anticipates that the Silicon Metal prices will remain stable in the upcoming weeks owing to the recent Chinese manufacturer's price hikes. However, the risk of more losses due to weak demand fundamentals and a turbulent global economy is causing some hesitancy among European traders about how long Silicon Metal prices will remain maintained.