Tight supplies, firmer costs to support Chinese silicon

Chinese silicon metal prices are expected by market participants to move higher in the coming week because of tighter metal availability and higher production costs.

Argus last assessed spot prices for 5-5-3 grade metal at a four-year high of 14,500-14,700 yuan/t ($2,244-2,275/t) delivered to ports yesterday, up by Yn700/t from 29 July in response to tighter supplies caused by power rationing measures in major production hubs and a rise in buying interest from aluminium alloy producers and trading companies.

Power rationing measures may continue to pressure operating rates in the main production hubs of Yunnan, Sichuan, Chongqing, Inner Mongolia and Hunan provinces in the coming month. China produced 1.36mn t of silicon metal during January-July this year, up by 25.35pc from a year earlier on a recovery in demand with the easing of the Covid-19 pandemic, according to data issued by the China Nonferrous Metals Industry Association.

An Inner Mongolia-based producer, with a 750 t/month capacity for 5-5-3 grade metal, failed to restart production in July because of more rigorous electricity supply curbs, following a five-month suspension caused by energy consumption control measures.

A Hunan-based smelter, with a 750 t/month capacity for 4-4-0-2 and 3-3-0-3 grade metal, had a difficult time maintaining normal production in the past week because of power rationing measures, as it was able to only operate at night with half a day's electricity supplies. Several local producers may suspend output if the power rationing measures continue in the coming week.

Tighter electricity supplies caused by a sustained shortage of rainfall have triggered power rationing measures in Sichuan, Yunnan and Chongqing.

Most Xinjiang-based metal producers resumed output in July after suspending operations in late June following safety inspections. But higher buying interest from consumers have aggravated supply shortages all over the country, coupled with higher petroleum coke, clean coal and silica feedstock prices, bolstering prices for the metal over the past week.

A Xinjiang-based producer, with a 70,000 t/month capacity for 5-5-3 and 4-4-1 grade metal, stopped quoting prices last week because of little to no inventories. It raised offer prices sharply yesterday in anticipation of even tighter short-term availability.

An escalating Covid-19 outbreak in China may also influence deliveries of silicon metal and its feedstocks in the short term.