In May, the price of metallic silicon slightly decreased and showed a weak and stable trend overall. According to the commodity market analysis system of Shengyishe, as of May 30, 2024, the reference price for the domestic 441 # metallic silicon market was 13480 yuan/ton, a decrease of 1.32% from the beginning of the month and a decrease of 4.87% from the same period last year. The fundamental trend of metal silicon in May is an increase in supply and a decrease in demand, as the rainy season approaches and silicon factories across the country have to increase production, leading to a gradual increase in supply; Downstream also reduced procurement operations due to the decline in silicon prices, and coupled with the gradual feedback of downstream production loss pressure to upstream, the spot price of metal silicon weakened under the bearish supply and demand side.

Supply side

According to data from Baichuan Yingfu, as of May 23rd, the number of silicon metal furnaces in China has reached 345, with an overall start-up rate of 46.06%, an increase of 10 from last week and an increase of 44 from last month. The increase in the number of industrial silicon furnaces is mainly due to the approaching flood season, driven by the maintenance and resumption of production by manufacturers in the northwest, and the mutual increase and decrease in other regions.

In terms of inventory, as of May 24th, industrial silicon inventory slightly decreased last week, with social inventory of 386000 tons, an increase of 7000 tons from last week and an increase of 22000 tons from last month; This week, the inventory of industrial silicon factories was 106000 tons, which was basically unchanged from last week and increased by 18000 tons from last month. Downstream demand has decreased significantly, spot market transactions have weakened, some silicon factory orders have been delivered one after another, and most silicon factory inventories have shown a slight increase.

Demand side

In May, domestic polycrystalline silicon saw a slight decline. In May, polycrystalline silicon enterprises faced a loss making situation, with poor production activity and frequent maintenance and production reduction operations. In addition, polycrystalline silicon enterprises continued to increase inventory, and under the downward trend of prices, the loss making area of polycrystalline silicon enterprises further expanded. The procurement of raw material silicon powder decreased, making it unable to support industrial silicon prices.

In May, the overall domestic DMC market for organic silicon showed a slight downward trend, and the benefits brought by macro policies have not yet been transmitted to the industrial end. Downstream demand is still lukewarm, and organic silicon production is still in a loss making situation. Therefore, production enthusiasm is limited, and some enterprises maintain a negative production state. They mainly purchase industrial silicon in small quantities and multiple times as needed, making it difficult to bring incremental demand to industrial silicon.

The price of aluminum alloy slightly decreased in May. Recently, aluminum prices have shown strong performance, providing support for aluminum alloy prices. However, aluminum alloy processing costs are significantly under pressure, and the production willingness of enterprises is suppressed. The procurement of industrial silicon raw materials is mainly based on on-demand procurement.

Future Market Forecast

On the supply side, there was a slight increase in supply in May. Silicon factories expanded their operations due to the approaching flood season. Although silicon prices continued to decline and silicon factories actively weakened their operations, the overall supply still showed a growth trend; In terms of demand, the downstream of industrial silicon still faces significant pressure at present, and the entire polysilicon industry is facing loss pressure. Production reduction and maintenance operations continue, and demand for organic silicon and aluminum alloys is also weak to follow up. The market has not reversed, and downstream production pressure is negative feedback to industrial silicon. Overall, the supply and demand side of the metal silicon market in June may shift towards a trend of increasing supply and decreasing demand, with fundamentals bearish on silicon prices. Although macro positive factors have led to an upward trend in futures trading, there is not much stimulation for spot prices, and downstream demand has not improved. It is expected that silicon prices in June may first decline and then stabilize, and then fluctuate to build a bottom.