Capacity expansions among silicon producers in China’s Xinjiang province and soft demand from the downstream secondary aluminium sector have combined to put the Chinese silicon market under pressure, Fastmarkets heard at Antaike’s 2019 China Industry Silicon Conference on Wednesday April 24.
The delegate added that an expansion of capacity among silicon producers in Xinjiang, an autonomous territory in northwest China, was one of the major contributing factors behind the price weakness.
In northern China, lower power costs coupled with supportive initiatives from local governments have encouraged silicon producers in the region to increase their production, which is likely to partly offset the supply gap arising from output cuts imposed by southern producers during the dry season, market sources said.
Approximately 1.02 million tonnes were produced in Xinjiang in 2018, accounting for around 42.5% of the country’s total silicon output that year, according to data from local industry information provider Antaike.
Xinjiang Hesheng is one of China's largest silicon producers and has been producing silicon since 2018. Hesheng produced about 605,000 tonnes of silicon in 2018, about 25% of China's total output, data from Antaike showed.
Meanwhile, an expectation that silicon prices in China would increase during the country’s dry season in May-October last year had prompted producers to ramp up their operations and exporters stockpiled material in warehouses at main Chinese ports.
This was another reason why prices were not supported during the dry season, a second conference delegate told Fastmarkets.
June restarts in focus, soft demand another cause for concern
At the same time, there are growing concerns about increased silicon supply in China once producers in Yunnan province resume operations in June – the start of the country’s rainy season.
This has led to widespread pessimism over the performance of the market at least until the third quarter of 2019.
“Both industrial silicon grades like 553 and 441 as well as organosilicon like grade 421 are oversupplied markets," a third conference attendee told Fastmarkets, adding that weak demand from both domestic and foreign buyers in the key downstream secondary aluminium market is putting additional downward pressure on silicon prices.
The growth rate of aluminium alloy production in China slowed significantly in 2018; China produced around 8 million tonnes of aluminium alloy last year, an increase of just 0.6% from a year earlier and the slowest growth in the past seven years, Antaike data showed.
This output of 8 million tonnes of cast aluminium alloy is roughly equivalent to 350,000 tonnes of silicon demand, market participants said.
But it is not only the domestic market that is witnessing soft demand, with demand in China’s silicon export market showing a considerable decline in the first two months of 2019.
China’s industrial silicon exports were approximately 104,700 tonnes in January-February 2019, a decline of 16.1% or 13,000 tonnes from the same period of last year, according to data obtained by Fastmarkets sources.
Japan, a major consumer of Chinese silicon, also imported less of the material in the first two months of this year; China shipped 25,000 tonnes of silicon to Japanese shores in January-February, a decrease of 17,000 tonnes from the same period a year earlier.
Demand is also said to be slowing in Europe, with prices there also under pressure.
European prices for grade-553 silicon, in-warehouse Rotterdam, averaged $1,798.46 per tonne in the first quarter of 2019, according to Fastmarkets’ price archive. This compares with an average quarterly price of $2,159.23 in the corresponding period of 2018.
A soft domestic market and weak demand from abroad has prompted exporters in China to similarly cut their offer prices to attract business.
The export price for grade 553 silicon in China averaged $1,549.23 per tonne in the first quarter in 2019, according to Fastmarkets’ price archive, down by $413.84 per tonne from $1,963.07 per tone of the corresponding period of 2018.