According to China Nonferrous Metals News, industrial silicon prices have recently trended upward, driven by supply-side contraction and market optimism.

Production Costs Rise

Electricity costs constitute the largest portion of industrial silicon production expenses. Due to regional variations in China's electricity pricing, power costs account for 40% to 55% of total production expenses. Currently, the southwest region is entering its dry season, where electricity prices will increase by 0.15 to 0.25 yuan per kilowatt-hour compared to the wet season. This translates to an additional cost of approximately 2,000 yuan per ton for industrial silicon, significantly raising production expenses for silicon manufacturers in the southwest.

Beyond electricity costs, silicon coal, petroleum coke, silicon electrodes, and silica stone also constitute major production expenses. Driven by earlier “anti-internal competition” efforts, silicon coal prices have steadily climbed. Recently, as industrial silicon furnace operation rates have declined, demand for silicon coal has weakened. However, most coal washing plants on the supply side continue to operate on a production-based-on-sales model, facing no immediate inventory pressure. With solid cost support for silicon coal itself, prices are expected to rise rather than fall in the short term. The petroleum coke market remains active, characterized by tight supply and robust demand, with leading smelters continuously raising prices. Silicon electrodes show relative weakness, facing significant upward price resistance due to sluggish demand and inventory pressure. Considering cost inversion for some manufacturers, electrode prices are expected to stabilize. Silica sand prices are trending downward as operating rates decline in Southwest China and demand weakens. However, its inherent natural characteristics result in narrow price fluctuations, limiting its impact on industrial silicon costs. Furthermore, from a medium-to-long-term perspective, the scarcity of high-quality silica sand resources will partially drive up industrial silicon costs. Overall, industrial silicon costs are rising significantly, forming solid support for silicon prices.

Southwest China's Production Rates Plummet to Low Levels

Supply-side shifts primarily originate from Southwest China (Yunnan, Sichuan). Since October, the region has transitioned from abundant hydropower to dry season conditions. Rising electricity costs have significantly increased silicon producers' operating expenses, while silicon prices remain range-bound. Compressed profit margins have dampened production incentives, prompting most silicon plants to enter seasonal shutdowns starting late October. According to research data from relevant institutions, as of the first week of November, the operating rate in Sichuan stood at 41%. Excluding major manufacturers in the sample, the operating rate of the remaining silicon producers was around 13%. Currently, Sichuan is in the normal water period, and operating silicon producers will choose to partially reduce or suspend production within the month or at month-end based on furnace conditions or market circumstances. Yunnan has entered its dry season, with most silicon producers halting operations by late October and additional furnaces shutting down in early November. Currently, around 20 furnaces remain operational in Yunnan, primarily those engaged in integrated production or fulfilling long-term contracts. Overall, Southwest China has entered its seasonal production reduction period, with operating rates steadily declining. Total output in the region is projected to drop by over 50% in November.

In contrast to the southwest, silicon furnace operating rates in the northwest have rebounded. After offsetting increases and decreases, the industrial silicon supply side currently shows no significant shortfall. A major Xinjiang plant gradually increased output from September to October, while some smaller plants ramped up production, leading to an overall recovery in regional operating rates. Operating rates in Inner Mongolia, Gansu, and Ningxia have also rebounded, with northwest production showing an overall upward trend. Regionally, Xinjiang accounts for 52% of national production, while Inner Mongolia, Gansu, and Ningxia collectively contribute 28%. Sichuan and Yunnan together make up 17% of total output, indicating a shift in industrial silicon supply toward the northwest. National production is projected to fall below 400,000 tons in November, representing a 12% month-on-month decline but remaining broadly in line with historical averages for this period.

Enterprises Focus on Essential Inventory Buildup

From the demand side, the primary shift stems from the polysilicon segment. Since the second half of 2024, driven by industry-wide voluntary production cuts, most polysilicon manufacturers have maintained reduced output levels, with operating rates persistently low. Since July this year, polysilicon prices have rebounded from their lows. Coupled with the onset of the low-cost rainy season in the southwest region, polysilicon manufacturers have seen significant profit recovery. Production capacity utilization rates have risen, with monthly output stabilizing around 130,000 tons. In November, polysilicon output is projected to decline to approximately 120,000 tons, with reductions primarily originating from Sichuan and Yunnan provinces, while Inner Mongolia may see corresponding production increases. Regarding the photovoltaic terminal market, considering the demand pull-forward effect from the first-half “rush installation” and adjustments to feed-in tariff policies, the fourth quarter is unlikely to see significant growth. Continued attention should be paid to the implementation of polysilicon capacity consolidation. In the organosilicon segment, as maintenance in South and Southwest China concludes and production resumes, operating rates may recover, boosting industrial silicon demand. However, inventory replenishment remains driven by essential needs rather than aggressive stockpiling, with mixed price movements in spot industrial silicon transactions.

Inventories remain at relatively high levels. As of November 6, total visible industrial silicon inventory stood at 724,000 metric tons, down 40,000 metric tons year-on-year but still relatively elevated. This includes 127,000 metric tons of social inventory, 425,000 metric tons in delivery warehouses, and 172,000 metric tons across factory warehouses in Xinjiang, Yunnan, and Sichuan. In addition, considering that futures warehouse receipts will be cancelled in a concentrated manner at the end of this month, it is estimated that 10,000 to 20,000 tons of industrial silicon will flow into the spot market. Moreover, the current supply and demand of industrial silicon are both weak, and the inventory is difficult to reduce in the short term.

Overall, rising costs provide downside support for silicon prices. However, weak demand and elevated inventories remain the primary factors limiting upward price potential.

As an integrated internet platform providing benchmark prices, on November 24, the benchmark price of silicon metal from SunSirs was 9,780.00 RMB/ton, an increase of 1.03% compared with the beginning of the month (9,680.00 RMB/ton).

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