Since the beginning of 2026, the industrial silicon market has continued the trend of bottoming out seen in 2025, with prices fluctuating at low levels near the cost line; the market's core dynamic remains a tug-of-war between abundant supply, weak demand, and strong cost support at these low price levels.
During the first half of August, the price of the dominant industrial silicon futures contract rose steadily from 8,100 yuan/tonne to 8,800 yuan/tonne. This rebound was primarily driven by tightening supply and a marginal recovery in demand, with a slight decline in inventory levels providing price support. On the supply side, production cuts are expanding: in early August, some enterprises in Gansu reduced or halted production due to electricity costs, while in mid-August, large enterprises in Xinjiang lost access to preferential rates for purchased electricity and have since formulated plans to cut output. Consequently, production for August is likely to decline, potentially falling to 370,000 tonnes. On the demand side, the resumption of polysilicon production is expected to spur a recovery in demand; as major polysilicon manufacturers restart operations, the increase in polysilicon output during the high-water season will drive up demand for industrial silicon.
According to statistics from the Silicon Industry Branch, domestic polysilicon production in August is projected to rise to 112,000 tonnes, a month-on-month increase of 6.5%. Weekly data indicates that, driven by a decline in output from the Northwest region, industrial silicon production in major producing areas fell by 2,500 tonnes month-on-month in early August. On the demand side, the slight increase in polysilicon production offset the decline in silicone production; specifically, weekly polysilicon output rose by 1,400 tonnes to 25,900 tonnes, while weekly silicone output fell by 1,500 tonnes to 43,200 tonnes. Overall, with supply tightening and demand remaining stable, a marginal improvement in the supply-demand balance led to a slight reduction in inventories, providing some price support. Consequently, during the first half of August, the combination of supply contraction and a recovery in polysilicon demand drove industrial silicon futures prices to rebound; prices briefly touched the 8,800 yuan/tonne level, opening up an arbitrage window.
In the short term, the market is characterized by weak supply and demand, with prices remaining under pressure.
On one hand, the profit recovery driven by rising prices will reignite enterprises' willingness to resume production. Ample idle capacity acts as a buffer for supply; since production cuts by some firms merely cede market share and create room for others to restart operations, the total supply is expected to remain abundant. While rising prices and restored profitability boost the incentive to resume production, the combination of ample capacity and high supply levels will further limit the scope for price increases. For instance, enterprises in Yili that completed production cuts in late July have already begun restarting operations, and their additional output can offset the supply shortfall caused by production cuts at other firms in August. Furthermore, should prices rise to levels that allow for profitability, enterprises in the Southwest are expected to become more active in ramping up operations during the high-water season.
On the other hand, support from the demand side faces the risk of weakening. The recent recovery in demand has been driven primarily by a temporary surge in volume resulting from the resumption of polysilicon production; however, with downstream photovoltaic demand currently sluggish, pressure for polysilicon production cuts is mounting. Should polysilicon producers once again lower their operating rates, demand for industrial silicon would likewise decline. In the short term, amidst a landscape of weak supply and demand, prices are expected to continue fluctuating within a low range. Current prices have reached the upper bound of this range, and there is significant downward pressure.
In the medium to long term, the clearing of production capacity, the low-carbon transition, and industry consolidation will serve as the core drivers of the industrial silicon sector's development; these factors will foster a continuously improving supply-demand landscape and drive a steady recovery in industry valuations. While the fundamental supply-demand dynamic has not yet shifted, market competition is gradually transitioning from a focus on scale expansion to a contest of comprehensive strength—encompassing cost efficiency, technological capabilities, and low-carbon performance. Small and medium-sized operations lacking integrated resource support and burdened by high energy consumption and costs are currently operating at a loss; they are likely to be gradually forced out of the market amidst rising environmental compliance costs and fluctuating electricity prices. As inefficient and outdated capacity exits, industry concentration is expected to rise, laying the groundwork for achieving a balanced supply-demand environment in the future.
Overall, the short-term industrial silicon futures market remains characterized by oversupply, awaiting capacity rationalization and inventory depletion; current market conditions are in a bottoming-out phase, with prices expected to fluctuate within a range. In the medium term, as supply-demand dynamics show marginal improvement, the market is poised for a valuation recovery. In the long term, driven by the sustained growth of emerging sectors such as new energy and robotics, the industry is expected to emerge from the cyclical trough and achieve healthy development.
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