On August 28, the Silicon Industry Branch released its weekly review of the industrial silicon market. This week, the market was characterized by "futures fluctuating at high levels while spot prices remained stable." Although news regarding production cuts continued to circulate, substantial production reductions by major manufacturers have not yet materialized; consequently, the main contract traded at high levels within the 8,700–8,900 RMB/tonne range. In the spot market, following price hikes and firming trends last week, prices across various specifications and regions stabilized this week as participants adopted a wait-and-see approach, marking the start of a new phase of price negotiations between upstream and downstream sectors.

Market Performance: Futures Fluctuate at Highs; Spot Market Pauses and Observes

Regarding futures, the main contract (2611) fluctuated at high levels throughout the week. According to data from the Guangzhou Futures Exchange (GFEX), the main contract closed at 8,805 RMB/tonne as of August 27, with weekly closing prices ranging between 8,730 and 8,805 RMB/tonne. Driven by news of production cuts at major northwestern plants, the battle between long and short positions intensified within the 8,700–8,900 RMB/tonne range; prices retreated after fluctuating above the 8,800 RMB mark as hedging-related selling pressure emerged, resulting in a market dynamic of "support below and resistance above." Currently, industrial silicon futures exhibit a typical contango structure (where forward-month prices exceed near-month prices), reflecting market expectations for improved supply-demand dynamics once production cuts take effect; however, the spread is limited, indicating market caution regarding the potential for significant price increases.

In terms of trading activity, the market has entered a phase of observation and digestion following the initial rise and subsequent stabilization of spot prices. Downstream purchasing remains focused on essential needs, with limited acceptance of high prices among end-users, leading to a slight decline in trading activity compared to the previous week.

Supply Side: Expectations of Production Cuts Intensify; Price Floor Remains Solid

Expectations for a contraction in supply intensified further this week. A major manufacturer in Xinjiang plans to shut down 32 furnaces starting August 31 due to the cancellation of preferential rates for purchased electricity; this move is expected to reduce monthly output by approximately 60,000 tonnes, with the primary impact felt in September. Meanwhile, electricity prices in major northwestern production regions generally rose in August; industrial electricity rates in Gansu reached 0.44–0.45 RMB/kWh (a year-on-year increase of over 10%), while rates in Ningxia rose to 0.42–0.45 RMB/kWh (up approximately 5% year-on-year). Rising electricity costs further increased corporate cash costs, reinforcing the willingness to cut production to support prices. In the southwestern production regions, output during the high-water season has peaked, leaving little room for further increases, and some enterprises have already begun cutting production due to losses. Overall, domestic industrial silicon output for August is expected to decline month-on-month, with signals of supply-side contraction becoming increasingly clear. Additionally, the recent sustained strength of coking coal prices has further solidified the price floor. In summary, with August domestic industrial silicon output projected to fall month-on-month and supply-side contraction intensifying—compounded by rising electricity and coking coal prices—cost support remains robust.

Demand Side: Polysilicon market in "wait-and-see" mode; silicone demand recovering; aluminum alloy market stable.

Demand-side performance was mixed this week: the polysilicon sector remained in a "wait-and-see" phase, while demand for silicone showed signs of recovery. Regarding polysilicon, the market maintained a cautious stance, with only small-volume transactions concluded by some enterprises. Although domestic polysilicon output increased in August—leading to a corresponding rise in industrial silicon consumption—the industry continued to see inventory accumulation. Consequently, procurement of industrial silicon remained focused on "buying on demand" and price negotiation; the consumption growth driven by increased polysilicon output did not translate into a significant surge in actual procurement volumes, limiting the substantive boost to industrial silicon demand. In the silicone sector, the strategy of voluntary production cuts to support prices remained in effect; operating rates stayed low, spot market supply was tight, and enterprises showed a strong determination to maintain price levels, with DMC prices rising by over 2,000 RMB/tonne from their July lows. Driven by a "buy-on-rising-prices" mentality, downstream buyers showed increased enthusiasm for stocking up, and enterprises have secured orders extending into mid-to-late September. However, as production cuts imply lower operating rates, silicone producers' procurement volumes for industrial silicon are unlikely to expand significantly, limiting the extent of demand support. As for aluminum alloys, the market continued to operate weakly, consistent with the traditional off-season. Supplies of scrap aluminum remain tight, providing cost-side support; however, orders from downstream consumer sectors—such as automotive and home appliances—have shown no significant improvement. With corporate operating rates remaining low, procurement of industrial silicon is primarily driven by immediate needs, resulting in little month-on-month change in demand. Overall, increased polysilicon production has not altered the pattern of on-demand purchasing; persistently low operating rates in the silicone sector fail to provide sufficient support for industrial silicon demand; and weak seasonal demand for aluminum alloys means the demand side for industrial silicon still lacks upward momentum.

Market Outlook: Production cuts dictate direction; awaiting confirmation of implementation.

In summary, the industrial silicon market is currently in a phase where prices are factoring in expectations of production cuts. Plans by major producers in Xinjiang to shut down furnaces have established a price floor, but the market's core uncertainty lies in whether these expectations will materialize. If production cuts are implemented as planned, the resulting improvement in supply-demand dynamics will drive prices higher; conversely, if expectations fail to materialize, the market risks a pullback of the sentiment-driven premium built up previously. In the short term, prices are expected to fluctuate at high levels while the market awaits substantive confirmation of the production cuts. Key areas to watch include the actual execution of production cuts by major producers, whether price transmission from the polysilicon sector ultimately takes hold, and whether downstream purchasing sentiment continues to improve.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.