Scarcity of Chinese silicon metal for aluminum industry causes steep rise

It is reported that a steep rise of price for Chinese silicon metal to be consumed by aluminum industry is remarkable. The price of this metal was on a level of USD 1,800 per tonne CIF Japan in November but is rising day by day from the beginning of December and has been actually sold currently at USD 2,200 per tonne CIF Japan for 5.5.3 grade. The parties concerned in China have a view that, since a drought in winter season is coming and causing a short supply of electric power, the case to raise price of Chinese silicon metal to a level of USD 2,500 per tonne CIF Japan will be within hail.

Owing to the fact that production of aluminum alloys has closely related with automobile manufacturing, the production of aluminum alloys in the H1 of 2009 had been driven to reduce largely and, therefore, the plants to produce aluminum alloys had to hold back their purchases of silicon metal for shipments in July to September quarter, following the same case in the H1. Consequently, the stocks of silicon metal held by Japanese plants have decreased to the lowest level at present. The same situation has been applied to that at suppliers in China and, because of the sluggish demand for exports of silicon metal and the unprofitable production of this metal, Chinese producers had been obliged to reduce considerably their production of silicon metal in April to September of 2009, when the production of silicon metal in China had to be originally increased in order to accumulate the stocks.

According to the statistics released by the Ministry of Finance, Japan imported 109,142 tonnes of silicon metal in January to October of 2009, having decreased by 48% compared with that in the same period of 2008. China is the largest source for Japan to import silicon metal and, as a matter of fact, Japan imported 88,520 tonnes of silicon metal from China in January to October of 2009, which had a considerable decrease of 53% compared to that in the same period of 2008.

Also, according to the customs statistics released in China, this country exported 316,000 tonnes of silicon metal in January to October of 2009, having decreased by 49% compared with that in the same period of 2008. The exports of Chinese silicon metal for Japan, as a main market for China, had been depressed largely in 2009 but the exports of silicon metal from China to such other markets as South Korea in 2009 had been influenced directly or indirectly by a reduction in automobile manufacturing. China exported silicon metal on a favorable tone in the last 3 years of 2006 to 2008 and maintained a scale of 600,000 - 700,000 tonnes per annum. However, the total quantity of silicon metal to be exported by China in the calendar year of 2009 is anticipated to come down to a lower level than 400,000 tonnes.

Nevertheless, it is not clear yet whether a sharp rise of price for silicon metal to be consumed in aluminum industry puts an influence on a rise of price for silicon metal to be consumed in chemical industry or not. The reason is that consumers in Japan have held substantial stocks of silicon metal for chemical industry. These consumers are generally said to have held enough stocks of chemical grade silicon metal estimated to be durable for consumption in 4 to 6 months, indicating a deepness of their pockets.

The cargoes of Chinese silicon metal have become scarce but a high water season to come in spring of 2010 enables hydroelectric power stations to increase their generation of electric power and the production of silicon metal in China will be able to increase. Up to that time, the companies to consume chemical grade silicon metal will be possible to economize their stocks of this metal. From this point of view, it is hard to make an obvious reason for the opinion, which price of Chinese silicon metal for aluminum industry will rise to a level of USD 3,000 per tonne.

It goes without saying that, when price of silicon metal for aluminum industry could have risen to a level of USD 2,500 per tonne, price of chemical grade silicon metal should be certainly influenced accordingly. A chance, which some cargoes of chemical grade silicon metal are diverted to the usage in aluminum industry and sold in this sector, is anticipated to enlarge. Also, the Central Government of China has raised electricity fees by 5.3% on the average as a whole scale of China, effective from the 20th November of 2009 and Chinese producers of silicon metal have similarly become the constitution to suffer from high cost.

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