US silicon metal prices are lower and are going lower, possibly much lower. While the narrative has been that buyers have enough silicon to last through the third quarter and possibly even into the fourth quarter and aren’t interested in buying regardless of price, it’s WRONG.
Not all buyers committed for the entire year using indexes and buyers are now BUYING for the third quarter and for August and September—at fixed prices. They are not watching and waiting but buying.
Fixed prices for July delivery for small quantities (one or two trucks) were concluded at around $1.32-1.34 per last week but fell to $1.30, ddp, this week. However, larger quantities were done much cheaper. Prices for slightly offgrade 5-5-3 were done as low as $1.26 per lb, ddp, while regular grade was offered at less than $1.30, delivered.
While sellers are claiming that the new lower prices “aren’t representative” it’s all bullshit. A sale is a sale, offering at a higher price without a sale doesn’t make the market, only a transaction makes the market.
In the past, consumers were tied to index price contracts with discounts. As a result of the US dumping case, suppliers negotiated small discounts (2-4% while GSM refused to offer any) for 2018. This made a few US consumers to abandon the index contracts. Now there could a general move away from all discounts.
The new fixed prices are lower than the index contracts with the small discounts; therefore, buyers with the index contracts are paying more if the indexes don’t reflex the market.
A few sellers say lower prices expected for 2019 will “force” them to keep discounts small. However, this strategy could backfire big time. At least one buyer said if discounts aren’t increased substantially for 2019 contracts, he would just buy everything on fixed prices. And, with lots of material around, it rings true.
Why? There is plenty of material around and more is coming. When Ferroglobe/GSM announced its dumping cases, nontraditional suppliers stepped in, often with the assistance of US consumers and merchants. As a result, shipments from Thailand for the five months of 2018 were 10,417 mt, including 7,736 mt in May alone, vs. 7,527 mt for ALL of 2017. Imports from Laos were 1,825 mt in the first five months of 2018 vs. 519 mt for all of 2017. Bosnia shipped 4,226 mt for the first five months of 2018 vs. 6,476 mt for all of 2017. And, imports for the first half of 2018 will show how much import penetration will be since the ITC’s decision not to impose penalty duties came in late March, so the door opened after that.
And, importers won’t abandon the US market easily.
The US with its strong dollar is a magnet for all imported silicon, while the drop in the Chinese rmb means more exports, though not to the US. “The increased Chinese exports will cause a readjustment of shipments to the premium markets. This in turn will trigger more exports from those countries to the US,” one dealer said.
In addition, China’s new policy limiting new solar installations has caused a significant falloff in polysilicon demand and much lower prices. This, in turn, frees up more Chinese silicon for other markets, including the metallurgical market.
PCCBakke is planning to start its second furnace soon in Iceland, with more new capacity expected before the end of this year.
While the producers will scream, prices will have to SIGNIFICANTLY fall before smelters will even think about cutting back. The pain point?