While it is now mostly watching and waiting for 2019 supply contracts, the US silicon market is far from inactive. Fourth-quarter business was concluded at just under $1.20 per lb, delivered, sales of normal quality 5-5-3 were in the $1.22-1.25 per lb, delivered range; a c.i.f. is usually 1-3¢ per lb lower depending on location. However, with all the sellers bunched up, the only way to get a consumers’ attention was to go lower. As a result, most buyers believe the $1.20 level will be breached shortly for spot business.
The secondary aluminum producers reiterated that they expect to buy less virgin silicon next year and will rely of cheaper and most available scrap. Buyers believe their virgin silicon consumption will fall between 3-8% next year, and it could get worse if the expected downturn in US auto production materializes.
While silicones demand is strong, chemical-grade users would prefer to make siloxane outside of the US using cheaper, i.e., Chinese, silicon. And you can forget about any revival in the US solar silicon market.
The consumers also commented on availability. One Brazilian producer is trying to book directly with consumers instead of using an agent and is offering very “competitive” prices. Also, Australian silicon is starting to be a factor, especially on the West Coast.
As for watching, buyers say most of the index prices are wildly out of line with reality, which leads to an interesting situation.
If they agree to an index price for next year, based on the current and past performances of the indexes, they want a sizeable, i.e., almost a double-digit increase. “A 1-2% discount off a $1.30 price is crazy when the real market is considerably cheaper if I buy fixed price,” one consumer explained. “Therefore I need a 6-9% discount if things don’t change.”
However, if the buyers get the sizeable discounts and the indexes start to reflect reality, the suppliers will be stuck.