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Silicon metal prices dip as outlooks diverge

Keywords: Tags  silicon metal, Michael Cowden

CHICAGO — Silicon metal prices have dipped in recent weeks, with market players split on whether the decline is a result of overreaction to fewer lower-priced deals or a lack of overall demand.

AMM has lowered silicon metal to $1.20 to $1.23 per pound—in line with most reported transactions—from $1.23 to $1.27 previously.

But limited volumes have been sold both significantly above and below the new range. One trader reported selling a truckload of silicon metal at $1.26 per pound, while another reported selling one truckload to a secondary aluminum producer at $1.15 per pound delivered and a second truckload to another secondary aluminum company at $1.138 per pound delivered.

Some market sources contended that sales below $1.20 per pound were outliers; others said they likely were made by traders who weren’t concerned with replacement costs. But the trader involved in making deals at $1.15 per pound and below insisted that his prices were representative of the market, calling deals at $1.20 per pound or more "producer propaganda."

"It’s all hogwash," he said. "The market is nowhere near those levels. If that were the case, I would be selling at those levels, and I haven’t booked anywhere near them." He said that key end markets, such as the chemical sector, were "in the toilet."

But one producer source called deals below $1.20 per pound "aberrations." He said his company, concerned that the market may have dropped significantly, dropped its prices to $1.22 per pound and in short order sold four to five truckloads. "It showed us that ($1.22) was the low end of the market because (buyers) jumped on it. We brought the price down because we sold at levels we shouldn’t have."

The producer source said that prices far below $1.22 per pound were outliers because most of the market had not been able to replicate them. "It was one guy with a couple of loads," he speculated.

Another trader said he had booked two truckloads recently at $1.23 per pound, adding that demand was "steady" thanks to a strong automotive market and a potentially recovering construction market. He said he didn’t doubt that deals had been transacted at $1.15 per pound or below, but noted that if he had done business at such low prices it would not be enough to match replacement costs for new material.

A second producer source said the market was "steadily plodding along." He said his company recently sold a truckload of spot silicon metal at $1.23 per pound and less-than-truckload volumes in a range as high as $1.25 to $1.28 per pound. He said that while $1.20 per pound might be available, his company would not quote that low. "People (contract buyers) are taking what they said they would and not much more. It’s about what buyers thought it would be, so there’s not a whole lot of spot business."

Sources across the price spectrum seemed to agree.

"The whole business is small quantities," one trader said. "The majority of large customers have already purchased (their requirements)."

Several such customers contacted by AMM said they would not be in the market again until September.

With most silicon metal booked under contract, the silicon metal spot market has deteriorated substantially, the first trader said. "Because of that, companies that have allowed for some spot (buying) ... go into the market and are able to benefit from lower pricing," he said, contending that a lack of spot activity would make it harder to sustain prices going forward.

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