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Silicon prices hold firm on Brazil supply cuts

Keywords: Tags  silicon, silicon metal, silicon prices, Brazil silicon, Michael Cowden

CHICAGO — Silicon metal prices have held at higher levels, with production cuts in Brazil and firm domestic demand keeping supplies tight.

AMM’s silicon metal price range remains unchanged at $1.35 to $1.39 per pound, although market sources reported transactions for less-than-truckload volumes at higher levels.

While some producers said they were angling for spot prices as high as $1.45 per pound, others market players scoffed at the idea that demand was strong enough or supplies scarce enough to support prices in the mid-$1.40s.

"Demand is good. But it’s not picking up or changing compared to last month, and we’re not having problems getting metal," one consumer source said.

However, some traders reported difficulty sourcing metal from Brazilian producers and in some cases said that even contracted material was late to arrive—assuming it arrives at all.

"It doesn’t pay to make silicon metal. It pays to sell energy back to the grid, so the Brazilians probably have enough production to meet contracts and after that forget it," one market source said.

The decrease in output from Brazil comes as drought conditions have crippled hydroelectric power generation in the country, with officials responding by prioritizing retail consumers over industry ahead of upcoming elections, market sources said. Politicians who came to power by accusing rivals of incompetence—including being unable to prevent blackouts—can’t afford to let the lights go out on voters, they said.

As a result, "some business in Brazil just isn’t going to get shipped, so people will be scrambling for metal," one trader said. "Anybody that hasn’t stepped up to the plate and bought silicon already will be short."

Also crimping supplies are continued power issues in South Africa and a recovering European economy, market sources said. European producers are allocating more capacity to domestic consumers, especially given tariffs in the United States and an unfavorable U.S. dollar-euro exchange rate, they said.

Yet spot market activity was generally said to be slow despite predictions of possible supply shortages, with most consumers already covered by long-term contracts or spot purchases made late last year or earlier this year.

"(Contract) business is strong and people are taking what they said they would take, so we have basically no inventory (for spot)," one producer source said. "But there might be some (spot) before long ... and it looks like prices will continue to inch up."

That bullish outlook wasn’t shared by all market participants. "My (Brazilian) supplier is not shipping anything right now," a second trader said. "But once he gets his energy back, the market could soften if everyone has plenty of silicon again."

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