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Silicon metal and ferrosilicon are very similar with regard to production process and the geography of world output but are very different in terms of their applications. Silicon metal is used in the manufacture of aluminium alloys, silicones, semiconductors and, increasingly, in photovoltaic solar applications. In contrast, over 85% of ferrosilicon is consumed in the production of iron and steel.
Prices in most regions finally bottomed out in the second half of 2019 and before starting a renewed uptick. In Q1 2020, the main impact on both markets was on the supply side. The COVID-19 lockdowns in China reduced Chinese exports and hampered shipments of Chinese raw materials for furnaces. The squeeze to supply caused prices for both silicon metal and ferrosilicon to increase during Q1 2020, peaking over March and April.
From the beginning of Q2, supply started to ease, as China came out of lockdown. By this time, the focus of the pandemic had shifted to other regions, including Europe and North America, where widespread lockdowns caused a sudden collapse in activity across a wide variety of industrial sectors. Though demand in China is expected to increase in 2020 for both silicon metal and ferrosilicon, this will likely be outweighed in both markets by lower consumption outside China.
In addition, falling prices have re-ignited pressure to tighten anti-dumping protections, especially in the US, where a new case against silicon metal imports has been launched. Prices for both silicon metal and ferrosilicon are strongly related to production costs, and the deflationary impacts of COVID-19 on production costs US$ exchange rates have been key factors pushing prices downwards.