From the 2022 Buying Frenzy to 2024 Oversupply: How Should Aluminum Buyers Adjust Their Silicon Strategy?

China’s Silicon Metal Overcapacity?

Overcapacity in China’s silicon metal industry became a market theme in the first half of 2024. According to Shanghai Metals Market (SMM), China’s silicon metal output reached 3.8 million tons in 2023, and by August 2024 had grown to 3.24 million tons (up 41% year-on-year), with full-year output estimated to exceed 4.9 million tons (IndexBox).

During the 2021–22 buying frenzy, silicon metal prices soared to $6,000–$9,000/ton. By 2023–24, the market shifted to oversupply, and spot prices fell sharply (Aranca).

Lessons from the Buying Frenzy & Current Inventory Pressure

Between 2021 and 2022, tight supply caused by China’s dry-season power limits, carbon-neutrality production cuts, and new line delays led aluminum plants to scramble for orders — often signing high-priced contracts without stock support. Today, while inventories seem ample, procurement structures are messy, small plants ship frequently, and product consistency is unstable, leaving hidden risks.

How Should Aluminum Plants Adjust Their Procurement Strategy?

1. Shift from “Price-Driven” to “Stability + Flexibility”
   In the current overcapacity environment, buyers should not rely solely on the lowest price but assess suppliers based on delivery history, quality consistency, and complete documentation (e.g., COA certificates).
2. Combine Long- and Short-Term Contracts for Agility
   Many mid- to large-sized aluminum alloy plants use the following ratio:
   • 80% long-term contracts with main suppliers
   • 20% reserved for spot and second-supplier options to handle sudden delivery or price changes
3. Regularly Review Contract Terms and Quotation Cycles
   In an environment of transparent pricing and oversupply, buyers should evaluate whether to use floating price clauses or hybrid monthly average/spot arrangements.

Second Supplier Strategy: Control Leverage, Not Just Split Orders

Many plants mistakenly believe that having a second supplier means splitting purchases and lowering negotiation efficiency. The real purpose is to:

• Prevent main supplier delivery failures
• Control negotiation leverage and maintain flexible procurement windows
• Use as a bargaining chip in contract risk clauses

Minmetals’ Support for Second Supplier or Main Contract Models

Chongqing Minmetals (CMETC) offers:

• Combination of spot and contract pricing
• Stable-grade 441 and 553 silicon metal
• COA, packing list, and customs clearance documents
• Monthly fixed delivery schedules and adjustable port options
• Taipei office for real-time communication and delivery monitoring

For long-term cooperation above 50 tons, fixed-price or monthly average arrangements are also available.

FAQ: Common Questions from Professional Silicon Metal Buyers

Q1: Do we still need a second supplier with oversupply?
A: Yes. Oversupply can lead to messy pricing and uncontrollable quality. A second supplier helps stabilize delivery rhythm and control schedules.

Q2: What documentation does Minmetals provide?
A: Complete export packages including CO (Certificate of Origin), COA (Certificate of Analysis), packing list, commercial invoice, and bill of lading.

Q3: Can we work with Minmetals as a backup if we already have a main supplier?
A: Yes. Minmetals supports short-term spot cooperation or acts as a “non-main contract backup” to maintain procurement flexibility.

Conclusion: Proactively Adjust to Reduce Dependence and Strengthen Risk Defenses

From the chaos of 2022’s buying frenzy to the oversupply of 2024, silicon metal prices have stabilized, but procurement risks remain. Building a second supplier, reconfiguring contract structures, and improving price transparency are essential steps for aluminum plant procurement teams today.