The commodities market witnessed a surge in volatility on July 2nd, with multi-silicon leading the charge after closing at the daily price limit. Meanwhile, live hog prices climbed on tightening supply expectations, and glass futures rallied sharply toward a two-month high. In this in-depth recap, we analyze the driving forces behind these movements, assess expert outlooks, and explore what traders should watch in the coming weeks.
Multi-Silicon Hits Daily Limit — A Rally Built on Sentiment?
Multi-silicon futures surged on Wednesday, hitting the daily upper limit and closing strong at 35,050 yuan per ton. The move was fueled not by fundamentals, but by rising market sentiment around potential supply-side reforms in China's solar industry.
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Policy Hopes Drive the Rally
According to Xinhu Futures, the rally stems from growing optimism over government intervention to curb "cutthroat competition" — commonly referred to as “anti-internal rolling” or fan neijuan. This concept gained traction after being mentioned in high-level political meetings and included in official work reports. Recent remarks by top leaders emphasizing legal action against predatory pricing have amplified expectations of structural reforms in oversupplied sectors like multi-silicon.
While these policy signals are encouraging, the fundamental picture remains soft:
- Supply: Production in key regions is increasing slightly, and with the arrival of the rainy season in Southwest China, more plants are expected to resume operations.
- Demand: After a strong second-quarter installation surge, demand has cooled. Downstream wafer producers are operating under reduced loads and continue to pressure multi-silicon suppliers for lower prices.
- Inventory: Despite short-term price hikes, overall inventory levels across the photovoltaic chain remain elevated.
As a result, Xinhu Futures suggests that while sentiment may support short-term gains, upward momentum is limited. They expect range-bound trading in the near term and recommend considering short opportunities on rebounds, pending further policy clarification.
Supply Uncertainty Adds Volatility
Industrial silicon supply dynamics are also contributing to market noise. With Yunnan entering its hydropower season, several industrial silicon plants have restarted operations. At the same time, rumors of resumption at major Xinjiang producers add uncertainty.
Yingye Futures notes that although there’s talk of increased polysilicon output in July, inventory continues to rise, weighing on pricing power. Wafer manufacturers are actively pushing for cost reductions, maintaining downward pressure on upstream prices.
Though speculative long positions drove early gains, momentum is fading as hedgers re-enter and macro sentiment stabilizes. The outlook remains one of short-term volatility within a broader consolidation phase.
Live Hogs: Supply Constraints Fuel Price Rebound
Live hog futures turned sharply higher, reaching a two-month high of 14,375 yuan per ton — a 3.2% gain — amid signs of tightening near-term supply.
Why Are Hog Prices Rising?
Two key factors are at play:
- Producer resistance to sell — Farmers are holding back pigs due to improving margins and seasonal weight gain constraints.
- Increased secondary fattening activity — Traders are buying lighter hogs to fatten further before resale, pulling forward future supply.
According to Minmetals Futures, rising temperatures have slowed weight gains, widening the price gap between standard and heavier pigs (known as fat-standard spread). As a result, many farms have shifted from de-weighting strategies to weight gain mode, supporting cash prices and boosting nearby futures contracts.
However, longer-dated contracts remain weak, reflecting concerns about delayed supply overhangs later in the year.
Supply Outlook: Tighter in Q3?
Zhuochuang Information projects that July hog supplies could shrink due to:
- Ongoing impacts from spring swine diarrhea outbreaks, which reduced piglet survival rates earlier in the year.
- Reduced urgency among large farms to lower weights quickly — meaning fewer market-ready pigs in July–August.
On the demand side, however, consumer appetite remains muted. High pork prices are discouraging bulk purchases by processors, and cold storage intake has declined. As a result, slaughter volumes may drop after early-July peaks, weakening price support.
Still, a wave of secondary fattening expected in late July could push more supply into Q4, creating artificial tightness in the third quarter and opening room for price appreciation.
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Glass Futures Surge Amid Production Cuts Talk
Glass futures jumped 6.48% to 1,052 points — nearing a two-month high — on news that policymakers are pushing for outdated capacity removal. Market participants interpreted this as a sign of potential supply tightening.
Market Reaction to Policy Signals
The rally was accompanied by a massive reduction in open interest — over 120,000 contracts were liquidated — suggesting short sellers rushed for the exit. Trading volume spiked to 3.66 million hands, up more than 2 million from the previous session.
But is the fundamental backdrop strong enough to justify this move?
Mixed Signals Across the Supply Chain
Xinhu Futures breaks down the current landscape:
- Production: A new 800-ton daily production line was ignited this week, pushing national daily melt capacity up to 157,800 tons.
- Demand: Sales were mixed — stable in Shahu and East China, stronger in Hubei and South China.
- Inventory: Overall factory stocks saw a slight drawdown of 671,000 weight boxes. However, regional divergence persists: North and East China saw drawdowns; Central, South, Southwest, and Northeast regions accumulated inventory.
Despite the rally, glass inventories remain high, demand is seasonally weak (due to summer heat slowing construction), and no significant improvement in downstream orders has emerged.
As such, Xinhu expects weak and choppy trading conditions for the September contract, with any trend reversal dependent on macroeconomic stimulus or sustained demand recovery.
Industry Response to Production Cut Rumors
Rumors circulated that China’s top ten photovoltaic glass makers collectively agreed to cut output by 30%. While several companies denied formal coordination, the mere speculation lifted sentiment.
Zhonghui Futures cautions that fundamentals remain lackluster. With spot producers still keen on hedging via short positions, they see 950 yuan as a key support level for the 09 contract. For now, they advise waiting for stabilization rather than rushing into long positions.
Meanwhile, Yide Futures characterizes the market as “supply and demand both weak,” with neutral momentum. They forecast a trading range of 990–1,120 yuan in core regions and stress that any meaningful rebound depends on:
- Recovery in domestic construction demand
- Increased furnace shutdowns (cold repairs) at sustained low prices
- Macroeconomic tailwinds
Currently, few cold repair plans are scheduled — limiting upside potential.
Frequently Asked Questions
Q: What caused multi-silicon futures to spike despite weak fundamentals?
A: The rally was primarily driven by policy-related sentiment. Market participants are betting on government-led supply-side reforms to reduce overcapacity and end price wars in the solar sector.
Q: Can live hog prices sustain their upward momentum?
A: Near-term strength is supported by supply constraints and secondary fattening. However, weak terminal demand and potential supply rebound in Q4 suggest gains may be limited without broader economic recovery.
Q: Is the glass rally sustainable?
A: Not yet. While policy talk boosted sentiment, fundamentals — including high inventories and seasonal demand weakness — remain bearish. A true turnaround would require actual production cuts or macro stimulus.
Q: Should traders go long on multi-silicon now?
A: Experts advise caution. With demand sluggish post-Q2 and supply set to increase, any long positions should be based on confirmed policy action — not speculation alone.
Q: How might summer weather impact commodity markets?
A: High temperatures slow construction (affecting glass), reduce pig weight gain (supporting hog prices), and boost renewable energy usage (indirectly benefiting solar inputs like multi-silicon).
Final Outlook: Sentiment Leads, But Fundamentals Will Decide
While policy narratives have ignited short-term rallies in multi-silicon and glass, and supply dynamics lifted live hogs, traders must stay grounded in reality.
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For now, the message is clear: sentiment can open the door — but fundamentals will determine how long prices stay elevated. Monitor policy developments closely, especially around anti-overcapacity measures in green tech sectors. Any concrete action could redefine market structure beyond 2025.