Operating rate in Yunnan will drop sharply and silicon metal prices still have room to increase

Asian Metal: Mr. Huang, thank you for accepting the interview of Asian Metal. Could you please give us a brief introduction Silicon Metal Association of the Prefecture of Dehong?

Huang: The silicon metal industry in Dehong has developed gradually with the production capacity increasing by 30% by years since 2008. Silicon Metal Association of the Prefecture of Dehong was established in October 2009. In the aim of developing the industry and reaching achievement together, the association persevered in our efforts to serve the members. Until November 2016, there were in total 33 smelters with 70 furnaces in Dehong. (18 smelters with 31 furnaces in Yingjiang, 4 smelters with 8 furnaces in Longchuan, 2 smelters with 6 furnaces in Lianghe, 3 smelters with 11 furnaces in Ruili and 6 smelters with 14 furnaces in Mangshi.)

Asian Metal: How is the silicon metal production capacity distribution in China?

Huang: In 2015, Xinjiang has exceeded Yunnan to be the number one in silicon metal output in China, accounting for 24.6% of the total output in the year (The production capacity in Xinjiang is still expanding.) The output of Yunnan and Sichuan accounted for 24.1% and 19.5% of the total output in China in 2015. The aggregate output of the above three provinces reached 1,300,000t in 2015, accounting for 68.2% of the total output in China.

Asian Metal: Could you please make a general introduction of the production capacity distribution in Yunnan?

Huang: Until the end of 2015, there were in total 66 smelters with 153 furnaces in Yunnan. The production capacity was 1,200,000t, accounting for 26.7% of the total volume in China. The total output in 2015 reached 470,000t in 2015, up by 20,000t from 2014. The output of silicon metal in Dehong was 239,000t in 2015, accounting for 50% of the total volume in Yunnan, and the operating rate was 68.57%. The operating rate of silicon metal smelters in Yunnan was 74.5% in late November.

Asian Metal: Xinjiang has exceeded Yunnan to be the number one in silicon metal output in China last year. Compared with Xinjiang, what are the advantages and disadvantages of silicon metal production in Yunnan?

Huang: Firstly, we have advantage in policy support. Through the development of these years, silicon metal has become one of the mainstay industries in Yunnan and the performance silicon industry lays great influence on the local economy. In the future, the regional competition of silicon metal in China will be the competition of policy support of local governments. This year, different government departments in Yunnan released support policy on silicon metal industry, especially the local government of Dehong Prefecture, and help silicon metal smelters to tide over the difficulties.

Secondly, we have advantage in green and sustainable hydropower. The hydropower price is in line with silicon metal price fluctuation in Dehong. Silicon metal industry could consume local power and relieve stress of local government. Silicon metal smelters in Yunnan focus on talent cultivation, technical innovation and environment protection and are actively in undertaking the social responsibility.

Thirdly, we have disadvantage in resources. Currently, relevant departments in Yunnan are coordinating to import from neighboring countries and giving help in capital to release the pressure and decrease cost of silicon metal smelters. We believe that the disadvantage will become our impetus.

Asian Metal: What’s the current operating rate of silicon metal smelters in Dehong? How is the future production plan?

Huang: Until the end of November, there were 66 smelters with 153 furnaces in Yunnan with a designed annual production capacity of 1,200,000t, accounting for 26.7% of the total volume in China, and the operating rate was 74.5%. There were 33 smelters with 70 furnaces in Dehong and the operating rate in November was 67%. The electricity price will still be in line with silicon metal price fluctuation in December. However, as the power supply is limited, only 25 smelters in Dehong could enjoy the favorable electricity price in December. If more furnaces are opened, smelters have to pay for RMB0.48/kwh (6.96cent/kwh) of the electricity. Silicon metal smelters in Dehong are decreasing output gradually. Into January, the electricity price for all the smelters will reach the dry season level of RMB0.48/kwh (6.96cent/kwh) and almost all smelters will stop production at the time. The dry season will last until 31st May next year.

Asian Metal: Chinese silicon metal prices have increased sharply in the first weeks of November and what were the reasons?

Huang: The following are major reasons that pushed up silicon metal prices in November.

1st, many domestic aluminum alloy plants resumed production and demand for silicon metal increased sharply.

2nd, the freight cost increased under new transportation policy.

3rd, the prices of raw materials increased, especially those for coal and petroleum coke, resulting in a sharp rise in cost for silicon metal smelters, and silicon metal smelters had to raise offer.

4th, the rainy season in Yunnan will end in the end of November and most smelters in Yunnan will decrease output or stop production on the increasing power price in December. The expectation in output decrease was also one of the key reasons that pushed silicon metal price to go up.

Asian Metal: Silicon metal market calmed down gradually recently. What’s your idea on the future market trend?

Huang: Silicon metal prices have increased too fast in November and it takes time for the buyers to consume stocks. The market will see tight supply again later when the inventory of buyers decrease and Yunnan, Sichuan and Fujian enter the dry season, and I think there is still space for the price to move up.

Asian Metal: What’re the future development plans for Silicon Metal Association of the Prefecture of Dehong?

Huang: Silicon metal smelters in Dehong will continue to innovate and together face the pressure from the market and outside. During “13th Five Year Plan”, silicon metal industry is in a turning point of “survival of the fittest”. Market players who could seize the chance and make development will get a success, while those who still follow the beaten track and do not bring forth new ideas will be weed out by the market.

1st, to give full play to the product quality and technical personnel advantages is the fundamental for the survival of silicon metal smelters in Yunnan.

2nd, to carry out energy conservation and emission reduction, adopt new technologies, enhance internal management, decrease production cost, improve staffs’ treatment and strengthen smelters’ competitiveness and viability.

3rd, to unite vertically and horizontally and participant in the industry competition by a union. To integrate the silicon metal industry and change the dispersing type industry to a united industry. To unify the technology quality standard and improve the ability of Yunnan silicon metal smelters to face the market pressure.

The silicon metal associations in Dehong, Baoshan and other regions in Yunnan will have deeper communication and cooperation to make unremitting efforts for the silicon metal industry development in Yunnan. We will also propel the establishment of silicon associations in other regions of Yunnan and make a big union of Yunnan silicon industry.

Asian Metal: Thanks for your share.

Huang: Thanks you.