Silicon metal prices have little room to go down
----Interview with Fangri Zhang
General Manager
Datian Huayang Photoelectricity Co.
- Established in June 2011, Datian Huayang Photoelectricity Co. was located in Longmei Industrial Zone in Shangjing County, Datian, Fujian. The company owns three furnaces of 15,000kVA in total and the dust-cleaning apparatus with the annually silicon metal production capacity of 30,000t. It mainly produces high-grade silicon metal 2202,25015,3301,3303, etc.
- Asian Metal: Welcome to our interview, Mr. Zhang. Please introduce your company briefly first.
- Mr. Zhang: Datian Huayang Guangdian Co., Ltd was established in June 2011 and is located in Longmei Industrial Zone in Shangjing Town, Datian County, Fujian City. We mainly focus on production and sales of industrial silicon metal. Based on an annual production capacity of 30,000t and the factory covering 170 acres, our company owns three furnaces of 15,000kVA in total with the dust-cleaning corollary equipment. We focus on producing various grades of silicon metal such as 2202, 25015, 3301,3303, 35015, 331, etc. We mainly sell our products to clients in South Korea, Japan, Russia, and the US. We also have another two companies. One is Fujian Jingke Silicon Research and Development Co.,Ltd. with one furnace of 12,500kVA, and another one is Sichuan Puge Huaxin Ferroalloys processing Co.,Ltd. with two furnaces of 12,500kVA in total. Due to the sluggish demand, Jingke will stop production at the end of June, and Puge Huaxin didn't resume production in 2023.
- Asian Metal: There are few plants that could stably supply silicon metal 2202 in China. As one of major suppliers, how do you evaluate the supply of silicon metal 2202 in 2023 compared with that in 2022? How about the raw material supply?
- Mr. Zhang: The supply of silicon metal 2202 in China this year still remains tight as the market barely sees qualified silica supply. The qualified silica requires an impurity of Fe0.01%max and these mines are mainly located in Jiangxi province with the maximum production capacity below 100,000t. Most of the mines only have the typical silica ore mining capacity hovering at 10,000-30,000t. We replenished about 10,000t of silica last year, but we barely see qualified silica supply this year. Consequently, the supply of silicon metal 2202 still remains tight this year and we, like other peers, prefer to hold back from selling silicon metal 2202 now. Another reason for the tight supply is the low profit margin. We need to use high grade petroleum coke to produce high grade silicon metal. For those plants who only produce 100-500t a year, it's not cost-effective for them to produce such product.
- Asian Metal: The market also sees supply of silicon metal 2202 produced by the medium frequency electric furnace. What are the differences between silicon metal 2202 produced by arc furnaces and that by medium frequency electric furnace in terms of quality and application?
- Mr. Zhang: Firstly, the calcium content in the silicon metal 2202 produced by medium frequency electric furnace reaches 0.03%max and it’s very hard to reach 0.02%max. Secondly, the content of silicon in the material produced by medium frequency electric furnace is about 2-3% lower than that by arc furnace, of which the content reaches 99.5%min. Besides, the content of other impurities is much higher than that by medium frequency electric furnace. If such material is used to produce special ferroalloy products, it will cause change of crystal structure of the products. If it is processed into silicon powder for production of polysilicon, the section will be easily broken.
- Asian Metal: Who are your main clients and how about their demand in Q2?
- Mr. Zhang: We have cooperations with many long-term end users in organic silicon plants, aluminum ingot plants and silicon powder plants. The demand from large-scale and top-tier end users remains stable on the whole in Q2 against Q1, and some even increased purchase volume in Q2 due to the gradual production resumption. While the demand from the spot market shrank obviously in Q2 against Q1. We also supply to silicon powder plants, especially the electrical-grade silicon metal powder plants. We’re the assigned silicon metal 3301, 2502 supplier for them, and the demand from our three major clients keep stable at 300tpm. Overall speaking, the demand in Q1 and Q2 this year is far less than that in Q1 and Q2 last year when the prices firmed at much higher levels. Our output decreased to around 1,000tpm in the first half of 2023, compared with about 2,500tpm last year.
- Asian Metal: The silicon metal prices experienced short-term increase in mid Feb and went down in the second half of March. The current mainstream prices in China (28th June) already stand lower than most suppliers’ production costs, while the market stills sees sufficient stocks. Additionally, the operation rate in July in Yunnan would increase MoM. How do you think of the price trend next month? Will it go down further?
- Mr. Zhang: Even though most suppliers raised the prices in the mid of February, most buyers stood on sidelines rather than place orders with larger volume due to the continuous market stock increase and weak demand. So the prices started to fall in the second half of March. We also saw a similar situation in mid June, when the price increase only lasted for one week and then the prices declined for the weak demand. The current electricity charge in Fujian keeps at RMB0.68/kWh (USD0.09/kWh) and we already suffer a loss of about RMB1,000/t (USD145/t). Therefore, the operation rate in Fujian remains low in June. Fujian Jingke stopped the operation of one furnace of 12,500kVA lately, and we only keep one furnace running in Huayang Photoelectricity to deliver the signed orders. The current mainstream prices of silicon metal 5-5-3 stay at around RMB13,000/t (USD1,817/t) delivered to Huangpu port. Such prices are much lower than the production costs of most producers in Yunnan and Xinjiang. Even though the electricity charge in Yunnan would go down in July, most suppliers would not lower their prices supported by high production costs, so I believe that the prices of silicon metal 5-5-3 barely have room to go down even though the demand would not recover in the coming two months. For silicon metal 2-2-02, prices would also keep firm upon the short supply.
- Asian Metal: How do you see the demand in China in the second half of this year?
- Mr. Zhang: After maintaining minimum stock replenishments for several months, I believe that most consumers face low raw material inventories and would need to replenish more stocks for the second half of the year. So the demand would recover slightly in the rest of the year. However, the prices would have little room to go up because of the oversupply.
- Asian Metal: Thank you for your wonderful sharing.
- Mr. Zhang: Thank you.
