----Interview with Pengyuan He
General Manager
Hualong Yongsheng New Material Co., LTD
Hualong Yongsheng New Materials Co., Ltd. is located in Jiahe Industrial Area which is about 5 kilometers away from Hualong county, covering an area of 68,000 square meters. With a registered capital of 92.82 million yuan and 80 employees, the company specializes in silicon carbide production, processing and sales.
Asian Metal: Hello, Mr. He! Welcome to the Asian Metal interview. Firstly, please introduce the basic information of your company.
Mr. He: Hualong Yongsheng New Materials Co., Ltd. was founded in April 2004, and moved to Jiahe industrial area in December 2007 with the construction of 6 12,500kVA silicon carbide production lines. In July 2014, we started the upgrade of the electric arc furnaces from 12,500kVA to 25,000KVA, completed the construction and put into operation in December 2015. In July 2022, it was wholly-owned by Shandong Huina New Energy Technology Group Co., Ltd. who invested 50 million yuan to upgrade the original electric arc furnace and environmental protection facilities. We built a new closed production workshop, installed online monitoring equipment for pollution sources, and put into production in June 2023, with a production capacity of 25,000 tons, an output value of 150 million yuan, and profits and taxes of 20 million yuan. From January to May this year, the company produced 8,500 tons of silicon carbide and achieved sales revenue of 41 million yuan. According to the planning and deployment of the Group company, relying on the advantages of petroleum coke trading networks, we plan to upgrade the second production line, and promote the deep processing of silicon carbide products with the total production capacity of 50,000 tons, the output value of 300 million yuan, aiming to achieve 40 million yuan of profits and taxes. We strive to build the company into an excellent enterprise to make customers satisfied, employees proud, earning social respect, and make greater contributions to the local economic development.
Asian Metal: Since the first quarter of this year, the silicon carbide market continues to be depressed, and the prices keep at low level, what is the reason for this phenomenon?
Mr. He: There are many reasons for the continuous downturn in the silicon carbide market this year. First of all, in terms of macro policies, under the influence of multiple factors such as the global epidemic, geopolitics and the economic downturn of the world's major economies, terminal demand has contracted significantly;
Secondly, the silicon carbide supply continues to remain sufficient, and the silicon carbide production in the first half of 2024 increases by about 10% compared with the first half of 2023; With sufficient supply, the price advantage of silicon carbide is difficult to reflect, and the market prices go down to different degrees under the bidding; In addition, under the influence of carbon policies, sufficient supply, and the background that the government restricts the year-on-year growth of crude steel production, the demand for silicon carbide is influenced and the prices remain at low level and even has inversion.
Asian Metal: At present, many factories in other regions face losses and choose to reduce production or even stop production. What is the current status of your company? What are the advantages of your company facing the market downturn?
Mr. He: In the context of the depressed silicon carbide industry but higher requirements for environmental protection equipment, many enterprises have various degrees of production reduction or even suspension, but our factory still has many advantages in the current situation. For example, in terms of costs, under the advantage of electricity price in Qinghai region, compared with the main producing areas of Ningxia and Gansu, there is a more obvious advantage in electricity charge. To be more specific, the electricity charge in Ningxia and Gansu is generally 0.45-0.48 yuan/kWh, while that in Qinghai can be as low as 0.38 yuan/kWh during the off period, and only stands at around 0.42-0.43 yuan/kWh during the peak hours. We all know that the electricity charge accounts for about 40% of the total cost of silicon carbide, so we have obvious advantage. On the other hand, the supply of our petroleum coke is directly from the parent company, which has great advantages in terms of petroleum coke procurement costs and indicators. In terms of products, most enterprises in the current main producing area of Gansu are still selling the original block, while our company has mature processing production lines, which can meet the various needs of customers at the same time, and elevate the value of products.
Asian Metal: Since last year, the Northwest region has tightened the inspection action on industries with high pollution and energy consumption, what is your company's response to this situation?
Mr. He: Under the influence of carbon reduction background, in the recent years, there are relatively strict requirements on environmental protection and energy consumption. Under the influence of policies, our company has been equipped with more mature supporting facilities; With the development of the industry, the requirements for carbon emissions may be further upgraded, so we invested in energy consumption optimization facility, and will learn the experience from the leading enterprises, and improve and upgrade the environmental protection and energy saving ability.
Asian Metal: Does your company has any plans to do export business? What's the proportion of domestic and export sales?
Mr. He: Our company is engaged in export-related business. Silicon carbide is a product with export volume accounting for about 30% of total consumption. At present, our company is still mainly based on domestic sales. However, considering the energy conservation, emission reduction and capacity reduction in China, we will expand overseas markets, especially the development of emerging markets in the third world countries and regions, where there is a large amount of infrastructure demand, and the demand potential of durable materials and abrasives markets is also very large.
Asian Metal: What is your opinion on the supply and demand trend as well as the price trend of silicon carbide market in the second half of the year?
Mr. He: At present, silicon carbide market is still in a weak trend, but taking the support of production cost into account , there is little room for price decline, so it is expected that the mainstream silicon carbide market in the second half of the year will continue to maintain soft. But on the other hand, considering the production suspension due to weak demand which leads to supply decrease, as well as the higher electricity charge that may push the prices to increase, the black silicon carbide prices in the second half of 2024 are likely to remain at around RMB6,500-7,000/t. Specific considerations are as follows. First of all, the market sees oversupply but weak demand due to the traditional off-season. Therefore, the silicon carbide prices would continue to maintain a soft trend in the short time. With low prices, it is possible that some enterprises have to stop production, which balance the supply and demand. Secondly, with the coming of the traditional peak seasons such as September and October, some producers who planned to suspend production delay their plans for expectation of price increase, even though the downstream demand face many restrictions to release. So the low prices would remain for a period of time. Thirdly, in terms of costs, the peak consumption period of electricity in summer support the production cost and may even pushes the prices up periodically due to power shortage; At the same time, most producers use pellet coke, which would provide firm support for its various applications in different downstream fields. Therefore, on the whole, under the continuous low prices, the current market generally holds optimistic mentalities. However, the downstream demand still remains weak even though positive macro policies are successively released, because the recovery of terminal consumption is still slow. In the second half of this year, silicon carbide market would maintain soft trends. As for our company, we are positive towards the second half as we have strong strength in both electricity costs and petroleum coke supply, and would continue to explore the international markets.
Asian Metal: Thank you for your sharing, we wish your company to have a better future!
Mr. He: Thank you for your invitation and we also wish Asian Metal to have a better development and keep providing comprehensive, fair and professional information for the market!
