Monday, April 23, 2012

No Decision

In issue #43 of SiC & More (January 2012) it was reported that the Chinese Ministry of Commerce announced that the silicon carbide (SiC) export license allocation for 2012 would be the same as for 2011. The Ministry also revealed that 70% of the 2012 SiC allocation would be made available during the first six months of the year. As a result, 151,200 m/t of SiC would be available for export during the first half of 2012.

This past week the Ministry was expected to make a decision regarding the second half allocation. Many in SiC industry expect the second half tonnage to be canceled, however, as of early in the business day on April 20, 2012 no decision had been rendered.

Prices on virtually all SiC products have been dropping since late 2011. That trend continued after China's Spring Festival. Many Chinese SiC producers expected prices to recover after the Festival, however, that has not happened. To the contrary, exports have dropped and so have prices.

The price of Chinese export licenses continues to fall and several traders believe the price will go as low as $125 metric ton. In China, demand for SiC metallurgical products has softened and green SiC consumption is off by as much as 50%.

In addition, the price of electricity continues to increase and struggling SiC furnace plants are scaling back or stopping production altogether. One trader told SiC & More that most of the plants in Yinchuan are running at about 45% of capacity. This same trader said that only three or four green SiC furnace plants are operating in Qinghai while half of both the green and black plants in Lanzhou are down.

As a result, SiC & More expects the Ministry to cancel the export license allocation for the second half of 2012. It's uncertain what effect this action will have on pricing, however, one trader said, "The canceling of 30% of the China's 2012 SiC export licenses should firm prices during Q3 and that should carry over into Q4". We will see.

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