In October, export prices move upward slightly for magnesia series, white fused alumina and flake graphite, with that of bauxite, brown fused alumina and silicon carbide remaining steady or modestly decline; while prices in domestic market perform smoothly only except that alumina rises in price and flake graphite tends to hike. Here is an analysis on flake graphite, Amorphous Graphite, Silicon Carbide (SiC), Bauxite, Brown Fused Alumina (BFA), Fused Magnesia (FM), MgO-Al2O3 Spinel, Dead Burned Magnesia (DBM) and such refractory raw materials.
In October, the overall market of flake graphite runs smoothly both in Northeast China and in Shandong province, with prevailing prices remaining stable in China and a US$10/t increase in export price.
Since the seasonal production halts is about to start, possibly in middle November, for flake graphite in Northeast China, which will last at least for 4 months, a majority of producers will gradually make shut-downs with the weather get colder, with some producers equipped with warming apparatus capable of sustaining the operation during winter.
In addition, affected by environmental protections, the length of time for graphite production is a couple of months less than previous years, resulting in the reduction of output. According to a survey conducted by Refractories Window, the output in Jixi reduces by about 15% YoY, and greater decline occurs in Luobei due to the shortage supply of raw ore.
The overall inventories presently can only meet the market demand of next two months.
In Shandong, producers in suspension have been increasing in numbers since the stricter policy on environment protection last year. As a result, the capacity of high-carbon graphite is insufficient and medium-carbon graphite is in tension supply.
According to the survey, normal production is maintained by the producers with annual capacity at about 20,000 tons, and the operating rate is at around 80% for the producers with annual capacity at over 30,000 tons. Some producers with 100,000 tons of annual capacity are seen a reduction of operating rate by 2/3, and the producers with less than 10,000 tons of annual capacity have been in suspension. Furthermore, the shut-down producers are mostly high-carbon graphite makers. The supply of flake graphite to refractories is likely to be affected with the growing demand from electronic, aerospace and military projects.
A sampling survey was recently conducted by Refractories Window for the major purchasers of flake graphite located in Jiangsu and Zhejiang province, China.
The survey shows that 80% of the purchasers source flake graphite from Shandong, and most of them have purchasing plan at the end of October or in early November, in view of the upcoming price increase of flake graphite in China, but the quantity will be limited to the rate of consumption in 3 months, so as to avoid much capital pressure.
Purchasers tell Refractories Window that they typically make production plan according to customers’ order, refraining from inventory backlog.
According to the survey, the purchased specifications of flake graphite are mainly 94%, -100mesh, 95%, -100mesh, and 96%, -100mesh, and the purchasers, adopting 95%, +80mesh and 98%, +80mesh, reveal that they have received the notice for price increase, in a range of RMB300/t.
In China, there are four major producing bases of amorphous graphite, i.e. Hunan, Liaoning, Shanxi, and Inner Mongolia, among which Chenzhou of Hunan province takes a leading position. The current regional situation is stated as below, according to a survey conducted by Refractories Window.
In Hunan, some large manufacturers occupy over one half of the total crude ore reserves in China, and other producers without their own mines need to purchase crude ore from miners. There has been a decrease in overall supply in October, mainly because of the shrinking market demand.
In Liaoning, Producers are mostly exporters to Japan, Northeast Asia, India and other surrounding countries, where the purchasers often make a number of inquiries, resulting in price war among the suppliers and the smaller market potential.
In Shanxi and Inner Mongolia, a substantial decline occurs in both output and sales volumes. According to a producer in Shanxi, sales have been reduced by 80% from 1,000 tons per month last year to 200 tons per month this year, and mainly delivered to Hebei, Henan, Sichuan and Beijing in China. The grade of amorphous graphite is lower in Inner Mongolia than that in other regions, and the market share is rather smaller due to less consuming customers.
On account of simple techniques, the sales of amorphous graphite are mainly crude ore, with low value added and fierce competition, resulting in market in chaos. Relevant regulations and rules are required to be made in order to promote the overall industry development.
In October, the operating rate of bauxite producers in Xiaoyi, Shan province is at about 30%, with prices remaining unchanged both in domestic market and for export, according to a survey made by Refractories Window. Local producers nearly have no incentive for production, since the new transactions reached less than the 50% of previous years. In view of the downturn market situation, 90% of producers prefer to delivery after payment, and some manufacturers would rather shut down than delivery before payment.
The survey shows that almost all bauxite producers have a large number of credit notes in hand, about 20-25% of which are bad debts, which push the producers in the dilemma of capital chain rupture. Actually such a situation is also faced by other refractory materials and products suppliers in China. In addition, bauxite kilns will be shut down during APEC conference held in Beijing early November.
Brown Fused Alumina (BFA)
While domestic price of brown fused alumina (BFA) moves steady, export price of BFA turns downward, by US$10/t, due to the weak market demand. A Japanese buyer, who purchases more than 500 tons of fractional sized BFA each month, said that their purchasing price of BFA reduced by US$10/t two weeks before. Many overseas buyers reveal that they do not need new suppliers as they have long-term suppliers at satisfactory prices. The exporters state that the current BFA market is in chaos, the mainstream quotation is at US$700/t, but some suppliers offer below US$700/t.
Affected by the depressed refractories market, most BFA producers maintain production according to the orders.
In the meanwhile, affected by the shrinking markets of white fused alumina and sub-white fused alumina, the BFA manufacturers are discontinued or running at half capacity, and their profit margin is rather low.
In October, price of industrial alumina in Henan maintains upward trend, rising by RMB300/t compared with that in September. Price increase of alumina is affected by the following seasons:
Chinalco Henan branch office have suspended the production line with annual capacity of 1.6 million tons, affected by the leakage of piping in No. 5 red mud pond. The company only can remain the rest production line with annual capacity of 600,000 tons. In the meanwhile, a large refiner in Shanxi stated that the company were overhauling calcinator during Sep. 7-27, which resulted in supply of alumina declining 40,000 tons. The output of electrolytic aluminium in the first three quarters in China is expected to exceed 700,000 tons, pushing the demand for alumina.
Australian alumina jumped in September lifted by a strong desire to replenish low alumina inventories and higher aluminium values, propelling domestic alumina price rising. In view of the increase of alumina price, some producers are planning to resume idle capacity.
White Fused Alumina (WFA)
In October, prices of white fused alumina (WFA) stay at the higher level in Shandong, due to alumina rise in price.
Nearly all local WFA producers have increased their offers by RMB150-200/t, and export prices have increased as well to US$810-830/t, FOB Tianjin. The trading volumes, however, are rather low both in domestic market and from abroad.
Overcapacity is the key point to shrink the profit margin of WFA producers, since there are about 100 sets of furnaces to produce WFA just in Shangjie District, Zhengzhou, Henan.
On the other hand, some manufacturers of well block and porous plug in China reveal that they will raise their offers for products if price of the material WFA continue to rise in November.
Silicon Carbide (SiC)
With the production equipment upgrading, the production efficiency of silicon carbide (SiC) has been increased about 10% in Ningxia, especially for grade one SiC (97-98%). However, the demand from downstream enterprises is not optimistic, which has been lowered down by 20% for grade one SiC, with prices offered by some producers down by RMB100-150/t. It is said that almost all steel mills will cut down their production, which is likely to last another half a year.
Facing with severe market environment, most grade one SiC producers in Ningxia are under great pressure of inventory, with around 1,000 tons for each, and nearly 10% of producers shut down, according to a survey conducted by Refractories Window. In order to survive, some producers market their products as possible as they can, and only a few producers would like to expand the channels to find new demand of customers. According to some customers in Shandong, innovation is the only way for SiC producers to survive for long-term development. On the other hand, overseas buyers reveal that they usually purchase from their regular suppliers, and will not expand the purchasing channel owing to chaotic quotations in China market.
The current export price of SiC 88% is at about US$740-800/t, FOB Tianjin.
Fused Magnesia (FM)
Export prices of China magnesia remain steady this month, and exporters predict that prices will stay at the current level in recent days, according to long-term contract and less export quota left. As the year end approaches, the quota usage of magnesia exporters is stated as below.
There were 60 companies attending magnesia export quota tender in 2014. The scheduled volumes were 1.67 million tons, but the actual bidding quantity was 1.0508 million tons, reflecting a downturn of export market compared with 1.1 million tons in 2013. Among the 60 companies, 6 have stopped production. The agency fee of export quota would drop in October according to the practice of previous years, and exporters tried their best to use up export quota within this month. However, prices of both magnesia and export quota fee in October keep firm after an increase in September, and some exporters said they had run out of export quota.
Prices of China fused magnesia keep stable in October, with the market running smoothly.
The time-of-use price policy is implemented in Liaoning Province’s industrial production. Off peak time is from 10 pm to 7 am, when the average power tariff is at about RMB0.51/Kwh, and the prerequisites for the time-of-use policy are to reach rated power. Power tariff will be increased correspondingly if being under or above the rated power. The power tariff policy shows the government’s determination to reduce the production capacity.
Under all kinds of restriction conditions, fused magnesia producer have to make a production plan for the whole year and perform it well to control electricity cost. Taken together, fused magnesia output in Northeast China is likely to be gradually reduced, and hardly to rise on the basis of current level.
Dead Burned Magnesia (DBM)
There was no improvement in domestic market of DBM by the end of September, and producers did not change their offers due to the flat market demand; while the export market becomes active with more enquiries from overseas buyers. The total exports of DBM in the first eight months reached about 380,300 tons, increasing by 14.8% YoY. Exports to Indonesia in August rose sharply, to 6,550 tons, up by 4,560.5% YoY.
Most producers just maintain the long-term customers with steady purchase volumes, and some products accept the orders from new customers. They stated that they would not raise the prices until market demand begin to increase. The export prices of DBM offered by large and mid-producers also keep stable, in spite of the slight rise of the agency fee of export quota. The export market will become more active as many overseas buyers begin to stocking up in the fourth quarter of the year.
In October, being supported by the price rise of alumina, prices of fused magnesia alumina spinel in Henan are seen the rise for the first time in the year. The average price is reportedly increased by RMB200/t in Henan, where the purchasing price for alumina is at a higher level of over RMB3,000/t. Most producers alternately produce spinel and other products of silimiar series, keeping a low level of the inventory of spinel. According to a survey of Refractories Window, there are 80% of producers who lowered their estimated output for the year.
The capacity of sintered magnesia alumina spinel in China has declined greatly in recent two years. According to the sampling survey made by Refractories Window, more than 50% of the 20 manufacturers have suspended production, with only Yingkou Renwei, Henan Rongann, Zhengzhou Jiaxiang insist on production, while Henan Magnesia Alumina, Henan Ruishi and other manufacturers who produce high-end products arrange production according to the orders. Though alumina price rises sharply in recent two month, only few manufacturers produce alumina-based sintered magnesia alumina spinel, coupled with the weak market demand, so prices of alumina-based sintered magnesia alumina spinel maintain unchanged.