Negative Profits of Calcium Carbide Producers
In October, calcium carbide prices hovered at lows. Producers in Wuhai and Ningxia cut the EXW price by RMB 150/mt. In addition, semi-coke prices remained relatively high yet the price inched down. Up to October 31, the average profit of calcium carbide producers was RMB -346/mt, down 41.9% M-O-M and 243% Y-O-Y.
The specific reasons for the loss of calcium carbide enterprises are analyzed as follows:
First, calcium carbide prices hovered at lows. In October, the calcium carbide industrial operating rate was above 75% most of the time. In addition, the newly added capacity was released gradually, propping up the supply. Moreover, as PVC units at Shaanxi Beiyuan Chemical were shut down for maintenance, downstream demand was unstable. Calcium carbide producers cut offers to promote sales amid sales pressure. Thus, in October, the mainstream EXW price in Wuhai and Ningxia dropped to an annual low level of RMB 2,700/mt. After that, though the price rose by RMB 50/mt, the overall price hovered at lows.
Second, the semi-coke price stayed high yet it inched down. The semi-coke producers cut operating rates, dragging down the supply. Entering winter, the demand for coal was strong, so a drop rate in the semi-coke price. Calcium carbide producers faced cost pressure. Up to October 31, the mainstream EXW price of semi-coke price in Shaanxi hovered at RMB 1,280-1,310/mt, down 7.36% M-O-M, up around 6% compared with the annual average price. The average cost at calcium carbide producers hovered at RMB 3,000/mt, with limited differences.
Whether the loss of calcium carbide enterprises in November and December can ease is mainly affected by calcium carbide prices and feedstock prices.
First, calcium carbide supply may be ample with newly added units being put into operation, though some producers may cut operating rates and produce unstably. Several PVC units in Hebei are planned to take overhauls, so the demand may be unsteady. SCI reckons that the calcium carbide prices in November will possibly remain low. Entering December, no PVC unit maintenance plan has been heard, while calcium carbide production and supply may be unstable. Thus, calcium carbide fundamentals are likely to improve. The mainstream price of calcium carbide may see a slight M-O-M increase in December.
Second, the change in the semi-coke price should be noticed. Coal prices moved down, dragging down the semi-coke price. However, the demand for coal may be fairish affected by cold weather, supporting the semi-coke price. Thus, the semi-coke price can hardly drop notably. Calcium carbide producers are expected to still face cost pressure.
Thus, profits from calcium carbide producers will possibly fail to turn from negative to positive in November and December.
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