SHANGHAI, Jul. 6 (SMM) – The latest SMM survey reveals that the average operating rate at major Chinese EMM producers is around 50% for the time being, up slightly from the previous week, which is due largely to higher operating rates at producers in Guangxi who have gained subsidy in electricity prices. Meanwhile, operating rates at producers in Chongqing's Xiushan are relatively high. In SMM's view, EMM supply is in noticeable surplus owing to sluggish demand as well as relatively high operating rates at major EMM producers.
With regard to production costs, inasmuch as EMM producers in Guizhou have seen a cut in electricity prices during the high-water period and as producers in Guangxi have been given subsidy in electricity prices, the average production cost at China's EMM producers has fallen by RMB 150-200/mt to around RMB 14,300/mt. 40% of EMM producers have an average production cost of RMB 14,000/mt or even lower than this.
Markets can generally consume EMM supply when the average operating rate at EMM producers is around 45%, so the market supply is now in surplus. Besides, the average production cost at these producers is around RMB 14,000/mt. As such, SMM holds the view that China's EMM prices will fall to about RMB 14,000/mt in the coming week and will prompt producers in Hunan with higher production costs to scale back production.