SHANGHAI. Oct. 22 (SMM) – It is expected that electricity prices will rise by RMB 0.05/kwh in Guizhou, which will increase production costs by RMB 350/mt for local EMM producers. EMM prices are already very close to production costs at EMM producers, so possible higher productions costs will make local EMM producers to lower operating rate. According to SM sources, operating rates at EMM producers in Guizhou have been higher than operating rates at Guangxi and Hunan due to lower electricity prices in Guizhou.
According to SMM sources, electricity prices in Guangxi province may be raised by RMB 0.0567/kwh during the low-water period on October, which will increase production costs by RMB 400/mt. Based on SMM survey result, producers that plan to resume production have no plan to halt production, so local operating rates are unlikely to fall due to expectation that EMM prices may rise. It is expected that only four EMM operators maintain production in Guangxi province.
Electricity price hike in Guizhou and Guangxi made electricity price at RMB 0.55/kwh in Hunan province more completive. However, as profit margin is thin at current prices, operating rates in Hunan province unlikely to grow.It is reported that operating rates at other major producing regions are stable.
SMM believes that EMM prices may rise slightly on higher production costs, lower operating rate and bidding from steel mills. It is expected that EMM prices will move in the RMB 12,200-12,500/mt in the following week.