Price Linkage Mechanism between Silicon Metal and Power Cancelled in Yunnan's Dehong

SHANGHAI, Apr. 21 (SMM) – Power price at silicon metal plants in Dehong, Yunnan Province will be set based on market price from the beginning of high water period from June to November, and the original price linkage mechanism between silicon metal and power will be cancelled, SMM learns from market insiders. 

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SMM survey of market insiders finds different opinions over the policy adjustment. 

Head of the Silicon Association in Dehong said some local silicon metal producers may be unable to run after the adjustment, as growing costs of raw materials and a 0.02 yuan/kwh rise in power costs for water conservancy construction funds collected by Yunnan government across the province since early 2017. 

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One large trader, however, takes a different view, believing the adjustment may not be a bad thing. The trader said final power price may be equal to the average power price seen in the high water period of 2016, and so the number of local silicon metal producers will not change dramatically. 

One silicon metal producer in Dehong said that silicon metal prices were sluggish, and its company will consider production plan after the final price is set, and will not start operations if no profits. 

At present, there are two transmission voltage grades in Dehong, namely 35kV and 110kV, and wheeling fees are different. According to power market price in 2016, the wheeling fees for 35kV transmission lines were 0.06 yuan/kwh higher than those for 110kV lines. The head of the Silicon Association in Dehong said the number of local silicon metal producers using 35kV and 110kV transmission lines account for about 50 percent each, and the final power price will be set before the end of May when local silicon metal producers usually prepare for production with the arrival of high water period. 

Different power price will differentiate competitiveness among producers of the same region, and power advantages in the high water period at silicon metal producers in Dehong will weaken compared with producers in other parts of Yunnan and even producers in other regions of China,. On the other hand, silicon metal producer, power plant and local government are estimated to reach a compromise which will benefit the three parties, to avoid power wastes during the high water period and production halt for high power prices. 

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