Electricity fees, green tax raise silicon production costs in Yunnan

SHANGHAI, Jul 27 (SMM) – Higher electricity fees, unfulfilled water charges, new environmental taxes, as well as green facility investments grew production costs at silicon plants this year in Yunnan province.

Most local plants lowered operating rates in the second half of July, after they started production in the rainy season that began in June. While weak silicon prices improved little this month, inventory pressure and cash flow issues weighed on enthusiasm across producers.

Electricity fees in Yunnan increased 0.02-0.05 yuan/kWh on the year as electricity available for industry use fell from last year. Costs rose at least 260 yuan/mt from a year ago, based on power consumption of 13,000 kWh for producing one mt of silicon, SMM calculated. Some plants consumed 13,500 kWh per mt of silicon production.

Plants also pay 0.02 yuan/kWh of electricity consumption, to the local water conservancy project fund. SMM learned that payments this year had to be made on a monthly basis. This additional charge is expected to raise production costs by 260 yuan/mt. In the Dehong area of Yunnan, this fee has already been factored into electricity charges for local plants. 

By the end of July, silicon plants in Dehong have to pay any unfulfilled water bills between 2011-2017, by 0.2 yuan/m³ based on their water consumption. The fee is around 70,000 yuan/month for a 12,500 KVA submerged-arc furnace. This will bring silicon production costs up around 47 yuan/mt, SMM calculated. 

From the start of this year, plants also had to pay a new environmental protection tax, calculated according to their pollutant discharge this year. This is part of the Chinese government's effort to convert administrative fees into taxes. A silicon plant with two 12,500 KVA submerged-arc furnaces is likely to pay 100,000-130,000 yuan in environmental tax per month, instead of the previous annual sewage discharge of some 120,000 yuan. This is set to raise production costs by 67-78 yuan/mt. 

Expenditures of in-plant desulphurisation facilities also grew costs. The Yunnan environmental protection authorities ordered such facilities to be installed. Half the plants in the province should complete installation and commission the equipment before the end of 2018, and the remaining plants have to commission the equipment by the end of 2019.

In Dehong, it costs about 4 million yuan for a one-time investment in desulphurisation facilities for a submerged-arc furnace. The cost is 5 million yuan for two furnaces, SMM learned. Each local silicon plant owns up to three furnaces. 

For raw materials, while the prices of clean coal and petroleum coke inched down from last year, prices of graphite electrode remained high.

Graphite electrode is widely used across silicon plants in Yunnan. Its price surge accounted for skyrocketing prices of silicon last year. 

Separately, for the most commonly traded #553 non-oxygen silicon, prices stood at 11,350 yuan/mt in Kunming, Yunnan on Friday July 27. This was up 200 yuan/mt from two weeks ago, but over 1,500 yuan/mt lower from a high of 12,925 yuan/mt in late March, according to SMM assessment.