Mines in Gucheng to suspend for rectification till end-2018

SHANGHAI, Sep 14 (SMM) – The local government required all mines in Gucheng county of Hubei province to extend suspension for rectification till the end of the year. Mines suspended at the start of August when the provincial inspection team visited. 

Some larger companies are expected to integrate small mines in Gucheng by the end of the year, in order to meet the government’s requirement for standardised mining, SMM learned. 

Mines in Gucheng are mostly found in Nanhe, Cihe, and Miaotan. Producers of non-oxygen #553 silicon mostly purchase silica from Nanhe, where the material has a high phosphorus content. Silica with a lower content of aluminum, phosphorus, and titanium is common across Cihe and Miaotan, and this attracts many chemical-grade silicon producers. 

Production of chemical-grade silicon in Sichuan could be severely affected by the suspension as Gucheng is the largest supplier of raw materials for chemical-grade silicon plants in Sichuan, SMM learned. Sichuan producers remain hardpressed to find a substitute supplier, given special requirements on silica’s impurity and trace element content. 

perations across producers of lower-grade silicon were little affected as they tended to procure raw materials from other provinces such as Shaanxi, Hunan, Yunnan, and Guizhou.

SMM expects silica production across mines in Gucheng to fall nearly 50% from 2017, to some 1 million mt this year. Suspension for rectification and expiration of mining rights started to lower the output from late July.

Existing silica inventories at traders and mines may continue to support supplies for a month or two, but stocks of higher-grade silica are almost depleted. Shrinking inventories have yet to shutter silicon plants as plants typically stockpiled materials for two to three months of supplies. 

Short supplies bolstered the average price of silica some 21% from the usual level, to 280 yuan/mt. This is nearly double of prices at the start of last year. The payment method also changed from monthly settlement to cash on delivery. 

Ferrosilicon plants are another major consumer of silica, especially those in Gansu and Inner Mongolia. Producers in the two areas relied entirely on supplies from Gucheng, given the low content of titanium in silica. 

Many traders preferred to sell to ferrosilicon plants, instead of silicon plants, due to lower transportation costs and favourable payment terms. This will further weigh on procurement of silicon producers. 

Regulation works required by the local government include closing mines whose mining rights expired and eradicating illegal mining. Companies that violated mining schedules or had potential safety hazards were asked to rectify and reform. Those that fail checks by the authorities after rectifications will have their mining licences revoked, SMM learned. 

In addition, mining shall be prohibited across nature reserves in Nanhe, at Xieshan tourism resort and at Hanjiang wetland park. The government will raise entry barriers for companies seeking new mining rights, and will encourage large companies with a complete industrial chain and advanced technology to move into the area. It is hoped that this move will drive development of the industry.