Silicon Carbide & More

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1 Silicon Carbide & More What s going on in silicon carbide, fused alumina & other minerals #36 August 2010 US Electrofused to expand BFA Micro By Paul Harris US Electrofused Minerals plans to expand its BFA microgrit capacity in 2011 in response to growing demand. The company makes air- and waterclassified micro grits with combined capacity of tpm, and it will expand its water-classifed line. Most water classified micro grits are semi-friable fused alumina for the coated abrasive industry. We are studying this at the moment and how much we will expand and the development will probably start in early 2011, managing director Luiz Curimbaba told SiC & More. The company produces a range of synthetic mineral products that it supplies to the abrasives and other industries including BFA, WFA, fused alumina spinels, fused calcium aluminate cements, WF mullite, fused zirconia mullite, alumina zirconia silicate, chrome alumina, semi-friable fused alumina for abrasives, and micro grits for coated abrasives. The Curimbaba group of companies is vertically integrated through the mineral supply chain from mines in Brazil to processing and final distribution in the US and elsewhere. In Brazil, Mineracao Curimbaba mines and produces bauxite-based products such as abrasives, proppants and calcined bauxite for different applications, refractory clays and so on. In the US, Elfusa is the fused products processing and production operation. Elfusa has enough capacity to supply its market and export materials. The Pittsburgh plant adds to our BFA capacity giving us market flexibility that allows us to better take advantage of the BFA market to remain competitive in the global market, he says. The company has weathered the global downturn and seen sales return to 2008 levels in 1H10 although its market outlook is not yet positive. We think it will take some time to come out of the recession. We think the boom in the first half of this year was mostly because companies had no or very little inventory, he says. Both the refractory and abrasives markets in Brazil have been busy in 2010 and demand has been very high, NEWS China Zhonging plants close Ningxia province government in China has indicated that all SiC furnace plants in the Zhongning area would close for environmental reasons. The furnace plants affected represent about 60,000 mtpy of production that amounts to nearly 30% of Ningxia s total SiC production, about 11% of China s total SiC productive capacity and is nearly 5% of world furnace capacity. The Zhongning area is heavily polluted and the local government has not reached government pollution emission reduction targets. Although no SiC tenders have been consummated since the September 1 announcement, contract negotiations have been unusually tense with traders told that prices have already increased, according to Chinese traders contacted by SiC & More. SiC Processing signs SiC recycling deal SiC Processing AG is to build three production lines to recycle and recover 45,000 tpy of SiC from slurry used to saw silicon ingots into wafers for Zhenjiang Rietech New Energy Science Technology Co Ltd and Yangzhou Rietech New Energy Science Technology Co Ltd Page 1

2 although this is starting to level off. Since July we have seen things start to settle especially in the refractory market. It is too soon to say why this is, but the government lowered taxes for steel imports and some of the bigger companies imported more. We think some of the good conditions in the first half of the year were because most companies had no or little inventory levels, he says. A Curimbaba group strength is that it has captive supply of its main raw material, bauxite, from mines in Pocos de Caldas, Minas Gerais state in Brazil, that shield it from the increasing Chinese prices that its competitors face. The Chinese price has changed but this does not really affect us as we have our own bauxite mines reserves, and so we can control our costs. People want to buy our bauxite but we have no interest in selling as we prefer to use it internally, he says. With long term energy contracts in place, the company has not had difficulties with power supply as other companies in Brazil have. under a 30M investment. The commissioning and production start of Line 1 is planned for 3Q11, and by 1Q12all three lines are planned to be operational. This contract is the first between the two companies that will see SiC Processing increase its capacities and production volumes in Zhenjiang in the future. SiC Processing AG is a market leader for slurry recycling from wafer sawing processes in photovoltaic (PV) and semiconductor industries. The company has also completed commissioning two SiC slurry recycling production lines at Baoding, China and started construction of lines 3 and 4 for Yingli Green Energy A success for the company has been its Sinter Ball and Sinter Lite products for the proppants that are produced by another of the Curimbaba group companies in Pocos de Caldas that has capacity to produce about 250,000 tpy. Our proppants capacity is sold out and we will be expanding. We sell proppants worldwide such as South America, Africa, the Middle East and Europe but we sell mostly into the US market, says Curimbaba. The business has grown due to an increase in oil and gas drilling around the world and the company expects the market to remain in good shape for at least another year or so. The company aims to keep expanding and diversifying its markets as market conditions allow and is may even consider increasing its range of products to include silicon carbide. We have plans to eventually get into SiC and we are looking at some projects, not necessarily in Brazil, possibly in South America, but it could be any place worldwide. We would like to get into PV and DPF markets but we have other work to do first, he says. Holding Co Ltd. Lines 3 and 4 will come on stream in 2Q11 at which time four production lines will be in operation with capacities of 15,000 tpy each for a total of 60,000 tpy. The investment for for Baoding lines 3 and 4 is about 20M. Yingli Green Energy is a leading vertically integrated PV manufacturer. Europe EU antidumping duties As prices for Chinese SiC continue to increase and now appear for many SiC products to exceed prices quoted in the EU, the next antidumping review should be interesting. Although at one time the elimination of 52% duties on Chinese SiC would have been devastating to SiC producers in the EU, it now appears as if the effects would be minimal. A discussion with EU producers and processors would provide interesting reading. ZAC at full capacity Ukranian SiC producer Zaporozhsky Abrasivny Combinat (ZAC) is producing at near full furnace capacity of about 24,000 mtpy. Besides metallurgical, refractory, and abrasive quality SiC, ZAC produces 600 mtpy of SiC powders. ZAC management reports that electricity is available and energy prices remain reasonable although they are increasing. Pet coke prices have also created difficulties as prices have increased by 3-5% per month. ZAC primarily serves the Ukranian refractory and abrasive industries and is exporting a substantial amount of SiC powders to the EU, the Middle East, Japan and South Korea. The company is also still a major player in brown fused aluminum oxide (BFA) with total productive capacity of about 50,000 mtpy. Although ZAC does not have expansion plans, it has Page 2

3 SiC pricing takes By Kormac Kennedy a breather er Since the start of 2010, SiC pricing has been on the rise. In fact, buyers of several specific SiC products have suffered 40% or more in price increases so far this year. During July and August, however, prices seemed to have experienced some stability. Globally, prices on virtually all SiC products either stayed the same or increased slightly during July and August. The most significant price increases came in Europe, while North and South America, and China, prices stayed the same, although further price rises are expected. This is the lull before another storm, a trader told SiC & More. The price lull was caused by softening steel demand in China and elsewhere, but this is believed to be only temporary as capacity utilization rates tend to drop during the third quarter. As a result, global demand for metallurgical, refractory and even abrasive quality SiC dropped during July and to a lesser degree in August. In addition, the supply chain more or less righted itself and refilled during the first six months of 2010 after emptying during the dismal business conditions of The lull before the storm observation is due to an expected shortage of SiC export licenses in China compared to anticipated global demand for SiC. The Chinese government dedicated approximately 215,000 mt for export during 2010 for all SiC raw materials and for all destinations, a consistent tonnage level since It is this generic policy that has led to an unbalanced price structure and fear amongst traders that there will be insufficient licenses to satisfy export demand for lower value SiC products. With the tremendous growth in demand for higher end-use SiC products, specifically in Japan, Taiwan and South Korea, metallurgical and refractory SiC products in particular bear the brunt of soaring export license costs. Export licenses fluctuate in value from US$50 to US$350/mt. Most export license suppliers prefer to use them for higher value products that sell for US$5,000/mt such as green SiC powder for the growing PV market rather than US$1,100/mt for metallurgical or refractory grain. When traders buy metallurgical or refractory grain for export, over 40% of the total cost is the export license compared to less than 10% for higher value-added products. In late 2009, although SiC grain sat in warehouses at Chinese ports, traders could not release it due to export license shortages, which resulted in SiC prices shooting up in January 2010 as traders, processors and end-users scrambled to fill the supply chain. This scenario is expected to repeat at year end. The difference this time is that prices are a strong market position for both SiC and BFA. Muller joins SiC Processing SiC Processing AG has appointed former Saint- Gobain executive Guido Mueller as vice president sales and marketing responsible for sales, marketing, application management and new business worldwide. Mueller, a material engineer, spent 17 years at Saint-Gobain, most recently as vice president and general manager of the silicon carbide business unit. Americas US SiC exports US SiC exports are on a record pace as June statistics are released. Through June, 9,796 tons left US ports with 72% destined for Norway and 20% to Germany. On an annualized basis, this equates to 19,592 tons. Since the emergence of China as the world s dominant SiC producer, the previous export high was 16,931 tons in 2009, which means 2010 could represent an increase of nearly 16%. Exports to Norway have experienced steady growth since the 5,474 tons exported in Shipments to Germany, however, reveal startling growth. In 2005 through tons were exported. This jumped to 2,547 tons in 2009 and the year-to-date total is 2,003 tons. Although there appeared to be no shipments in June, annualized tonnage could hit 4,000 tons. Mexico is the next largest Page 3

4 already up nearly 40% with a possible supply shortage on the horizon. Traders are looking to other countries to fill the gap, but producers are aware of global price dynamics and follow China. The obvious solution to this imminent supply problem is for China to authorize additional licenses. This was proposed in August as traders and producers appealed to the Ministry of Commerce for another 30,000 mt of SiC licenses, but this was in vain and was refused under government aims to curb the export of energy. The energy issue in China continues to haunt SiC. The government has made a concerted effort to close small SiC plants to consolidate furnace capacity and increase energy efficiency. The closing of plants with less than 6,000 kva has cut China s SiC furnace capacity from about 680,000 mtpy to an estimated 550,000 mtpy. The rest of the world has not filled the supply void and global recession has masked the fact that SiC supply will not meet demand World SiC microgrit capacity estímate (net tons) Company Country Product Capacity Alcoa Brazil 500 Various China Green (Misc) 1,500 Various China Black 4,000 CUMI India 6,000 Electro Abrasives USA 1,200 ESK-SIC Germany 10,000 Fujimi Japan 8,000 Micro Abrasivos Mexico 1,200 Nanko Japan 5,000 Navarro SA Spain 1,200 St Gobain Brazil 2,000 St Gobain India 1,000 St Gobain Norway 12,000 Pingdingshan China 6,000 Washington Mills Norway 6,500 Shimano Electric Japan 7,000 Showa Denko Japan 1,200 TGA Czech Rep 500 Volzhsky Russia 500 Washington Mills UK 300 Weifang Liuhe China 5,000 Zaporozhabrasive Ukraine 600 Other China China 43,500 Other Japan Japan 2,000 Total ,700 Source: SiC & More estimates, company information Chinese furnace plants with more efficient transformers are planning expansion but that tonnage will not be seen for many months. There have been other expansions such as Sublime in South Africa and Washington Mills in the US. Another is CUMI s expansion of the Volzhsky plant in Russia by up to 50,000 mtpy, but this is at least 18 months from turnkey stage. The July-August price slump is not indicative of what will occur in 4Q10. If business conditions remain constant, SiC prices will increase slowly and may stabilize again. However, if business conditions improve, SiC consumers will see rapidly increasing prices. The good news is that additional furnace capacity is coming, but will new capacity be online before global economies flourish again? Can you imagine the trouble we would be in if the US was selling 16 million vehicles instead of 11 or 12 million? a North American SiC processor asked SiC & More. export destination with 511 tons through June 2010, representing an annualized pace of 1,021 tons, which would exceed the 759 tons in 2009 by 35%. SiC & More expects the annualized export numbers to decrease in 2H10. Nevertheless, it is encouraging to see US exports nearly triple since 2005 especially since 2010 imports are expected to be down about 40% compared to SiC in Brazil With presidential elections taking place later this year, the rest of 2010 is expected to see both price and supply stability in Brazil, according to local producer SiCBras. Brazil is home to several SiC furnace facilities. SiCBras has one of the world s newest SiC plants and is believed to be one of the world s most efficient facilities, with production of about 12,000 tpy. Brazil also hosts one of the world s largest SiC furnace plants, St. Gobain s 90,000 tpy plant in Barbacena. Minerals giant Imerys also operates a 12,000 tpy Acheson furnace plant near Sao Paulo, the oldest of Brazil s producers. Brazil accounts for nearly 10% of world SiC capacity, a which is unlikely to change much in the near future. Gov Sanford welcomes Horsehead Corp Gov. Mark Sanford joined economic development officials and company executives to celebrate zinc recycler Horsehead Corp s ribbon-cutting ceremony of its new facility in Barnwell, South Carolina in August. Horsehead is the world s largest recycled zinc producer and has facilities in five other US states. Africa Sublime awaits #3 South African SiC producer Sublime SiC is still waiting to commission its #3 furnace despite strong business. The costs associated with final commissioning and the strength of the South African rand have seen the company delay commissioning the new production line. The company s #1 and #2 production lines are operating at full capacity. Page 4

5 BFA BFA update End users of BFA can expect to see continued increasing costs for product as changes in China policy work their way through the supply chain. BFA pricing entered 2010 with some stability thanks mainly to the elimination of China s15% export tax. However, in May, China s National Development and Reform Commission, National Energy Administration and State Electricity Regulatory Commission announced that BFA fusion plants would no longer receive preferential energy prices. As a result, many fusion operations stopped production. Most smelters do not believe the current market price is in line with the cost of fusion due to energy price increases, a trader told SiC & More. This situation has not changed and even with a price jump from US$590/nt delivered NOLA to US$ /nt, most fusion plants in China are thought to be producing at cost. The BFA market is in the curious position in which supply exceeds demand but upward price pressure remains. We have filled our FREIGHT RATES supply chain with BFA crude anticipating a price run-up similar to early 2008, however, our fear is that a possible supply glut in China will force prices down before we even receive our new parcels, a US processor told SiC & More. SiC & More believes this is unlikely due to the new energy conservation policies in China and the everincreasing energy cost. Although the energy conservation policy parameters seem vague, many fusion plants in Guizhou and Henan have been forced to curtail or stop production until they meet new standards, and over 20 companies in Zunyi have stopped production due to exceeding their energy allocation. The current business environment should mean stable BFA prices for a while as the supply pipeline has been filled and most processors in Europe, Asia, and North and South America have enough inventory to sustain themselves based on 1H10 business levels. The price tag shock will be in the end-use market where customers are still buying BFAO grain at prices Origin Lot size Rate/metric ton Brazil 10,000 mt $29 34 China (North) Any bulk cargo $32 37 China (South) Any bulk cargo $37 40 India 5,000 10,000 mt $42 48 Russia Small bulk 3,000 mt $70 90 Russia Large bulk 20,000 mt $42 50 based on 1H10 crude prices. This is about 15% lower than the price of crude that will arrive in the coming months. Traders and processors should experience price stability over the next three to six months while endusers will see prices for abrasive and refractory sizes increase 10-15% between now and 1H11. Steel A state of flux Worldwide raw steel production appears to be in a state of flux. Although 2010 production numbers are superior to 2009, the industry seems cautious. In particular, recent production numbers from China have created a stir across around the globe. China s raw steel production in July was about 51.7M mt, a drop of 7.8% from the highest production month (May) of Although a 7.8% drop during one of the slowest production periods of the year should not cause much alarm, it represents 4.4M mt of steel. To put that in perspective, Russia produced 5.6M mt in July and the US produced about 6.7M mt. In other words, the month over month production shortfall in China is about 66% of US and 78% of Russia s total monthly raw steel production. Alarm bells do ring when China suffers maladies in its metals or minerals businesses. Shan Shanghua, Secretary General of China Iron & Steel Association, told the Securities Times that domestic steel prices had dropped to a very low level whereas raw materials prices kept running high putting some steel mills in a pinch. Shanghua does not see much change in 2H10. For steel and raw materials, problems in China equate to problems everywhere. World raw steel capacity utilization dropped from 80.4% in June to about 75% in July. In the US, capacity utilization dropped into the mid 60s for several weeks of July and was 70.2%. in early September This was a huge improvement over 2009 when US raw steel production rebounded to 57.7% capacity utilization in early September but is still causing a stir amongst traders and processors. Over the past two weeks, I have seen end-use market FeSi prices range from 92 /lb contained to US$1.07/lb. It s obvious that traders and processors are uncertain if they should maintain the status quo or dump inventory, a processor told SiC & More. As Shanghua pointed out, global steel prices will fall while raw materials will continue to run high. Since late 2007 and early 2008 new pricing thresholds have been established for virtually all raw materials and both basement and ceiling prices are much higher than historical benchmarks. Gone are the days of 40 /lb FeSi, Chinese BFAO crude at US$320/nt or SiC refractory grain at 42 /lb. Page 5

6 Fused mineral pricing Western Europe SiC - Metric Tons 88-92% Metallurgical (EU Producers) % Metallurgical (Russia) % Refractory; Typical Sizes , % Refractory; Typical Sizes 1,050-1,150 97% Refractory; Typical Sizes 1,100-1, % Refractory: Typical Sizes 1,170-1,250 98% FEPA F12-F90 1,100-1,190 98% FEPA F100-F220 1,150-1,300 98% FEPA Black F600 3,000 98% FEPA Black F800 3,200 98% FEPA Black F1,000 3,700 98% FEPA Black F1,200 4,000 98% FEPA Green F8-F220 1,900-2,175 98% FEPA Green F600 4,400 98% FEPA Green F800 4,800 98% FEPA Green F1,000 5,100 Middle Europe SiC - Metric Tons 88-92% Metallurgical (Russia) % Metallurgical (Romania) % FEPA F12-F90 1,050-1,090 98% FEPA F100-F220 1,060-1,100 97% Refractory, Typical Splits (Czech) 1,000-1,050 98% Black 320 (Czech) 1,350 98% Black 500 & 600 (Czech) 1,900-1,975 97% Black 800, 1,000 & 1,200 (Czech) 2,200-2,400 USA Other SiC - Net Tons 97% Refractory, Hi Fe (China) $1,725-1,775 97% Refractory, Low Fe (China) $1,800-1,875 97% ANSI Grit (PNAM) (FOB SP) $1,520-1,620 97% ANSI Grit (PNAM) (FOB SP) $1,800-2,000 98% Black F500 & F600 $3,700-4,100 97% (Russia) $1,300-1,375 N/A 97% (Russia) $1,300-1,375 N/A 97% 180 & 220 (Russia) $1,450-1,500 N/A Prices ex-works, dry sieve per metric ton, except USA which are net tons. Chinese SiC 52.6% anti-dumping duty in EU. RoC = Run of Crusher. PNAM = Processed North America, SP = Shipping Point. WAO = White Aluminum Oxide. N/A = Not available. Price information has been obtained through contact with sources engaged in the trade of silicon carbide. Actual transaction prices will be determined by a host of factors, including, but not exclusive to, quantity, grades, contract terms and various other factors. Price information sources are deemed to be reliable but due to the possibility of error by Silicon Carbide & More, or others, Silicon Carbide & More does not guarantee the accuracy, adequacy or results obtained from the use of such information. All price information 2010 by Silicon Carbide & More Inc. Silicon Carbide & More Publisher: Kormac Kennedy Editor: Paul Harris Copyright information: Copyright 2010 by Silicon Carbide & More Inc. All rights reserved. Information contained in Silicon Carbide & More may not be redistributed, reproduced or put into an information retrieval system without prior written permission. Subscriptions: $350 per year for a single user; $450 per year for a multiple-user company subscription. For more information call or kormackennedy@aol.com.silicon Carbide & More, PO Box 503, Glen Ellyn, IL Information contained in Silicon Carbide & More has been obtained from sources believed to be reliable but due to the possibility of error by Silicon Carbide & More, or others, Silicon Carbide & More does not guarantee the accuracy, adequacy or results obtained from the use of such information. Silicon Carbide & More is published five-eight times per year. Page 6 Middle Europe Alox - Metric Tons 8-46 Grit Bonded Abrasive (Ukraine) Grit Bonded Abrasive (Ukraine) 600 WAO F12-F150 Bonded (Czech & Russia) 900 WAO F12-F150 Bonded (Hungary) 930 WAO Refractory, Typical split (Hungary & Russia) USA SiC & Al2O3 FOB New Orleans - Net Tons 90% Metallurgical SiC (China) $1,010-1,070 97% Crude SiC Refractory (Russia) $1,550-1,580 97% Crude SiC (China - Pet Coke) $1,790-1,850 97% Crude SiC (China - Anthracite) $1,690-1,750 Al2O3 Crude (China) bulk (1.5 silica) $ Al2O3 Crude (China) bulk (1.1 silica) $ Brown Al2O3 (PNAM) FOB SP - Net Tons ANSI ANSI 80 ANSI ANSI 120, 150, 180 ANSI 220 $ $970-1,070 $920-1,060 $980-1,100 $1,040-1,200 China SiC & Brown Al2O3: FON Regions Metric Tons 98% Black F $1,450-1,500 98% Black F36-90 $2, % Black JIS 1,200 Green $4,500-4,700 98% Black JIS 1,500 Gren $4,500-4,600 98% Black Brown AO 36 >Grit $ Miscellaneous products Ref Bauxite (China) (3.15) FOB China (m/t) $ % FeSi (USA) (Contained Si) FOB Ware /lb WFA FOB China port $ m/t DB Mag, FOB China port $ m/t Pig Iron, Steel Quality Pig Iron, Nodular $ g/t $ m/t NEW SiC Feedback & News line Our staff is dedicated to seeking out the information you need to stay on the leading edge of silicon carbide and related businesses. Please industry news, press releases or details of other events of note to us at the address below. If there are specific supply issues or topics that you would like to see discussed in future issues of Silicon Carbide & More, please your ideas to us at: kormackennedy@aol.com