Fan Houli: Silicon carbide export market may result in chaotic and fierce competition after the cancelation of export quotas

Asian Metal: Good afternoon, Mr. Fan and thank you for accepting this interview. Would you like to talk about current silicon carbide market?

Fan: Actually, seen from a macro perspective, economic growth is slow both at home and abroad, and I don’t expect better result for the H2. As to silicon carbide industry, the demand from downstream customers remains sluggish this year and the operation rate is low among silicon carbide producers.

Asian Metal: What do you think the main problem or challenges participants face?

Fan: No matter producers or traders, silicon carbide market participants all face aggregate weak demand and low profit margins over time. For producers, they worry about the slow sales and high inventories in view of the stagnant demand, and some of them have to suspend production for a while to ease the financial pressure. The operation rate is only 50%min for silicon carbide smelters in Ningxia. For traders, export volume recovered in some degree compared with that of last month, while the concluded price at very low level indicate over-supply of the product in China and fierce and chaotic price competition following the cancellation of export quotas.

Asian Metal: Since the cancellation of the export quotas system for silicon carbide on January 1 this year, what new market trend and development have come into play? Besides, there are a lot of new exporters in silicon carbide trade and, given the data released by China Customs, what do you think about this phenomenon?

Fan: We exporters have discussed this issue with Chamber of Commerce before. Export market may result in some disorderly competition after the cancelation of export quotas, such as smuggling, which is more serious in the ferrosilicon industry. There are no tariffs on silicon carbide exporting so it doesn’t need to take in consideration for silicon carbide exporting. However, there might appear some evasion on VAT issue. Silicon carbide market now faces a similar situation with another product, and it is coke, which also saw increased volume but lower price with the cancelation of export quotas.

Asian Metal: What do you think about the future price of silicon carbide?

Fan: The output of silicon carbide in Chinese domestic market would be limited with the operation rate of 50%, while the demand for grade-two silicon carbide from overseas is considerable. Combined with the appreciation of RMB and currency inflation, the price of silicon carbide might go up in the Q3.

Asian Metal: Facing a large number of competitors flushing into silicon carbide export market, what leverage does your company have as an established and veteran trader in China inland as against those located in coastal province?

Fan: The price is the dominant factor in the trade activities. As a Ningxia-based trader, we are familiar with the resources, producer, and market channels. Besides, we have long-term relations of cooperation with local enterprises. In addition, we also have a good reputation as an old trading company.

Asian Metal: Finally, do you have any suggestion for market participants or government?

Fan: As I mentioned just now, I suggest government set up supervision mechanism on the evasion of VAT. For example, Customs and taxation authority set a connected network to guarantee the VAT is duly paid for every deal of silicon carbide trading. In this way, evasion phenomenon can be eliminated to establish healthy competitive environment.

Asian Metal: Thank you again for accepting the interview and we wish you success.

Fan: Thanks! We appreciate supports from Asian Metal.