The ex-factory price of calcium carbide has surged to 3,500 yuan per ton, with supply struggling to meet demand. "Newly released products were quickly taken by customers waiting in line," said Manager Zhu of Hubei Xianning Hengyu Material Trading Co., Ltd., during an interview with reporters. Since the restoration of power and transportation at the end of February, calcium carbide producers have maintained continuous operations. Strong downstream demand has left many companies without inventory, creating a rare seller’s market that has brought a sense of relief to the industry.
Meanwhile, Gao Baoqing, General Manager of Shaanxi Fugu Xinlong Chemical Co., Ltd., noted that since March, the return of normal electricity and transport in southern regions has helped rapidly consume northern inventory. Prices have steadily climbed, with ex-factory prices in Yulin Prefecture rising from 2,400 yuan/ton in mid-February to 2,800 yuan/ton. "According to current market trends, the ex-factory price could surpass 3,000 yuan/ton within a few days, increasing gross profit to 500–600 yuan/ton," he said optimistically.
This prediction has already come true at Inner Mongolia Baiyan Lake Chemical Co., Ltd. Deputy General Manager Yuan Xiu told reporters that the company’s ex-factory price for calcium carbide has risen from 2,800 yuan/ton in early March to 3,100 yuan/ton, with sales remaining smooth. Based on local grid electricity rates of 0.34 yuan/kWh and a power consumption of 3,400 kWh per ton, production costs are approximately 2,100 yuan/ton. Adding labor, safety, environmental protection, equipment operation, transportation, and management and financial costs, the pre-tax cost per ton is about 2,500 yuan, resulting in a gross profit of around 600 yuan/ton. After deducting 17% VAT and corporate income tax, net profit reaches 200–300 yuan/ton.
"The good year for calcium carbide companies this year is due to national macro-control policies and increased downstream demand," said Yuan Xiu sincerely. On one hand, the government has implemented differential electricity pricing and strict access conditions since 2004, aiming to eliminate outdated production capacity and curb overcapacity. Over the years, policies such as reducing total calcium carbide output have curbed uncontrolled expansion. By 2007, the National Development and Reform Commission listed two batches of "allowed" calcium carbide companies, eliminating a total of 700,000 tons of outdated capacity. In recent years, regional governments have continued to reduce production, with Inner Mongolia cutting output from 5.6 million to 5 million tons, and Shanxi planning to phase out 58% of its total capacity by 2010. Major producing areas like Shaanxi and Ningxia have also eliminated outdated production, raising industry entry standards and controlling overall supply.
On the other hand, the downstream polyvinyl chloride (PVC) industry has grown rapidly, maintaining a demand for calcium carbide exceeding 20%. These combined factors have led to a basic balance between supply and demand, allowing companies to enjoy a profitable period.
However, Yuan Xiu warned against excessive optimism. Rising international oil prices may increase the cost of calcium carbide. Meanwhile, the PVC industry appears to be following the same path as the calcium carbide sector, with the consequences of overexpansion likely to emerge soon. If the PVC industry begins to compete recklessly, it could significantly reduce profit margins, weaken cost control, and lower demand. Additionally, as coal prices continue to rise, there is growing pressure to increase electricity prices. Even a small increase in electricity costs would have a major negative impact on calcium carbide companies, which rely on electricity for over 70% of their production costs.
To ensure the sustainability of the current favorable situation in the calcium carbide industry, Yuan Xiu hopes that local governments will continue to shut down outdated production capacity and strictly enforce access conditions. It is especially important to prevent the resurgence of "restricted" or "out-of-class" companies. Otherwise, the current success in the calcium carbide industry may not last long.
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