Shenwan Hongyuan Group: Transforming resource advantages into industrial advantages, highlighting the integration of coal, electricity, and silicon industries in Xinjiang.

Shenwan Hongyuan Group released a research report stating that the power cost of industrial silicon is high, and the industry structure is showing a situation of one dominant player and many strong players. Xinjiang is the largest production area for industrial silicon in China, accounting for close to 40% of the capacity and close to 50% of the output, ranking first in the country. Xinjiang's integrated coal-electricity-silicon industry features prominently, with abundant coal resources and relatively low electricity costs creating a significant cost advantage for industrial silicon production. The industry's production is stable throughout the year, with strong resilience to cyclical fluctuations. The report recommends focusing on the dual-leading companies in the industrial silicon and organosilicon sectors, such as Hoshine Silicon Industry (603260.SH). Shenwan Hongyuan Group's main points are as follows: - The power cost of industrial silicon is high, and the industry structure is showing a situation of one dominant player and many strong players. 1) Industrial silicon, also known as metallic silicon, has semiconductor properties and abundant resources in the earth's crust. Its main costs include raw material costs (silica, carbon reductant, electrodes) and power costs. The electricity consumption for producing 1 ton of industrial silicon is between 12000-12500kWh/ton, accounting for approximately 30%-35% of the total cost. It is a typical high-energy-consuming product, with high power costs, therefore regions with electricity advantages have a significant cost advantage. 2) The industry structure has low concentration, with private enterprises as the main players, showing a situation of one dominant player and many strong players. Hoshine Silicon Industry currently has a total production capacity of 1.22 million tons of industrial silicon, accounting for 17%, making it the largest industrial silicon enterprise in China in terms of capacity. 3) The downstream demand for industrial silicon mainly includes polysilicon (49%), organosilicon (31%), and aluminum alloy (16%). In recent years, the demand for polysilicon has grown rapidly, with a compound annual growth rate of 50% from 2021 to 2024. Xinjiang's industrial silicon accounts for nearly half of the production, with significant cost advantages Xinjiang is the largest production area for industrial silicon in China, with a capacity share of close to 40% and a production share of close to 50%, ranking first in the country. The distribution of industrial silicon production capacity in Xinjiang is concentrated mainly in Changji/Shihezi. Xinjiang's abundant coal resources, low electricity costs, and obvious electricity price advantages result in lower industrial silicon production costs than the national average. In 2024, Xinjiang's industrial silicon start-up rate (above 80%) is significantly higher than the national average (around 70%) and more stable than production in Sichuan and Yunnan. Prominence of the integrated coal-electricity-silicon industry chain Xinjiang has abundant coal resources with low electricity generation costs, estimated reserves of 2.19 trillion tons, accounting for about 40% of the national total, and suitable for large-scale open-pit mining, resulting in low costs. Large silicon enterprises have their own power supply, leading to rapid development in the silicon-based industry. Industrial silicon capacity accounts for 40% of the national total, and polysilicon capacity accounts for 26%. Large silicon enterprises also extend downstream to the photovoltaic industry. Risk alert: Industry supply exceeds expectations, and downstream demand falls short of expectations.