Sichuan's "mines are oversupplied" during the flood season, and a "price war" has begun before the mines are put into operation

The army for the "decisive battle during Sichuan's flood season" has not yet settled down, but news has come from Sichuan mines that there is a "surplus" of machine positions.

April to October every year is the flood season in Sichuan. The hosting price of mining machines in hydropower areas can be as low as about 0.25 yuan per kilowatt-hour. Compared with the price of about 0.35 yuan per kilowatt-hour in Xinjiang and Inner Mongolia, Sichuan's hydropower has attracted many miners.

Some industry veterans speculate that during the flood season in Sichuan, 80% of mine owners moved from Xinjiang and Inner Mongolia to Sichuan, Guizhou, etc. Odaily Planet Daily learned that most mine owners began to take electricity to build factories in large numbers before the New Year.

The mine owners were building mines in full swing, but no one expected whether there would be enough miners behind the surge in mines.

Chai Hua, founder of Tiantian Mining, estimated that Sichuan Province has added 500,000 mining machines this year compared to the same period last year, but both miners and mining machines are much less than last year. Several mine owners told Odaily Planet Daily that now that April has arrived, their mining machines have not been sold yet.

The supply-demand relationship is already out of balance. Another bad news is that the current open price of Sichuan Fengshui machine positions is 0.26 yuan/kWh, but in actual transactions, some mine owners have already reduced the price to 0.22 yuan/kWh in order to sell the positions as quickly as possible, which seems to be a sign of a "price war".

As early as a month ago, some miners were reflecting on whether hydropower is really so "sexy" and worth the crazy pursuit of mine owners. Now it seems that the rational examination and evaluation of the flood season has been neglected, and the reality for mine owners has suddenly changed and is very "skinny".

Mine surplus

"The price of Sichuan Fengshui Power Trusteeship is already the open price, 2.6 cents, and there is still room for negotiation on this basis." Recently, mine owner Liu Xiang revealed to Odaily Planet Daily. In several price negotiations he has been involved in, the electricity price can even be negotiated to 2.3 cents or 2.2 cents, but even so, the machine position may still not be sold.

The situation Liu Xiang described is troubling most mine owners who moved here during Sichuan's flood season.

At the end of March, a mining resource matchmaking meeting held in Chengdu, which was supposed to be a gathering of miners, mining machine dealers and mine owners, almost became the mine owners' home court.

"The scene is full of mine owners." Mine owner He Xi smiled bitterly. At the meeting, he and the mine owners could only look at each other helplessly.

Chai Hua, founder of Tiantian Mining, told Odaily Planet Daily that Sichuan Province is expected to add 500,000 new mining positions this year compared to the same period last year, but the number of both miners and mining machines is much less than last year.

"On the one hand, the bear market has affected the entry of new miners, and old miners have also gradually withdrawn; on the other hand, some old mining machines such as Whatsminer M3 Avalon 741 and Ant T9 have been shipped to overseas regions such as Iran where electricity costs are lower. The mining machines currently circulating on the market are not enough to support so many positions." she said.

Chai Hua revealed that the reason why so many people flocked to Sichuan was also related to the situation last year.

"Last year, the electricity price for managed hosting slots during the flood season was around 0.35 yuan, and all the slots were sold out. This led many mine owners to gamble and build new mines, most of which had nearly 10,000 slots," said Chai Hua.

"We have a total of 50,000 machine spaces, and now we have more than 20,000 available for rent," said a mine owner at a mining matchmaking meeting.

"The Sichuan mine is ready for the flood season, and there are tens of thousands of slots left waiting for you to sign!" Recently, Wang Jun has appeared in the circle of friends every day to advertise his mine, but there are few responses.

In the miners’ group, each mining farm is also “calling orders”.

Wu Gang, CEO of Bixin, lamented: “All of them are mining farm positions, and there are no mining machine advertisements.”

Wang Jun owns a hydroelectric mining farm with 100,000 mining slots in Sichuan, which will be powered up for mining by mid-to-late April at the latest. He has only sold half of the mining slots (the buyer paid half a month's electricity bill as a deposit), and he needs to sell the other half as soon as possible within half a month.

Cao Shengyuan was not as lucky as Wang Jun. The mine had been prepared long ago, and with the flood season coming in another month, he had not sold a single machine slot.

Despite the general oversupply of mines, Odaily Planet Daily learned that many mines are currently under construction in Liangshan, Wenchuan, Leshan, Xichang and other places, hoping to be completed before the flood season at the end of April.

Leverage Huaqiang North distributors

Since 2014, Cao Shengyuan has been mining with his friends (the mining machines are hosted in other people’s mining farms), and he has gradually gone all in.

At the end of last year, Cao Shengyuan was introduced to low-priced hydropower in Sichuan by a friend. After a month of investigation, he finally signed a contract for 20,000 kilowatts of electricity (capable of arranging 15,000 machine positions). After obtaining electricity, Cao Shengyuan's mine began construction and is expected to be completed and powered by the end of April this year.

But what Cao Shengyuan is more concerned about than building a mine is finding "tenants" for these machine positions.

In the past month, Cao Shengyuan has asked friends in the industry to help introduce miners who need to be managed. But Cao Shengyuan, who is recruiting investors on a large scale for the first time, seems to have encountered difficulties.

Cao Shengyuan told Odaily Planet Daily that there are miners who have hosting needs, but miners with more than 2,000 mining machines are "rare to find."

In Cao Shengyuan's vision, "tenants" with a large number of mining machines are easier to manage. "We only need to sign 5 to 6 orders to rent out 12,000 machines, and the remaining machines will be rented to small retail investors with hundreds of machines. Even if there are still a few that are not fully rented, it won't matter much."

But the problem is that big miners are a relatively scarce resource.

Why is this? Cao Shengyuan attributes the reasons to low industry transparency and information asymmetry.

Information is a resource, especially in the unregulated mining industry. Cao Shengyuan pointed to the machine position recruitment advertisements in various miners' groups and told Odaily Planet Daily, "Many mining farms that advertise in the group have problems, and they may not be able to sell (electricity/machine positions). The good electricity has been snatched up long ago, so there is no need to promote it."

Although this speculation is somewhat one-sided, it has become the existing understanding of people in the industry, and it also reflects that mining is an "acquaintance" business.

Cao Shengyuan said that he is also planning that if the mine is not fully recruited by the time it is completed next month, he will have to recruit special salesmen to be responsible for machine sales. Most of these people are mining machine dealers in Huaqiangbei, and they have the resources of miners.

At the moment, Wang Jun and Cao Shengyuan are both extremely anxious. Generally speaking, after taking over the mine, it takes another 15 days to transport the mining machine to Sichuan and put it on the shelf. Therefore, miners who want to use Fengshui electricity for mining have to sign the mining machine position in the next few days. This means that there is not much time left for the transaction between the mine owner and the miners.

The price war has begun

The first shot in the price war between Fengshui and Electricity was fired by BitDeer.

On March 30, at the "Flood Season Matchmaking Conference" hosted by Biyin Mining Pool, BitDeer founder Lu Haiyi announced the launch of a flood season package, in which the flood season electricity fee is as low as 0.22 yuan.

There were cries of pain at the scene.

"How can we survive? Isn't this going to provoke a 'price war'?" Liu Xiang sighed. For miners, buying cloud computing power does not require purchasing machines, operation and maintenance, transportation costs, or even losses. The electricity price is even cheaper than the current price of 0.26 yuan during the flood season.

The profit margin of mine owners mainly lies in the price difference of electricity charges, which covers the hidden costs other than electricity charges such as mine construction, operation and maintenance.

"Now the profit margin has been squeezed out, and some mine owners are even selling at a loss just to make back their investment," Liu Xiang told Odaily Planet Daily.

In this context, Chai Hua judged that "the mining industry is about to undergo a major reshuffle during this year's flood season."

In addition, she believes that the flood season will be from April to October, and after the flood season ends, the fate of many mining machines is uncertain.

"This may be the last year for Ant S9, which accounts for half of the mining machines sold," said Chai Hua.