Executive Interviews

Asian Metal: Hello Mr. Wang, thanks for taking the interview by Asian Metal. Please introduce your business briefly.

Mr. Wang: Thank you! Yinguang integrates business of mining, magnesium ingot production, and deep processing of magnesium alloy. The company has 11 branches, covering an area of more than 2,000 acres and owning over 3,000 employees. With an annual production capacity of 35,000t of magnesium ingot, 20,000t of magnesium alloy and 20,000t of deep processing products, Yinguang’s total assets reached around 1.2 billion yuan. In the recent years, in accordance with the development route of "innovative creation, fine management and brand building" and on basis of Yinguang Science and Technology Industrial Park, the company has been committed to R & D and production of magnesium alloy deep processing products targeting at expanded application in high-speed rail, automobile, electronic information, military and aerospace in order to realize the transformation and leap-forward development of Yinguang Group. At present, the seven deep-processing production lines have all realized industrialized production (including the entire industrial chain of die-casting, extrusion, forging, rolling, casting, etc.), forming a magnesium deep-processing system with full categories and complete technologies and a large deep processing company with diverse categories in domestic magnesium industry. As a leading role in the transformation and upgrading of the city, the province and even the domestic magnesium industry, the company has also built a thorough quality management system which has won certifications of various national standards, national military standards, confidentiality standards and so on.

Asian Metal: After the Spring Festival holiday of 2022, the exploration for dolomites in Wutai of Shanxi became limited and the quality was uneven, and the prices also doubled. Do you plan to sell your dolomite in the market? Will dolomite become a key factor to affect the production of magnesium plants?

Mr. Wang: Yinguang has its own dolomite mine, which is located in Wenxi County. The ore contains about 24% magnesium and is of good quality. Due to the large investment in increasing the mining volume, the current mining volume is limited but is enough for self-consumption, so we don’t sell. During the full-load operation of the rotary kiln, the calcined dolomite has been mainly sold to local magnesium plants and surrounding companies secondly with an average monthly volume of 3,000t and the price of RMB1,500/t (USD223/t). On the one hand, it can alleviate the dilemma of insufficient supply of calcined dolomite in the surrounding magnesium plants; on the other hand, it can effectively utilize the resource advantages of our factory. Regarding the importance of mineral resources, this is the source of production of magnesium enterprises and a key constraint on production. With the stricter control of mineral resources by the state, both mineral supply chain and mineral quality will become key tests for magnesium plants. At the same time, after the Spring Festival in 2022, it can be clearly seen that the prices of dolomite has doubled from RMB110/t (USD16/t) before Spring Festival of 2022 to the current RMB230/t (USD34/t). When the magnesium market trapped into a quiet and weak state, they are also the challenge on cost advantage for enterprises.

Asian Metal: After experiencing a sharp increase of magnesium products in 2021 and a downward trend in the first half of 2022, how could magnesium companies seize the opportunity and confront challenges?

Mr. Wang: In 2021, driven by the recovery of demand in the domestic and foreign markets and continuous rising prices of raw materials, the prices of magnesium ingot moved up sharply. It has also attracted more attentions to this market. As a producer, we have to ensure sufficient inventory of raw materials, including dolomite, ferrosilicon and coal. Meanwhile, we could strive for ensuring full-load production during the sharp price increase period to gain more profits. Meanwhile, we have to make sure to meet the demand from downstream users and to maintain the stability of market. Generally speaking, the regular ratio of our company's raw materials and processing products is 6:4. We adjusted the proportion to 6.5:3.5 for raw material and processing products due to price surge for raw material. It is worth mentioning that we grasped the market trend well when prices moved up sharply by converting part of calcium production into magnesium production in November 2021, which increased by 500tpm since then, bringing new profit growth point to us. Entering 2022, under the weakening demand for magnesium ingot and excess supply, we adjusted the ratio of materials and processing products to 6:4 again. At the same time, we transferred the additional volume generated by calium-to-magnesium transformation back to the previous status since April of 2022. Meanwhile, we follow the market situations and keep ow inventories during the period. Even though some peers showed cautious attitudes towards market trend and had strong confidence in the policy of semi coke upgrading, we just prefer to lock orders and ensure smooth delivery of goods to maintain requirements of downstream users and new growth points steadily.

Asian Metal: How do you think of the price trend of magnesium products in Q3 of 2022? How should producers respond?

Mr. Wang: Assessing market price trends usually requires consideration of cost, supply and demand. The current prices of coal are around RMB1,600/t (USD238/t) delivered, RMB9,100-9,200/t (USD1,358-1,373/t) delivered D/A for ferrosilicon and RMB230/t (USD34/t) for dolomite. The cost of the above main raw materials has basically doubled compared with that before the first half of 2021, and there is a shortage of pre-furnace workers. In addition, the wages of workers continue to increase. The production cost for magnesium ingot in Shanxi is RMB25,000/t (USD3,731/t) EXW D/P, and some plants’ costs are much higher. Judging from the current prices of magnesium ingot which has already reached a production cost level, there is limit room for the price to edge down even though the demand of steel mills and aluminum plants would stay weak, meanwhile, it is also a conventional off-season in the foreign market in Q3. Considering the maintenance of the northern magnesium plants in hot summer, the mainstream prices for magnesium ingot would hover at around RMB25,000-25,500/t (USD3,731-3,805/t) in July and August. As the demand would pick up slightly from late August and September, the prices for the metal are expected to hover at RMB25,000-26,000/t (USD3,731-3,768/t).

Asian Metal: Please give a detailed introduction of the production status and planning of your magnesium die-casting and extrusion products.

Mr. Wang: Judging from the current situation of downstream production, we have set up a die-casting production line to produce related products including wheels, power tools and 3C products. Although the current magnesium-aluminum price gap has narrowed, it will take a certain period of time to boost demand. Our current output of magnesium die-casting products remains stable at around 200t. At the same time, the cast anode, which is mainly used in engineering pipelines, is also our main product. The average monthly output of related products is 200t, and the overall market demand is stable. Furthermore, our factory has extruded products, including extruded anodes, sheets, welding wires, profiles, and architectural templates. The average monthly output of these products is about 180t, and the market demand is also stable on the whole. Regarding the planning, although the current magnesium-aluminum price gap has narrowed, magnesium products can gain some market share by virtue of its lightweight and other related characteristics. However, considering that the price stability of magnesium ingot is unstable and downstream advancement will take a certain period of time, we mainly focus on stabilizing the current production line and maintaining regular customers. We will observe the recovery of downstream demand to make investment decision.

Asian Metal: How do you think about the price trend of magnesium deep processing products in Q3? How about the demand of magnesium anodes?

Mr. Wang: Generally speaking, the prices of magnesium deep processing products fluctuates according to magnesium ingot prices, and its trend is consistent with the raw materials. On this basis, the processing fees of downstream magnesium alloys, magnesium die castings, extruded products and cast anodes are stable. Although customers ask for lower processing fees, the current high solvent costs determines limited downside space for processing fees. The prices of deep processing products would rebound in late August or early September driven by slight recovery of end market demand. The anode market demand is dominated by downstream water heater and pipeline anode industries. The domestic infrastructure construction and economic boost will bring certain opportunities to the anode market in coming Q4 of 2022.

Asian Metal: As a pioneer of deep processing in the magnesium industry, what are the biggest technical challenges and bottlenecks in magnesium extrusions and die-casting products?

Mr. Wang: From the perspective of technical challenges, surface treatment and product design are the biggest challenges encountered in magnesium downstream products. Let me explain in detail, the surface treatment is to improve the anti-corrosion ability of the product. If the related products are broken during the usage, it will have a poor impact to the user. However, the investment in this area is huge, and the processing cost of high-end magnesium products is dozens of times higher than that of aluminum products. Regarding design, Yinguang currently has national-level technology center, innovation center, and engineering center. Although it is actively promoting and concentrating on research in design, it is also necessary to test with customers to achieve the goal of promoting product development due to the current high cost. The key bottleneck of downstream product promotion is still the prices of materials. Many of our downstream products are signed for annual orders. If the prices of raw materials fluctuate frequently or exceed the acceptable range of suppliers or downstream users, the promotion and application of products will also be hindered during this period.

Asian Metal: Referring to magnesium products, we can always think of the advantages of light weight, energy saving and emission reduction, but the process of replacing from aluminum to magnesium is also difficult. How could magnesium companies continue to expand the application field of China's lightweight magnesium technology? How could we change China's magnesium resource advantages into economic advantages?

Mr. Wang: Lightweight is the greatest superior performance of magnesium products. How to use this performance to increase market share is the direction for magnesium insiders to strive for. First of all, a reasonable price range is necessary. If the price of magnesium is only 30% higher than that of aluminum products, the downstream consumers would accept and consider replacement. Secondly, the improvement of surface treatment and design is also the key for deep processing enterprises to continuously break through. Additionally, the easy oxidation and deformation of magnesium products are also the key points that we need to break through. Achieving a comprehensive improvement in performance could make better use of our own advantages. At last, if the country gives a clear carbon emission target, magnesium products will also achieve a larger-scale breakthrough in the market share by virtue of light weight.

Asian Metal: In your opinion, will new energy vehicles and building templates bring new opportunities for the application of magnesium metal?

Mr. Wang: New energy vehicle is the development trend of the automobile industry. By 2025, the production of new energy vehicles will increase significantly, which is also an opportunity for the magnesium metal market. At present, the industry is promoting large-scale die-casting machines, and related production enterprises are in full production. The production of related components such as rear axles, battery packs and steering wheels of new energy vehicles will become new growth points for the application of magnesium industry. In addition, the architectural template industry is actually relatively mature, but the demand in the real estate market has been sluggish in the past two years, and the amount of use has decreased. However, in terms of performance, magnesium products have outstanding advantages of light weight, easy demolding and cost reduction. After the market enters into a stable stage, it is expected that the annual consumption of magnesium will increase by more than 50,000 tons.

Asian Metal: Thanks for accepting the interview with Asian Metal. I wish Yinguang Magnesium Alloy to make further progress!

Mr. Wang: Thanks for Asian Metal’s interview. I hope that Asian Metal could provide continuous timely, fair and comprehensive information to the magnesium industry.