Asian Metal: Good day, Mr. Yu. Thank you for granting this interview. According to the data released by China Customs, Chongqing Kangmeng became one of the top five exporters of manganese metals in 2014, ranking first among Chongqing-based suppliers. How did you achieve this?

Yu: Firstly, we insisted on purchasing manganese metals from well-known Chinese producers throughout the year in order to ensure a high quality and steady supply of products. If we were to discover that some materials had failed to fulfill our customers’ requirements, we would rather accept the losses than export defective goods. Therefore, no customers informed us of any quality problems in the course of our transactions in 2014. Secondly, we shipped the materials on time and in accordance with contracts the whole year, allowing us to win orders from consumers in Russia, India, the Middle East, Southeast Asia, Hong Kong, Taiwan and other countries and regions, besides those from our regular customers in Europe, America, Japan and South Korea.

Asian Metal: Chinese manganese flake prices have dropped sharply as at October 25, 2014, and are close to their lowest level recorded in April, 2014. What are the reasons for this? Do you think the prices will decrease further?

Yu: The market price should normally drop to the bottom in July or August as a result of slow demand from end users, if we take the market performance in previous years into consideration. However, the prices held firm in July and August, 2014, and producers reported good sales, so they believed that demand would increase in the coming months and thus increased production between September and November, 2014. But the fact was, Chinese domestic steel mills decreased their purchase quantities for manganese metals in Q4 of 2014, making supply within the market abundant, and this led to a slump in prices. As for the future market direction, I worry that the ex-works price will drop to the level of RMB11,500/t (USD1,855/t) in the next two months as producers will face greater financial pressure with the approaching Spring Festival.

Asian Metal: The comprehensive cost was RMB12,000-12,500/t (USD1,936-2,016/t) for most Chinese manganese flake producers, who have been selling at a loss in the past two months. Why did we not see any output suspensions until December 2014?

Yu: First of all, the producers made a profit in the first three quarters of 2014, so although the market price kept decreasing, they were still expecting the market to recover before the Spring Festival. Moreover, many plants had stocked up on raw materials like manganese ore and selenium dioxide, and would not suspend production until the stocks had run out. In addition, the producers are trying their best to maintain production to avoid performing poorly in banks’ risk ratings, which would decrease the quantity of loans in 2015.

Asian Metal: Would you be able to make a comparison between the various manganese flake producers in the “Manganese Triangle”?

Yu: Judging from the performance in 2014, the plants in Chongqing have obvious advantages on supply stability and anti-risk capabilities over those in the other two provinces. And their products are of good quality with a stable supply of manganese ore and electricity at modest prices. Hunan-based producers have the technical maturity, but the grade of the local manganese ore has dropped to 8-12%, leading to higher production costs along with higher power prices. Worse still, production has been unsteady due to the stricter environmental inspections. The potential is greatest at Guizhou-based manganese flake plants, which get the most support from government and enjoy lower manganese ore and power costs. However, the producers are less well known compared with those in Chongqing and Hunan, and products from some of the plants have a higher sulfur content, which is unacceptable to overseas consumers.

Asian Metal: The largest manganese flake producers expanded their production in 2014, while some medium-sized and small producers in Hunan and Guangxi failed to resume production during the year, impacted by stricter environmental inspections and poor market performance. Will more small and medium-sized plants suspend production or even shut down in 2015?

Yu: Although the government has been conducting stricter environmental inspections in Hunan, it’s unlikely to carry on when the economy faces greater downward pressure. So I believe that the operating rate for medium-sized and small producers will mainly depend on the market situation in 2015. Furthermore, the small and medium-sized producers should seek out characteristic development rather than enlarge their capacity, and gain as much advantage as possible on manganese ore and electricity, making full use of the coming power reforms in the country. Some overseas consumers have special requirements for certain manganese metal content, and only those who are capable of reaching these standards can win orders.

Asian Metal: China exported 276,200t of manganese metals between January and October 2014, and the total export volume is expected to reach 300,000t during the year, increasing by 15% over 2013. Among the export destinations, demand from South Korea has increased significantly. Will South Korean end users continue to increase procurement of the materials in 2015?

Yu: Purchases of manganese metals come mainly from POSCO and HYSCO in the South Korean market, and POSCO upped the quantity from 2,000-2,500tpm to 3,000-3,500tpm in 2014 thanks to stronger demand from Mn-steel production, and I think its demand will be stable or even increase in the coming year. HYSCO was unwavering in its consumption at 2,000tpm in 2014, but the quantity is likely to reach 3,000tpm in 2015.

Asian Metal: What do you think the market performance for manganese metals will be like in 2015? And what’s your own goal?

Yu: Currently, the Chinese steel market — especially the 200 series stainless steel market — remains sluggish, and I do not think that it is capable of making substantial improvements in H1 of 2015, so demand for manganese metals will remain slow in China. But exports are likely to increase steadily next year, with the American economy recovering and South Korean end users increasing their purchase quantities. As for our company, we expect the sales volume to increase further, by 20-30%, on the basis of 2014 and we will continue to provide our customers with superior products and services.

Asian Metal: Asian Metal will be holding the 3rd World Selenium & Manganese Forum in Chongqing on April 23-24th, 2015, will you be attending the conference?

Yu: Definitely. We intend to meet more Chinese and overseas manganese participants during the conference to enhance our understanding of each other and seek cooperation. I would also like to take this chance to thank Asian Metal for all the support given to Kangmeng Trade and wish you great success with the forthcoming conferences.

Asian Metal: Thanks for taking the time to give this interview. We wish your company a bright future.