8th World Antimony Forum

Jun 11-12, 2020
Guiyang, Guizhou, China

12th Rare Earth Summit

May 18-19, 2020
Hangzhou, Zhejiang, China

11th Aluminum Raw Materials Summit

May 14-15, 2020
Hangzhou, Zhejiang, China

9th Magnesium Summit

April 16-17, 2020
Hangzhou, Zhejiang, China

13th World InBiGeGa Forum

Mar 12-13, 2020
Hangzhou, Zhejiang, China

7th World Antimony Forum

June 13-14, 2019
Changsha, Hunan, China

7th Refractory & Abrasive Materials Summit 2019

May 23-24, 2019
Qingdao, Shandong, China

10th Aluminum Raw Materials Summit

May 16-17, 2019
Zhengzhou, Henan, China

11th Rare Earth Summit

May 9-10, 2019
Qingdao, Shandong, China

8th Magnesium Summit

April 11-12, 2019
Zhuhai, Guangdong, China

12th World InBiGeGa Forum

March 14-15, 2019
Zhuhai, Guangdong, China

Interview with Ms Wang, general manager of Inner Mongolia Baotou Daqingshan Smelting Co., Ltd

Inner Mongolia Baotou Daqingshan Smelting Co.,Ltd is a major ferrosilicon manufacturer and exporter whose operational activity also covers sales, technology service and information service synchronously. Our first phase with 2x6300kva and 1 x 17500kva furnaces have been put into production with 30, 000mt ferrosilicon output annually. The second phase of 2X 33,000KVA furnace is under construction, and total annual output will reach 100,000mt then. Now we have advanced test equipment and highly motivated core-professional personnel. We established Baotou North Si-mg alloy Group Co., Ltd. by incorporating of six manufacturers in Baotou Shiguai District with annual 100,000mt output. We have established a long-term business relationship with steel mills and traders like POSCO, Hyundai etc. Our ferrosilicon with Daqingshan brand has been acknowledged by foreign clients and enjoyed a good reputation...
Chinese Government should give more time to ferroalloys enterprises to carry through the necessary adjustment and technical upgrade in the industry
----Interview with Ms Wang, general manager of Inner Mongolia Baotou Daqingshan Smelting Co., Ltd
Asian Metal: Ms Wang, Good afternoon! Thank you for accepting to grant this interview. Firstly, what's your opinion of the current economic situation?
Wang: At first, let me introduce the economic situation in 2009. The year of 2009 is drawing to the end, and according to many kinds of indexes, Chinese economy as well as world economy have walked out the recession and began turn better gradually. The economic growth becomes better and better in the first three quarters, and it is 6.1% in the first quarter, 7.9% in the second quarter and 8.9% in third quarter. Meanwhile, according to industrial data and generated energy in October, Chinese economic growth should be around 10% in October, so it is no problem for government to keep average economic increase in 2009 at above 8%. In the first three quarters, consumption contributes 4% to the economic increase and investment contributes 7.3%, but the foreign trade contributes -3.6%. Chinese economy depends on the foreign trade greatly, with 60-70% of products exported to U.S.A., Europe, and Japan. However, the three economic powers are in recession now, so our foreign trade has witnessed negative growth, and it affects our economic growth and development greatly.
Furthermore, strictly speaking, the improvement of current economic situation can be only called "economic upturn", and we cannot see it as "economic recovery". Several days ago, I read an article written by an economist called Fan Jianping and published by "Economy Monthly". He inferred that "economic upturn" and "economic recovery" are two different concepts, and we cannot call the current economic situation as "economic recovery". Actually Chinese government officially uses "stand firmly the rise", "economic upturn" or "turning better" to describe the current situation, and they did not use the word of "recovery". Mr. Fan pointed out that there is a relation between "economic upturn" and "economic recovery", but essentially they are different; "economic recovery" means that enterprises begin to invest greatly to update their equipment. I cannot agree more his view. The current economic upturn is only supported by the government’s stimulus policy and investment-pull, and the true economic recovery must depend on new industry growth point prompted by the science and technology progress.
Asian Metal: How do you think of the economic situation in the first quarter of 2010?
Wang: As far as the current situational trend is concerned, all might not be well in the first quarter of 2010, but people will become more confident, and the economic situation will be at least better than the situation in the third and fourth quarters. However, for the real economic recovery, it is impossible to achieve in the first half of 2010.
Asian Metal: The economic situation influences ferrosilicon and other ferroalloys industry greatly. Since early 2009, many ferrosilicon smelters halted their production, and some have resumed their production in the second half of this year, but others have not resumed production yet. Recently the power price increased, and how do you think of the influence of this rate affecting production in the ferrosilicon market?
Wang: We can analyze ferrosilicon market on two sides. One is from supply, and another is from demand. In 2008, China exported about 1.3 million tons of ferrosilicon in 2009 and steel mills and magnesium smelters consumed about 1.5 million and 1 million tons of ferrosilicon respectively. Meanwhile, molybdenum and vanadium industries have consumed 0.3 million tons of ferrosilicon in 2008. So the total consumption of ferrosilicon in 2008 is roughly 4.2 million tons. However, the situation has changed greatly this year. China only exported 30,000tpm of ferrosilicon on average from January to August, and in February and March, the quantity is only around 25,000t each month. In 2009, the output of crude steel is expected to reach 0.6 billion tons, so the demand for ferrosilicon from steel mills will be 1.8 million tons. Meanwhile, capacity utilization rate of magnesium was about 30% in the previous three quarters, and it will need about 300,000t of ferrosilicon. Due to the sluggish economy, the outputs of other industries have decreased, and they may consume approximately 100,000t of ferrosilicon. So the demand for ferrosilicon in 2009 should be around 2.6 million tons, equal to 60% of the consumption of 2008. I calculate the quantity by myself, so it maybe not very accurate.
On the side of supply, local government since 1st March 2009 has canceled the preferential power price in Inner Mongolia, so nearly all ferrosilicon smelters in Inner Mongolia had to halt their production except Erdos and Wuhai Junzheng. The policy of preferential power has started since 1st March 2009 and the power price decreased by RMB0.1/KWH, and in Ningxia, it decreased by RMB0.08/KWH. So except Inner Mongolia, capacity utilization rate in other three areas is above 80-90%. Because many smelters in Inner Mongolia have halted their production, ferrosilicon demand and supply generally kept in balance in the past several months. The power price increase on 20th November will not affect ferrosilicon market much.
Asian Metal: What is operating rate in provinces in Northwest China?
Wang: In Gansu, it is about 80%. In Ningxia and Qinghai, it is a little bit higher, but in Inner Mongolia, most smelters have not started the production except some smelters who have their own power station.
Asian Metal: Viewing from demand aspect, how do you think of the demand from foreign customers?
Wang: The demand from Japan, South Korea and Southeast Asia is relatively stable, but the demand from Europe is quite slow.
Asian Metal: Thank to the stable demand from domestic steel mills, smelters sell 80% of their products in domestic market. Under such a situation, are there any technology innovations in ferrosilicon industry?
Wang: The economic crisis is really nightmare to us, and some enterprises that could not manage the problems very well have lost all their income in the past several years, but I think in some kind of degree it is also a good chance for ferrosilicon smelters. The bad situation makes more strict demand on enterprise's management, and enterprises must grinds away at cost control and management. In the past time, ferrosilicon industry faces low threshold and low technology, and the equipment and technique of different smelters are nearly same, but because of the development in the recent several years, the different gap between enterprises becomes larger and larger. Many smelters have prevented their equipment from magnetic, and smelters can save 500KWH by the kind of technique innovation. According to the current power price, the production cost can decrease by RMB200/t. Furthermore; Qinghai Wutong is working on the project of waste-heat recovery power. Although it needs lot money, the project can reduce their production cost greatly and it can save RMB300/t. It is really a long-term benefit. Other smelters, such as Ningxia Yinglite, just started the production of high-purity ferrosilicon, and I think it is really a good trial. So the enterprises that pay close attention to technique innovation will become more competitive, but the enterprises that still use low technique for ferrosilicon production will wipe out from the industry.
Asian Metal: Does your company have any new projects in the pipeline?
Wang: We have discussed the development of ferrosilicon industry before, and we think ferrosilicon industry will go through a period of adjustment, and the adjustment has already started in recent years. Mr. zhang from Erdos once remarked: "China supplies 70% of ferrosilicon in the world, but we have no mechanism to dictate and fix the price.” Ferrosilicon industry is of low convergence, and offers are very chaotic. Meanwhile, with the high development of Internet, information flows quickly. If there is a low price in the market, consumers will use this low price to press down other suppliers’ prices. It will harm the whole industry greatly. In 2009, China adjusted coal and steel industry, and ferrosilicon industry has had to adjust. We will adjust 6 enterprises in Shiguai Industry Park, and we establish Baotou FeSiMg Group, with an output of 100,000t. There are 3 magnesium smelters in Baotou Shiguai Industry Park, and a circular economy of ferrosilicon, magnesium and coke will set up over there.
Asian Metal: Your Company will build circular economy in Shiguai Industry Park. How is your company's performance recently?
Wang: Because of the economic recession, our company's performance is not good in 2009. We started the production in February 2009, but had to halt in March because the preferential power price was cancelled. Since September we started the production again, but have been under deficit since then. The power price in Inner Mongolia is much higher than the power price in Ningxia and Gansu, and it is really a big strike to us. You know, 60% production cost of ferrosilicon are coming from power price, but ferrosilicon enterprises can not control the power price, so we are struggling for survival, not to mention development.
Asian Metal: Do you have any suggestions about government's policies?
Wang: Firstly, one would like to suggest that the power prices in different areas should generally keep at a same price level. In the past time, the difference of power price in the four areas is not very big, but since March 2009 the preferential power price has been cancelled in Inner Mongolia. However, smelters in Qinghai, Ningxia and Gansu still enjoy the preferential power price, and the power price in these areas is quite different, so ferrosilicon offers in the market are very chaotic. Actually the export market is also chaotic. If some suppliers offer USD1,100/t, others can reduce their offers to USD1,090/t, so the buyers use the offers to request his supplier to sell ferrosilicon 75% for USD1,080/t. It is a very serious internal friction, and it will harm the benefit of the whole industry. So we suggest the power price in the different provinces can generally keep same.
Asian Metal: Do you suggest that the power rate should keep at a same price level, or the price difference should not be so big?
Wang: Yes, but the power price in some remote provinces can be a little bit low, such as in Qinghai, and they use hydroelectric station. It is reasonable, however, ferrosilicon smelters in Inner Mongolia, Ningxia and Gansu use the power from coal-fired power station, but the power prices among these provinces are very different. Smelters in Ningxia and Gansu who enjoy the preferential power price and keep producing ferrosilicon are worried that the preferential power price will be cancelled one day in the future. Currently what ferroalloys smelters mostly think about is not how to improve our management efficiency and how to reduce our production cost, but how much we will pay for the production cost from power price. Ferrosilicon smelters are really uncertain, and they don't know what their future is. If the power price generally keeps at a same level, it will not leave room for buyers to press down producers' offers. It is really good to make a regular and just market.
Secondly, I mean that Chinese government should give more transition period to enterprises for adjustment. For instance the adjustment of export duty and power price, central government should give us a month to fulfill the contracts signed before the adjustment; meanwhile, ferrosilicon enterprises can make preparation for the future. Take the adjustment of power price on 20th November as a case in point. We got the notice of the power price increase on the morning of 24th November, but actually the document has come on 18th November and the price increase started from 20th November. So we have no transition period for adjustment. Again, the power price increased on 1st March, we got the notice on 10th March, and sometimes we even cannot get a formal announcement, but only rely on public announcement. And also for the export duty, I remember on 26th December 2008 we got the formal announcement of the export duty increased from 15% to 25%, and the policy just started from 1st January 2009. The result of this is that many Chinese suppliers have had to break the contracts due to the cost increase; otherwise they would have incur heavy loses. As result, it is damaging and diminishing to the credit standing of our Chinese enterprises and the image of our country.
Thirdly, I would like to talk something about the risk parameter of export price limit by China Customs. The price limit is really good for ferroalloys market and avoids the vicious competition that could result from lower prices. Actually we welcome the policy. However, viewing from the result, the risk parameter deviates the market greatly, especially when the market goes up and down drastically. I suggest that China Customs can fix the risk parameter a month earlier, for example, Chinese Customs agency can announce the the export price limit of January 2010 on 1st December 2009. In this way, ferrosilicon enterprises can calculate the cost from the export duty. If the concluded price is higher than the price limit, the export duty can be imposed according to the concluded price. If the concluded price is lower than the price limit, the export duty can be imposed according to the price limit. In this case, Chinese exporters need not break the contracts to avoid the loss. We have been doing ferroalloys business for many years, and I think the biggest trouble for us is not that we can not stay with the market trend, but frequent policy changes always put us in difficulty.
Asian Metal: How do you think of the market trend in the coming weeks?
Wang: In winter, transportation cost has increased greatly and quickly, and the power price has increased since 20th November, so the production cost of ferrosilicon went up a lot. The previous price is close to the production cost, so ferrosilicon price will be bound to go up in the coming weeks. However, the export market is still sluggish. Chinese ferroalloys enterprises are really in difficulty, because central government does not encourage the development of ferroalloys industry, and they increase export duty and cancel the preferential power price. We hope central government can give us transitional period when they upgrade the industry because in some provinces ferroalloys industry is still the pillar supporting the local economy.