Executive Interviews

Asian Metal: Hello, Mr. Lin. Welcom to the interview hosted by Asian Metal. Please introduce your company briefly.

Mr. Lin: Xinjiang Changji Zhundong Economic and Technological Development Zone Tianlin Aluminum Manufacturing Co., Ltd., with a total investment of 110 million yuan (15.88 million US dollars), currently employs 51 people. The plant has four aluminum bar production lines and two aluminum rod production lines, with a production cycle of 12 months throughout the year. The company specializes in producing solar energy aluminum bar 6063, 6005 and 6061 with diameter specifications of 90mm, 100mm, 110mm, 120mm, 127mm, 135mm, 152mm and 178mm. It can also produce personalized products according to users' requirements, with an annual production of 200,000 tons of aluminum alloy bar. (According to production in 2022)

Asian Metal: The aluminum bar TC kept declining since the beginning of November last year and even became negative by early December. What do you think was the reason for this?

Mr. Lin: In November 2022, the TC continued to decline mainly due to the resurgence of the epidemic in some areas of China, especially in the East and South China markets, where the transportation was restricted due to the anti-epidemic policy, so many consumers like deep-processing plants suspended production. However, aluminum bar producers didn't experience large-scale shutdowns or production reductions, which led to a significant decline of over 30% in downstream demand for aluminum bar, while supply remained relatively stable. In November, aluminum bar producers kept cutting TCs to close deals for recouping funds, so aluminum bar 6063 TCs in South China fell from about RMB620/t (USD90/t) in early November to RMB-50/t (USD-7.22/t) in early December.

Asian Metal: The aluminum bar market witnessed strong demand at the end of the first quarter and the beginning of the second quarter in 2023. Which industries do you think have seen rebounds in demand during the period?

Mr. Lin: The demand kept rising from March and the market witnessed brisk trading activities. In the first quarter, the construction industry and the new energy industry became the main downstream industries with active dealings of aluminum bar. The demand for building materials in March and April of this year was largely driven by the fact that real estate companies, backed by government funds, began to ensure the delivery of buildings in the second half of last year. In addition, in the context of the government's efforts to promote new energy development, the demand for aluminum bar in the solar photovoltaic industry continued to increase from March. In March, aluminum bar 6063 TC rose to RMB800/t (USD116/t) at the highest.

Asian Metal: In the fourth quarter of last year, the social inventory of aluminum ingot continued to decrease, while that of aluminum bar increased instead. What do you think is the reason for this consequence?

Mr. Lin: In the past three years, with the continuous improvement of aluminum liquid on-site conversion rate in primary aluminum production enterprises, the on-site conversion rate of aluminum liquid increased from about 60% two years ago to about 68% in the fourth quarter of last year. Since most of aluminum liquid is converted into aluminum bar, the market saw a rapid increase in aluminum bar production capacity. However, the demand of end consumers for aluminum bar didn't improve correspondingly in the same period, resulting in a continuous overhang of aluminum bar inventory. At the same time, the inventory of aluminum ingot kept decreasing. Primary aluminum enterprises cut production of aluminum ingot, while the demand of end consumers didn't decline sharply.

Asian Metal: In the past 3-5 years, new aluminum bar projects increased significantly with the improvement of on-site conversion rate of aluminum liquid. Do you think there is already overcapacity in the aluminum bar market?

Mr. Lin: We believe that the current domestic aluminum bar production capacity has appeared in excess. Firstly, the reason why the current aluminum bar TC continues to fall is that the domestic aluminum bar supplier exceeds the demand. Aluminum bar plants bear heavy inventory pressure, so they have to mark down TCs in order to ship as soon as possible. Secondly, the current average operating rate of domestic aluminum bar production enterprises is about 50%, and the rest half of the capacity is idle.

Asian Metal: At present, primary aluminum plants are still improving the on-site conversion rate of aluminum liquid, so do you think the production capacity of aluminum bar will continue to increase substantially in the next three years?

Mr. Lin: As far as we know, more than 50% of the investment projects of primary aluminum plants are aluminum bar production enterprises. Compared to other aluminum deep processing enterprises such as aluminum plate and strip, building an aluminum bar plant has the advantages of less investment, faster project initiation, faster fund return, and strong social demand. Therefore, many bosses would still choose to build a new aluminum bar plant, and the aluminum bar production capacity will continue to increase significantly in the coming three years.

Asian Metal: Secondary aluminum bar is a strong competitor to aluminum liquid bar. What are the advantages of aluminum liquid bar compared with secondary aluminum bar?

Mr. Lin: The advantages of aluminum liquid bar over secondary aluminum bar are as follows: Firstly, the impurity content is lower. For example, in terms of iron content, the iron content of aluminum liquid bar is below 0.2%, and that of our company's aluminum bar 6063 is below 0.13%, while that of secondary aluminum bar is above 0.3%. Secondly, the extrusion speed is faster and the yield is higher. The biggest advantage of secondary aluminum bar is that it is cheaper than aluminum liquid bar. Under normal circumstances, with the same brand and specification, the TC of secondary aluminum bar is RMB200/t (USD28.84/t) cheaper than that of aluminum liquid bar.

Asian Metal: In the face of fierce industry competition, what is your company's future development direction and are there any new projects?

Mr. Lin: We will further cultivate our business in the aluminum bar industry and mainly produce industrial aluminum bar, with our main focus on the solar photovoltaic and new energy vehicle industries. In the future, we will also produce 2 series, 5 series, 7 series and other high value-added aluminum bar products according to customers' needs to enrich our product categories. In terms of new projects, the workshop of our second phase project with an annual capacity of 180,000 tons of aluminum bar has been completed and the equipment is being installed. We plan to first put two furnaces into operation in August, involving a production capacity of 50,000 tons. By then, the annual output of aluminum bar will reach about 220,000 tons.

Asian Metal: Thank you for accepting our interview and wish your company a better future.

Mr. Lin: I am also very grateful to Asian Metal for giving us such a platform for mutual communication. I hope that Asian Metal can continue to provide us faster and more accurate information on the metal industry.