Asian Metal: Could you please introduce your company to us, Mr. Zhang?

Mr. Zhang: Zhejiang Fuwei Energy Technology Co., Ltd., established in 2016, was initially engaged in the R&D and production of nickel-based materials for new energy batteries. However, with the ever-changing market demand and fierce competition, we decided to switch to ferronickel production in 2017 after repositioning our corporate mission and further discussing long-term development goals. At present, we mainly supply nickel-based alloys required for metallurgical equipment production. The company began to launch commercial production of ferronickel in 2018 and achieved large-scale production in September 2020. It owns an annual production capacity of 24,000t of ferronickel currently, and the output value reached RMB17 million (USD2.60 million) in 2020.

Asian Metal: What are the main downstream customers of your company?

Mr. Zhang: Our direct customers are metallurgical equipment manufacturing companies that produce equipment for steel mills, including well-known domestic steel companies such as Wuhan Iron and Steel, TISCO, Anyang Iron and Steel, Sinosteel, and so on. Our products are featured with low phosphorus (P≦0.02), low sulfur (S≦0.02), low chromium (Cr≦0.005) and titanium free, containing 3.8%-5.5% nickel. At present, our company produces around 2,000t of ferronickel per month, which can meet the need of a quarter of domestic customers.

Asian Metal: How do you run your business in shortage of imported nickel ore amid fierce competition among ferronickel plants in China?

Mr. Zhang: Domestic ferronickel plants have faced raw materials shortage since 2018; especially after January 1, 2020, China's imported nickel ore volume declined by 50% as its main lateritic nickel ore supplier, Indonesia, suspended the export of the raw material, which meant that most domestic ferronickel plants would have no access to raw materials. In response to this situation, we conduct technical upgrade and process R&D. At present, 95% of our raw materials are recycled materials, including but not limited to nickel-containing wastes from steel mills and other ferronickel plants. Thus, we can stay away from the competition of imported nickel ore, shorten the smelting time and greatly reduce energy consumption, and at the same time, increase the margin. At present, our production cost of recycled materials is about 40% lower than that of lateritic nickel ore.

Asian Metal: Do you think that current recycled materials throughout China can meet the market demand？

Mr. Zhang: At present, few domestic companies master the production technology of recycled materials. In the short term, the supply of these materials can meet the demand, but we expect a supply gap two years later. Currently, 35% of the scraps we use come from steel mills, 60% from ferronickel plants, and the remaining 5% from ferronickel-related companies. As domestic ferronickel plants switch to production of other products or move abroad, we expect that 30% of China's ferronickel plants would disappear within two years. The traditional ferronickel plant belongs to low-end industry in the stainless steel field, and it is an inevitable trend for the plants to shift their production or move abroad because of high pollution and low efficiency.

Asian Metal: What's your opinion about the fact that domestic ferronickel plants move abroad or switch to production of other products?

Mr. Zhang: After Indonesia suspended the export of lateritic nickel ore at the beginning of 2020, domestic ferronickel plants shut down or switched production rapidly. Some powerful plants went to Indonesia to build factories and transfer their production capacity abroad. Based on this fact, we must take precautions. First, we prepare to import scraps, actively contacting foreign suppliers of recycled materials, and carry out rough processing of scraps abroad and then import them into China. Second, we adjust the formula, adding other alloys, reducing the proportion of scraps from ferronickel plants and increasing that from steel mills. Third, we make process innovation, adjust production processes to meet the national carbon emission requirements, and also alleviate the impact of raw materials shortage.

Asian Metal: We know ferronickel plants stand as the basic industry of stainless steel industry chain, so whether domestic steel plants will establish ferronickel plants overseas or acquire domestic ferronickel plants in your opinion?

Mr. Zhang: Domestic steel plants are unlikely to acquire domestic ferronickel plants. Because of raw material shortage, national environmental protection requirements as well as low returns, they would rather purchase imported ferronickel directly than acquire domestic ferronickel plants to produce the material by themselves. However, it is feasible to build factories overseas. Most domestic steel mills have started the layout and some even have established ferronickel plants in Indonesia, driven by the policy of the Indonesian government on the one hand and low requirements on environmental protection abroad on the other hand. In addition, producing abroad close to the original places of raw materials can greatly reduce production costs and bring a higher rate of return on investment compared with that in China, which contributes to the overall transfer of the industry chain.

Asian Metal: What do you expect for the ferronickel market and prices after Q2?

Mr. Zhang: As raw material cost is firm and most of Chinese ferronickel producers rely on imported raw materials, ferronickel 10%min prices are predicted to stay firm above RMB1,100/mtu (USD168/mtu) in Q2 this year but no higher than RMB1,300/mtu (USD198/mtu) before August. Throughout the ferronickel industry, ferronickel 1.5%min has stable production, sales as well as demand, while ferronickel 4%min, with low demand and high cost, will withdraw from the market for ever. At present, domestic ferronickel industry faces with one problem, that is, steel mills have rights to bargain. Stainless steel plants purchase ferronickel based on their profits and cost, so ferronickel producers have no pricing rights for a long time and can only make production according to the market demand and margins.

Asian Metal: Could you give us your expectation about the price trends of nickel metal and ferronickel throughout 2021?

Mr. Zhang: Given the global inflation, shortage of raw materials and growth in demand expected this year, the prices of LME nickel are expected to hover at USD14,000-18,000/t, and the domestic nickel prices are predicted to fluctuate between RMB105,000-170,000/t (USD16,031-25,955/t). So far in 2021, the USD currency has not stabilized, and nickel price trend in futures market fluctuate greatly, which affects its prices in spot market. We expect that both nickle futures and spot markets would witness great price fluctuations in the remaining days of 2021. With firm cost of imported lateritic nickel ore, ferronickel 10%min prices are predicted to stand higher than RMB950/mtu (USD145/mtu) but lower than RMB1,400/mtu (USD214/mtu) in the whole year as most domestic producers will halt production when the prices stay below RMB900/mtu (USD137/mtu).

Asian Metal: Thank you for your great sharing.

Mr. Zhang: Thank you for your interview.