Mo Lin: Zinc oxide industry will enter into the meager profit era

Asian Metal: Good day, Mr. Mo. Thank you for accepting this interview. Please introduce the condition of your company. How is your company's production situation at the moment?

Mo: Xianyang Jinshan Zinc Industry Co., Ltd was formerly named Shaanxi Jinshan Electric Appliance Co., Ltd Zinc Oxide Plant, which was founded in 1996, and it was renamed in June 2008 after shareholding reform. We mainly produce and sell zinc oxide. In addition, we also sell zinc concentrate, zinc ingot. The capacity of zinc oxide is 12,000tpy, and now the output is nearly 500tpm. The products are mainly sold in Guangdong, Guizhou and the Northwest Territories.

Asian Metal: Zinc price kept at a low level last year, and the price of zinc ingot increased slightly recently. Would you like to talk about the trend of zinc ingot price in the following months?

Mo: Compared with the price of the previous years, the price of zinc ingot kept at a low level last year, and the fluctuating range of zinc ingot price was limited in the second half of 2013. Although the price increased slightly last December, I think the trend of zinc price will move up or down according to Chinese economy. The Chinese economic situation is unfavorable now, and the price of zinc ingot will keep stable around RMB15,000/t (USD2,463/t) in 2014. The zinc price increased recently supported by the softening US dollar, and the real demand for zinc ingot was weak in Chinese spot market.

China reduced the investment of infrastructure in 2013, and the operating rate of hot-galvanizing and zinc alloy plants decreased greatly, so the demand for zinc ingot was sluggish. The fundamental of zinc market is still weak in 2014, and the zinc price lacked upward momentum. Of source, the price of zinc ingot may increase if China publishes the favorable policies. However, China will develop in accordance with the economic rule over the next few years, and the government will not intervene in the enterprise development. In addition, some small and medium-sized galvanizing plants were forced to shut down due to environmental clearance, so the demand for zinc ingot will keep at a low level for a long time.

Asian Metal: The supply exceeded demand in Chinese domestic zinc oxide market in the past years. What prediction do you have for the future zinc oxide market?

Mo: The oversupply problem of zinc oxide has always existed, and the situation is increasingly prominent and is also unable to avoid. Whether the enterprises can survive for a long time depends on the choice of downstream consumers. I think some small-sized zinc oxide plants will be eliminated in advance due to high production cost and unstable quality.

Asian Metal: Although the supply of zinc oxide exceed, some zinc oxide plants also extend or build production. how do you think of this phenomenon?

Mo: Some zinc oxide plants mainly increase the capacity of zinc oxide produced zinc scrap, as they are optimistic about the development trend of zinc oxide produced from zinc scrap. The product has certain advantages. It meets the national policy of energy conservation and emissions reduction and recycling. In simple terms, this product can save resources. However, there are some limitations about zinc oxide produced from zinc scrap, which is mainly used in tyre and rubber industry. However, other industries such as phosphating and electronic industry do not use zinc oxide produced from zinc scrap due to high concentration of the heavy metals.

Asian Metal: The market competition is fierce and cruel at present. How do you see future development of zinc oxide market?

Mo: The use of zinc oxide, which is basic material, is very wide. In addition to tyre and electronic industries, zinc oxide is also used in ceramic, medicine and phosphating industries, so the prospect of zinc oxide is good. However, the market competition is also increasingly fierce. I predict zinc oxide enterprises will compete on price, as the production technology of zinc oxide is simple and there are many zinc oxide plants in China due to the low entrance standard. I think the zinc oxide industry has entered into the meager profit era since last year.

We will mainly consolidate consumers in the following one-two years. Meanwhile, we will invest capital on product development and try to reduce the grain diameter of zinc oxide.

Asian Metal: Your company mainly produces zinc oxide from zinc ingot, but there are above 80% of zinc oxide plants which produce zinc oxide from zinc scrap, and the market of zinc oxide produced from zinc ingot was hit heavily as the price of zinc oxide produced from zinc scrap is low. Do you have a plan to increase zinc oxide produced from zinc scrap production lines?

Mo: We have ever considered about extending zinc oxide produced from zinc scrap production lines, but we lack some conditions. We face difficulties from the project site and funds. In addition, it is hard for us to obtain enough raw materials. The supply of zinc scrap is unstable, and the operating rate of hot-galvanizing plants is low, so zinc scrap price continues to increase per month. Moreover, our plant is in the northwest, and the transportation cost is high and the consumers are limited in the local place, so we need to consider seriously.

We will not extend zinc oxide produced from zinc scrap production lines in the following five years.

Asian Metal: Facing the increasing fierce competition in zinc oxide market, do you have any advice to activate companies in the industry?

Mo: The price of zinc oxide is transparent at present, and the enterprises should decrease the production cost as much as possible. Meanwhile, improving product quality is key element for enterprises development. In addition, enterprises should consider more completely for clients and reduce the production cost of consumers.

Asian Metal: Thank you for sharing your opinion with our readers and industry players.