S.G. cast iron demand cautiously optimistic in 2018

Asian Metal: Thank you for accepting the interview of Asian Metal. Please first give a brief introduction of your company.

Fan: Weihai Xinshan Group is the only legal producer of S.G. cast iron in East Shandong province. We have two blast furnaces of 128 cubic meters with a capacity of 300,000 tons per year. We mainly produce cast iron series from Z14 to Z26 and S.G. cast iron series Q10 and Q12. Our product is of low content of sulfur, phosphorus and manganese and thus could be widely used for auto parts, machinery for textile, fire protection and petroleum pipes and so on. We also explore into iron ore, logistics and downstream casting industry.

Asian Metal: How was your business going in past 2017?

Fan: We produced only 100,000 tons of S.G. cast iron and cast iron in 2017 as most of the time, we only run one blast furnace. But this month, we start full operation and expect the output to double in 2018.

Asian Metal: What do you think was the most impressive in 2017?

Fan: The environmental protection pressure in 2017 was so intensified but the whole industry benefited with better profits for both S.G. cast iron and cast iron. As many downward capacity was wiped out, iron industry was not in so severe competition that prices had soared, even doubled from the previous years. But meanwhile, downstream casting plants turned to use more foundry scrap to lower costs, which reduced demand of iron as a result.

Asian Metal: In your opinion, what percentage has scrap taken up in current casting production?

Fan: Now some casting plants have totally used scrap to replace iron in low quality castings. Even in the production of high quality castings, some casting plants with mature technology have enlarged the ratio of scrap to 70%. Only those castings requiring high quality iron still use mostly S.G. cast iron to ensure good quality.

Asian Metal: While demand slides, iron output also decreases much. In 2017, many iron producers in China halted production of S.G. cast iron or cast iron to produce pig iron for steelmaking. The other producer Shandong Jinan Gengchen Iron and Steel Co., Ltd., the largest producer in Shandong totally closed production and would not resume within one year. The supply of S.G. cast iron in Shandong would reduce significantly. What do you expect of the supply and demand trend in 2018?

Fan: Decreasing capacity and output would support prices of S.G. cast iron and cast iron, especially when foundry scrap prices are also very volatile. And the good profits of downstream steel mills also result in increasing demand of scrap which would tighten supply of scrap and push upward scrap prices. Once the price gap between foundry scrap and S.G. cast iron narrows to a considerable level, downstream casting plants would favor iron again.

Asian Metal: Prices of raw materials were also very volatile in 2017 with prices of coke rising by 20% and prices of iron ore increasing by 10%. How could iron producers combat the increasing costs?

Fan: We are using both domestic iron ore and imported iron ore to balance the costs. As we are near to the ports, supply is sufficient to us for both iron ore and coke. We do not hold much inventory and only purchase from hand to mouth.

Asian Metal: Do you have any expectation towards 2018?

Fan: We expect better demand in March when the Chinese Spring Festival would be over and the environmental protection pressure would soften gradually. Iron prices may start to rebound then and last till July and August when iron prices may start to slide as casting industry would enter off season. But entering the fourth quarter, we expect environmental protection pressure to increase again and tightening supply would push upward iron prices again.

Asian Metal: What is your target of 2018?

Fan: We intend to increase our output to 200,000 tons in 2018, and meanwhile, we will upgrade standard of environmental protection and safety and enhance our competitiveness by increasing our iron quality.

Asian Metal: Thank you!