Trade war weights on zinc oxide market

Asian Metal: Hello, Mr. Wang, thank you very much for accepting the interview of Asian Metal. Would you please give a brief introduction to your company?

Mr. Wang: Weifang Orlon Zinc Co., Ltd. specializes in producing zinc oxide via indirect process with a design annual capacity of 100,000t, and is a global leader in production scale and technology.

We are producing at full capacity at present with stable output and sales. Especially in the past few months, despite trade frictions happening frequently, we are glad to see that our business has barely been affected.

Asian Metal: With great volatility for zinc ingot prices recently, what do you think are the main factors for it? What's your opinion on the price trend in the future?

Mr. Wang: Instead of substantial changes between supply and demand, it was trade frictions that caused zinc ingot price fluctuation, resulting in more uncertainties for future consumption, so zinc ingot prices fluctuated irrationally.

Zinc ingot price trend is mainly decided by China-US trade war in a short-medium term with wide fluctuation as the main theme.

Asian Metal: How is the market demand for zinc oxide now? And what do you think are the reasons for the situation?

Mr. Wang: The zinc oxide market sees weak demand at present.

Affected by trade friction, the tire industry witnessed a severe export situation, leading to insufficient operating rate in the industry, which is the main reason for weak demand for zinc oxide.

Asian Metal: With increasing focus on environmental inspections, do the frequent environmental inspections have impacts on your business?

Mr. Wang: Orlon Zinc prospectively studied China's policies including that related to environmental issues at the beginning of production system design, and the actual pollutant emission is far below the limit set by the central and local governments.

Environmental inspections have positive impacts on Orlon Zinc. On the one hand, the effectiveness of our environmental facilities is verified; on the other hand, it provides correct direction for us to enhance environmental protection level in the future.

Asian Metal: What do you think are the impacts of environmental inspections on the whole zinc oxide industry?

Mr. Wang: Environmental inspections have exerted substantial influences and will have increasing influences on the zinc oxide industry. These are as follows:
1. The industry became more concentrated. Many of small and heavy polluted companies and production bases were shut down, the capacity of which was transferred to companies meeting relevant requirements;
2. Industrial technology was advanced. To meet new environmental protection requirements, companies had to upgrade production system, especially environmental facilities, leading to a large step forward on the technology on the whole.
3. Industrial profitability was improved gradually. With small and substandard zinc oxide companies closed in a short period of time, the heavy overcapacity situation was eased, leading to a balance between supply and demand, so zinc oxide prices rose to reasonable ranges and the profitability was enhanced on the whole.

Asian Metal: In your opinion, what fields will need more zinc oxide in the future?

Mr. Wang: The rubber tire industry will be the largest user of zinc oxide with the highest potential to need more of the material in a long term in the future. China's exports of tire to America stumbled affected by the trade war, but it can be exported to a third market, from which America would import the tire as the demand in America increased while the capacity was unlikely to expand swiftly in a short time restricted by various factors.

In addition to the rubber tire industry, the demand from compound fertilizer, animal feed and other fields is also increasing rapidly. The demand from electronic products and cosmetics is relatively stable now.

Asian Metal: Could you please note the challenges for zinc oxide companies under current economic situation and what are their coping strategies?

Mr. Wang: The main and crucial challenge for most zinc oxide companies is environmental protection. Zinc oxide companies are not highly concentrated due to historical reasons, and most of them do not have sufficient fund and technology to update production equipment including environmental facilities, so the environmental facilities of the industry are relatively outdated on the whole.

China's environmental policies would not be relaxed, but would become increasingly stringent, so enterprises have to invest enough manpower and material resources to fundamentally solve the problem of pollution control. Enterprises that can meet the environmental requirements by taking effective measures in the next two or three years would have the opportunity to obtain broader development space.

Asian Metal: Would you please share your development goal with us?

Mr. Wang: As a leading enterprise, Orlon Zinc has the responsibility to promote the technological progress of China's zinc oxide industry and promote the healthy development of the industry through technological progress. Specifically, in the future, we will carry out in-depth work in the following three aspects:
1. Do systematical studies on pollutant generation mechanism and control measures in the process of zinc oxide production to make pollutant discharge standards reach the advanced level of similar industries.
2. Join with relevant scientific research institutions and manufacturing enterprises to upgrade the core evaporation equipment and combustion equipment to greatly reduce the comprehensive energy consumption of products.
3. Carry out equipment automation and process intelligent transformation to guide the whole industry to enhance the modernization level through our own demonstration.

Asian Metal: Thank you again for accepting the interview. Wish your company a better future.

Mr. Wang: Thanks you. Welcome to our company.