Promote magnesium industry development with professionalism and excellence

Asian Metal: Mr. Chen, thank you for taking the interview by Asian Metal. Please introduce your business philosophy briefly.

Mr. Chen: From the very beginning, we have been sticking to the principles of customer-first, commerce facilitating industry, and industry serving customers. No matter what we are doing, coal, semi-coke, magnesium, trading or real industries, we are always customer-oriented.

Asian Metal: In 2018, magnesium ingot prices in China kept rising all the way. By the end of November, mainstream prices in Fugu culminated in the past nearly five years to RMB18,200/t (USD2,696/t) EXW D/P. What were the main factors to drive the prices up in 2018?

Mr. Chen: Comparatively speaking, I myself as a member of Fugu Magnesium Association have more access to statistics related to the magnesium industry. I think that magnesium prices in 2018 reflected the real value of magnesium products. It has been well known that since 2013 a large number of magnesium companies, out of downward economic pressure, have been forced to suspend production or cut outputs, and some large-sized producers were even forced to exit the market for ever. How many of the former top five producers are still active in the magnesium market now? And the total output of the current top ten magnesium metal producers is smaller than that of the former top three producers. In sum, China's magnesium metal production capacity has shrunk to a quite serious extent. Moreover, statistics on magnesium capacities in Fugu and Shenmu have been exaggerated. For example, affected by quite low magnesium prices in the previous years, some magnesium producers have left the market. In Shenmu where there are totally 11 magnesium plants licensed by government, only five are able to maintain full-year operation in the recent five years, while in Fugu there are only 26 plants in operation now out of the total 34 licensed magnesium plants. And plants which are in operation are unable to run at their full capacities either. Moreover, owing to characteristics of the magnesium market itself, statistics on magnesium metal outputs in the major Chinese magnesium production regions are not very accurate, with the actual annual statistics far below the official ones. At the same time, rigid demand for magnesium metal always exists; and together affected by increasing demand from industries such as aluminum alloy, magnesium alloy and steel desulfurization as well as by environmental inspections, supply of magnesium metal has been tight and its prices kept rising. We can't attribute increasing magnesium prices all to environmental factor. Actually, China does not have a very big magnesium metal output at all. 

Asian Metal: In 2018, China's central environmental protection group patrolled to Shaanxi for several times, imposing stricter requirements on local magnesium plants. How does Tianyu Magnesium rise to such requirements? Has your production been affected?

Mr. Chen: Today, environmental protection is an inevitable obligation that a commercial company can't dodge. You must comply with it and must do it well. For Fugu local magnesium industry which has adopted the development principle of comprehensive utilization of resources and of cultivating circular industrial chain, if we can realize sanitized production and green development, I believe that we can see a very prosperous future ahead. So we should not attach too much importance to losses or gains of a moment.

Asian Metal: Since 2008, Fugu and Shenmu in Shaanxi province have been rising as major magnesium production regions (producers) in China, giving Shaanxi a say in China's magnesium industry as its magnesium ingot output accounted for 63% in China at the end of 2018. As the top magnesium ingot producer in Shaanxi, what advantages does your company have in production and development?

Mr. Chen: Back to the year of 2003, Fugu was among the earliest ones to adopt the practice of integrating magnesium metal production into comprehensive resources utilization and circular industrial chain. And Tianyu Group's first magnesium company, Xiyuan Chemicals, was one of the earliest magnesium plants in Fugu. 2008 was an important year when the Fugu magnesium industry underwent rapid growth, and since then the whole world got to know the Chinese county Fugu and its magnesium industry. As a member of the Fugu magnesium industry, Tianyu Group re-identified itself in 2017 as a magnesium metal producer. We will focus upon magnesium metal production and produce products that better meet customers' need.

Asian Metal: At present, insiders are quite concerned about impacts from the coal industry on supply and price of magnesium ingot. What is your opinion? What is the trend of magnesium ingot prices around the Spring Festival holiday?

Mr. Chen: Thanks to progresses in production technologies, since 2012 all Chinese mines have abandoned the explosive mining mode and switched to mechanized mining, and as a result the lump-forming ratio at wellheads drops from above 65% of the old mode to below 25%. Lump coal is needed in producing semi-coke, and though overall coal output increases, supply of lump coal drops and tends to shrink in the long run. So the magnesium industry has been affected. But thanks to years of technical research and upgrading, our counterparts in Fugu and Shenmu have successfully progressed from using lump coal to seed coal in semi-coke production, and now are working on the possibility of using spray coal. Our experiences tell us that when a person or a company has no choices, they are able to do things that they used to think they could not. But what I want to reiterate is that China's magnesium output is not as big as we think, and there is no inevitable connection between tight supply of magnesium metal and tight supply of coal. It's quite of a small possibility that magnesium prices will fall back to the old levels. If you pay enough attention, you are able to garner information on magnesium ingot stocks held by producers and available in the market as well as imported materials at Chinese ports. Anyway, the magnesium community is small, and it's easy to have access to such information.

Asian Metal: As the President of Fugu Magnesium Association, what challenges do you think local magnesium industry will face in 2019? What measures will your association adopt in 2019? Will you do things like pricing alliance, which was adopted long ago, to adjust the market?

Mr. Chen: As Executive Director of Shaanxi Magnesium Industry Association and as Director of Fugu Magnesium Association, I am concerned the most not about impacts from environmental inspections, nor raw material supply, but lacking of talents. Located in northern Shaanxi, a remote region in China, Fugu and Shenmu magnesium communities quite lack talents, especially high-end talents. Talented professionals are reluctant to come to our county but at the same time, our local magnesium industry is in urgent need to undertake technical upgrading in terms of automation, mechanization and even intelligentization. Lacking in expertise has seriously stymied our development. So the biggest challenges Fugu magnesium industry will face in 2019 will be technical upgrading and reforming on the industry, instead of pricing alliance. The right of pricing should go back to the market and clients, and we do not want to and will not control the market. Instead, we will encourage our member companies to sharpen our competitive edges by saving costs, improving efficiency, enhancing management skills and cutting consumption. We will work hard and join our counterparts in the rest of China in welcoming a more prosperous tomorrow for the magnesium industry. 

Asian Metal: Would you please share with us your opinion in environmental protection and tax reform policies in 2019? How will the policies affect the magnesium industry?

Mr. Chen: Environmental inspection will happen not only in 2019 but also will be routinized in the future. Since it will become routinized, we just go ahead to fulfill it instead of worrying about its impacts. But as for financial policies related to company tax or individual income taxes, they have imposed great economic pressure upon magnesium companies, and we hope that government can come out with new policies and give us more tax-cuts. 

Asian Metal: Thank you very much. We wish Tianyu Magnesium a more prosperous future in 2019!

Mr. Chen: Thanks for your attention to Tianyu Magnesium. Let's work together and look forward to a better tomorrow. In addition, we also expect that Asian Metal sticks to the principle of objectiveness and timeliness in providing clients with better information about the magnesium market.