Chinese magnesium ingot market to meet severe challenge in Q4 of 2019

Asian Metal: Mr. Liu, thanks for taking the interview by Asian Metal. Please introduce your business briefly.

Mr. Liu: Under Wanfeng Auto Holding Group, Shanxi Bada Magnesium Co., Ltd. is a direct subsidiary of Meridian Canada that is engaged in auto parts, intelligent robot, new materials, financial investment, general aviation and other fields. With seven production bases and five R&D centers in the United States, Canada, United Kingdom, Czech, India, Mexico and other countries, the company is one of China's top 500 private companies and a world's leader in magnesium alloy manufacturing and application. As the audited supplier of GM, Ford, Volkswagen, BWM, Range Rover, Tesla and other top brands, the company expects to use 100,000 tons of magnesium alloy per annum. Owning more than 1,000 employees and an annual production capacity of over 35,000 tons of magnesium ingot and 25,000 tons of magnesium alloy, it's a benchmarking enterprise and the largest plant in Chinese magnesium metal industry. It's also a magnesium metal producer integrating ore mining, logistics, magnesium metal smelting and alloy production that is rarely seen in China.

Asian Metal: Since 2008, by virtue of the cost advantage for coke oven gas cycle production process, the proportion of magnesium ingot production in Shaanxi increased year by year. As a long-established corporation in Shanxi, how could Bada strive for and guarantee low inventory in such fierce market competition?

Mr. Liu: We have a professional team with more than ten years of experience in producing and management of magnesium products. In addition, we have special experience in improving pigeon technology and the control of production cost, especially in controlling of the impurity elements of silicon, aluminum, manganese and iron. The quality classification of magnesium ingot from Bada is the most detailed in China and is more standards than the national standard. According to the requirements from clients, we have strict quality classification. Differentia development strategy is our competitive edge, excellent quality is our key to keep low inventory.

Asian Metal: Prevailing Chinese magnesium ingot prices showed the downward trend from late August and kept going down these days. How do you think about the reasons on price decline?

Mr. Liu: Entering 2019, firstly, the trading war has seriously divided market consumption and demand, and the export of high-tech products suffered great impact and restrictions. Given this situation, the application and consumption volume of magnesium ingot shrunk sharply. Secondly, the consumption volume for magnesium alloy among automobile and 3C industries decreased by 20-30%. Thirdly, owing to the cooling of the real estate industry, the steel industry faced consolidation and the demand of magnesium powder reduced. Taking these factors into considerations, the sharp decline for the application of magnesium is the main reason for the slack market.

Asian Metal: With the coming of 70thNational Holiday, the environmental protection policy becomes strict. Whether the related requirements will influence the production of magnesium plants? How to affect?

Mr. Liu: As you mentioned, the requirements for environmental protection policy will increase and the pressure on production will strength. We put more human, material and financial costs, which occupy producers’ operating capital and it will be a big challenge for magnesium plants. Producers have no choice but follow the current requirements and adopt the production accordingly.

Asian Metal: How do you allocate domestic and foreign sales? How do you think about the market demand of magnesium products from downstream titanium sponge, aluminum alloy and die casting industries in coming Q4?

Mr. Liu: Actually, our business objective is to provide the most professional magnesium products and high quality services for customers in the worldwide. We founded Shanxi Credit Magnesium Co., Ltd., which is mainly focus on the product segmentation, customer segmentation and regional segmentation in the domestic and foreign markets. Rely on the experience in the domestic and foreign marketing, Bada improves ourselves and also meets buyers' requirements.

In 2019, the market buying activities among downstream titanium sponge are active and market deals become increase. Therefore, prices for titanium sponge keep increasing and suppliers could get good profits, meanwhile, the demand for magnesium ingot 99.9%min is very strong. Nevertheless, restricted by the weakening demand from downstream automotive industry, the aluminum alloy and die casting industries are pessimistic. Given this situation, the demand of magnesium ingot also reduces and it is hard to be improved in a short time.

Asian Metal: Entering Q4 of 2019, how do you think about the demand supply for magnesium ingot? What’s the price trend? As a magnesium producer, how to meet market challenge?

Mr. Liu: Entering Q4 of 2019, magnesium ingot industry will meet harsh market and it will be the hardest year in historical magnesium industry. On the on hand, the demand among application markets decrease; on the other hand, some plants are still increasing operation rate and the output will become more; thirdly, most plants among magnesium ingot industry haven’t earned good profits over the past months in 2019 and they have weak ability to resist risks. Confronting the above problems, the only way to improve the situation is to reduce the production cost and increase the products’ quality.

Asian Metal: As I known, currently most plants use reduction retorts to produce magnesium ingot. Meanwhile, including Nanjing Welbow, Xinjiang Tengxiang and Fugu Xintian, Bada also uses vertical retort to produce the material. Could you introduce about the advantage and disadvantage of vertical retort? Do you think this kind of new equipment will become the "new favorite" in magnesium industry in the future?

Mr. Liu: Commenting on the usage of reduction retorts, the outstanding advantage is that it solves the bottleneck of human resources. In addition, it also has some new problems, such as usage of center tank, the strength of the ball's gravity. Therefore, we also confront some issue in using the vertical retort. Actually, investment is the easiest problem, management team and defect problem solving are the challenges to meet. Anyway, the popularity of vertical retort is still an irreversible trend to produce magnesium ingot in the future time.

Asian Metal: As a producer, the security of funds is of vital importance. Entering 2019, some banks couldn't accept acceptance bills, how do you deal with this situation?

Mr. Liu: In 2019, insiders are meeting financial risk, and the collocation of Baoshang Bank opens the risk for commercial acceptance bills. Currently, more than hundreds of banks' acceptance bills have been added to blacklist, which also strengthened the pressure in magnesium industry. Owing to the restrictions of the payment, the company's capital was taken up. According to the above issues, we have no choice but control the acceptance bills to ensure the safety for the company's operation and strength the capital risk.

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

Mr. Liu: Thanks for your attention to Bada 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.