Diversifying magnesium products to enhance market competitiveness

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

Mr. Dong: Thanks, it’s my pleasure to accept interview from Asian Metal. Shaanxi Sanxin (Group) Industrial Co., Ltd. was established in 1999. It is a large private enterprise for integrating coal washing, low-grade coal conversion, power generation, ferroalloy and magnesium production with a virtuous circle of industry chain. Magnesium ingot belongs to the leading product and annual capacity reaches about 32,000t. Over the years, Sanxin has a significant development and also been fully acknowledged by participants by virtue of our own endeavor and support from all circles.

Asian Metal: As a long-established corporation, Sanxin has been well received by magnesium market participants. Could you please share with us about your experience in quality and supply control?

Mr. Dong: Sanxin places an emphasis on quality and service. The specific practices are as follows: firstly, as for product quality management, we not only concern with terminal detection and hierarchical management, but also focus more on source prevention and process control; secondly, we pay more attention to the management and control of differentiated products and after-sales services. In view of these management measures, we won the market and also won the wide praise of users. Here, I want to extend thanks to my clients and friends for your continuously trust and support to Sanxin.

Asian Metal: The mainstream magnesium ingot prices in domestic market keep showing downward trend since early this early, how do you think the reasons for decreasing prices?

Mr. Dong: Frankly speaking, I think it is caused by the “world economy atrophies”. In addition, global magnesium industry suffers serious “intestinal obstruction” problem. All in all, the main reason is caused by the demand and supply of market discipline. What’s more, I believe the situation is hard to be improved in a short time and it will last to the second half of 2021. Nevertheless, mainstream prices for magnesium ingot also have little room to go down. On the one hand, most plants in China suffer great loss and some of them even confront the pressure caused by price inversion, especially for lots of our peers in Shanxi, so it is not realistic for prices to deviate too much from cost. On the other hand, prevailing aluminum ingot prices kept rising from early this year and mainstream prices are even about RMB2,000/t (USD294/t) higher than magnesium ingot, while magnesium ingot prices are about RMB1,500/t (USD220/t) higher than aluminum ingot normally. So the current situation is really unconventional market. Thirdly, under the constraints of the sluggish economic situation, the national environmental protection policy will be relatively loose in 2020, and the impact of environmental protection on production enterprises will be smaller. From the above, prevailing Chinese magnesium ingot prices showed a downward trend after the Spring festival holiday on account of oversupply and pessimistic attitudes among buyers.

Asian Metal: Based on the current state, what are the key factors to keep magnesium ingot prices from decreasing? Is it possible to see a rising price trend in Q4 of 2020?

Mr. Dong: The key factor for price trend is the status of demand and supply. The main reason for decreasing magnesium ingot prices is the oversupply and weak demand in the market presently. Entering 2020, under the impact of the global epidemic, industrial production has suffered a terrible defeat, and the downstream magnesium powder, magnesium alloy, aluminum alloy and sponge titanium market also suffered discouraged by slow demand among steel mills, diecasting, automotive and aerospace industries. I think there are only two ways to restrain price decrease. On way is a better demand. Nevertheless, it will take a long time for the demand to improve owing to sluggish economy overseas. On the other hand, tightening supply could be also a way to restrain the price decline. However, so far, most magnesium ingot plants are relatively strong, and it is reasonable to cope with the market downturn in a short term under the support of good demand and considerable profits in the previous two years. Therefore, the probability of large-scale reduction and shutdown of magnesium ingot manufactories in the short term is low. To sum up, it is difficult for relevant factors to restrain price decline to occur in a short time, and the prices would hover at the current low level for a long time.

Asian Metal: The year of 2020 is a very harsh and challenged year to lot of magnesium ingot plants caused by COVID-19, how does your company cope with the dull market status during this period?

Mr. Dong: The market belongs to a big situation, and the plant is hard to control under such a gloomy economy. We have no choice but to promote quality management and cost-effectiveness to seek more stable clients and strive to compete better orders under the market impact.

Asian Metal: As a Shaanxi magnesium ingot plant, I think Sanxin also enjoys an outstanding advantage among the market competition by virtue of the cycle production model caused by semi coke. What’s the role of semi coke in the production cost of magnesium ingot production? In addition, does semi coke still has advantage in magnesium ingot production, or is there any change?

Mr. Dong: As for Fugu magnesium ingot plants, we use the waste gas of semi coke to produce magnesium ingot and also take an outstanding advantage in magnesium ingot production costs’ competition. On the one hand, it meets environmental requirements; on the other hand, we have advantage in the production cost in virtue of semi coke. Over the past several years, we just take magnesium as our by-product and also use the waste gas well. In the recent years, on account of advanced payment way and stable market demand in magnesium industry, magnesium ingot becomes our main product and we recoup funds according to this metal. Nevertheless, owing to COVID-19 in 2020, we suffer loss on the price inversion for semi coke and also have to subsidy the material through the tiny profits from magnesium ingot. In the second half of 2020, owing to slack market movements for semi coke and downward prices of magnesium ingot, we suffered great pressure and had no confidence in the trend in coming Q4 of 2020.

Asian Metal: As we know, some magnesium plants seek different development method, such as downstream products and vertical applications. What about Sanxin’s diversified products and different development directions?

Mr. Dong: Management and development are the eternal themes of plant. Currently, our company is mainly concern with quality improvement and basic management. In addition, we intend to train a group of outstanding management and technical colleagues. This is the foundation. I think a good enterprise should lay a solid foundation first. As for the new process technology, I think we should bring in "internet/internet of things/big data +" technology and the traditional production line of silicon-thermal method could be transformed. Meanwhile, new production technology is also necessary. As for the development of new products, I think structural materials are not our points and we should vigorously develop functional magnesium alloy materials.

Asian Metal: Thanks for accepting Asian Metal’s interview. We wish Sanxin a more prosperous future in 2021!

Mr. Dong: Thanks for your attention to Sanxin Group. Let's work together and look forward to a better magnesium market trend. In addition, we also expect that Asian Metal ksticks to the principle of objectiveness and timeliness in providing clients with better information about the magnesium market. We would like to join hands together and continue to serve in magnesium industry.