Zinc die-casting alloy producers to see greater pressure in 2020

Asian Metal: Thanks Mr. Tu for taking our interview. Would you please first give a brief introduction on your company?

Mr. Tu: As a professional zinc die-casting alloy enterprise of over 20 years, our company focuses on production and selling of zinc alloy. We adopt innovative nitrogen stirring technique to cut oxidation of the alloy, improve its purity and cut impurities. We introduced from Germany direct-reading spectrometers to monitor quality of our products and also installed full-automation ingot-casting production lines.

Asian Metal: What is about your current production status?

Mr. Tu: We have a monthly production capacity of 4,000t of zinc alloy. But owing to weak demand, our output is only 2,000tpm at present and the operating rate is around 50%.

Asian Metal: What are your main products at present? And in which fields are they mainly used?

Mr. Tu: At present, our zinc alloy portfolio consists of Zamak-3, Zamak-4, Zamak-5, Zamak-8, Zamak-12 and Zamak-27, and they are used mainly in auto parts, sanitary fittings, furniture, zipper, construction hardware and so on.

Asian Metal: What is market demand status for zinc alloy at present? And what do you think the reasons are?

Mr. Tu: Demand is quite poor now. Firstly, since last year production and sales of the auto industry have been on the decline. Depressed by the sluggish auto market, demand for zinc alloy shrinks. Secondly, owing to the China-U.S. trade conflicts as well as the globally raging COVID-19 now, exports of Chinese hardware decreased, leading to a notable decrease in demand for zinc alloy. But industries such as real estate and construction have long business cycles and therefore their demand for zinc alloy sees relatively small impacts.

Asian Metal: How do you think of trends of the zinc alloy market in 2020?

Mr. Tu: Generally speaking, we feel pessimistic. Affected by the COVID-19, most zinc alloy producers just resumed production in late February and downstream clients also resumed operation late for the same reason, so our sales dropped. March and April are traditional busy seasons for the zinc alloy market, but compared with the previous years, this March and April the zinc alloy market was quiet. On the other hand, overseas consumers also chose to cut or suspend production as a result of the COVID-19. As it usually takes two or three months for decline in overseas demand to pass to the Chinese market, I believe that by this August there will be no improvement in demand for zinc alloy. So zinc alloy suppliers bear increasing pressure in surviving. I believe that in 2020 the zinc alloy market would see oversupply on the whole and prices for the material would linger at low levels for a long time.

Asian Metal: Prices for raw material zinc ingot are closely linked to zinc die-casting alloy prices. How do you think of the price trend of zinc ingot in 2020?

Mr. Tu: Current zinc ingot prices have already dropped to around production costs. In the long run, zinc ingot prices will surely rebound to some extent. But at present, the market is in an abnormal status, with prices in the global financial market including stocks and futures dropping notably; moreover, the COVID-19 is still spreading overseas. In the short term zinc ingot prices are expected to drop further, but from medium- and long-term perspectives, they will move up.

Asian Metal: Environmental inspection affected every zinc enterprise in recent years. What are your inputs in environmental protection? And what impacts have environmental inspections imposed upon your production and operation?

Mr. Tu: Attaching great value to environmental protection, we introduced the most advanced dust-removing equipment into production. Our production environment has passed ISO14001 certification, and all our products have been granted by SGS with ROHS environmental certificates and also passed SVHC/REACH certification. As a result, environmental inspections do not affect our production and operation greatly.

Asian Metal: Recently, many zinc die-casting alloy plants say that there are more zinc smelting plants beginning to produce zinc die-casting alloy. What impacts do you think this trend will have upon the whole zinc die-casting alloy industry?

Mr. Tu: We think the effects are tremendous. Four years ago we already felt this trend and we think it will have huge impacts upon zinc alloy producers in the coastal regions in Southeast China. Zinc alloy producers in the coastal regions bear high costs in land, staff and environmental input; moreover, they do not have their own mines and have to purchase zinc ingot from outside to produce zinc alloy. In comparison, zinc smelting plants enjoy absolute advantages in terms of costs, and therefore it is inevitable for them to extend businesses into downstream industries, and it's unrealistic for us to resist this trend. Instead, it is becoming a trend for zinc alloy producers to cooperate with zinc smelting plants, and it's also possible that some zinc alloy producers will exit the market gradually.

Asian Metal: What are your future development plan and goals?

Mr. Tu: We already began to cooperate with zinc smelting plants, and part of our zinc alloy production capacity has been transferred to zinc smelting plants. Zinc smelting plants have advantages in costs and production while we have advantages in selling and service. Regarding our future development plan, we will keep our production stable on the whole and, based upon future market trend, choose to cut part of our business.

Asian Metal: Thanks again for taking our interview. Wish your company better and better.

Mr. Tu: Thanks.