Asian Metal: Thank you Mr. Xu for joining our interview, please introduce your company briefly.

Mr. Xu: Our company was established in Oct, 2006 and is locatied in West yard Road, Xiachuankou Industrial zone, Minhe county, Qinghai province with the construction area about 70,000 square meters. Our company covers an area of 160 acres. Previously we own five furnaces of 18,500kVA but we updated all of them into 22,000kVA with the annual capacity of 150,000t now. We also have the feedstock self-feeding system and encrypted dust removal installation and the facility of power generation using waste gas.

Asian Metal: How about the current monthly output of ferrosilicon, and what's your mainstream customers?

Mr. Xu: We have five furnaces of 22,000kVA in total, and we had one under maintenance in January and the output reached around 8,000t in January. Our monthly output could reach around 11,000t in February. We keep two furnaces running for ferrosilicon 75%min with daily output of 136t and three of them running for ferrosilicon 72%min with daily output of 216t. We process ferrosilicon 72%min 10-60mm with the processing machine and supply around 70% of the whole amount to steel mills through traders. We also supply ferrosilicon 75%min 200-500mm to magnesium ingot plants directly, which accounts for around 20%, and the left was supplied to foundries.

Asian Metal: What's the advantage of your ferrosilicon products from the perspective of production cost and quality?

Mr. Xu: The current electricity payment is consuming first and bill second based on the deposit. The cost of electricity in January was around RMB0.43/kWh (USD0.067/kWh), up by RMB0.04/kWh (USD0.006/kWh) from last month, while the charge in February would be the same as January. While other peers in Ningxia and Shaanxi, their electricity charge already above RMB0.5/kWh (USD0.078/kWh). The electricity cost accounts for around 60-70% of the whole production cost, so our production cost keeps relatively lower than others. The current prices of semi coke, silica ore, oxidized scale and electrode paste hover at RMB2,040/t (USD320/t), RMB186/t (USD29/t), RMB1,850/t (USD290/t) and RMB4,700/t (USD738/t) respectively (9 Feb) and the prices of raw materials keep stable. Additionally, We have the facility of power generation with waste gas, so the production cost turns lower than others, so we can afford to consume sufficient power energy and add some steel scraps when we smelt ferrosilicon, which guarantee our ferrosilicon solid enough to resist pulverating.

Asian Metal: Please summarize the ferrosilicon demand and price trend in the past half a year.

Mr. Xu: The ferrosilicon market was impacted by the energy consumption reduction policy very much during the whole year. The output in Inner Mongolia and Ningxia continuously reduced in the first half this year, and the price of ferrosilicon kept rising in the H1 2021. The second quarter is the power consuming peak period in summer, and the power supply in Inner Mongolia shortened, then the ferrosilicon output decreased further in the province. Moreover, Ningxia government also conducted power consuming restriction policy in Q3 which drove the price of ferrosilicon increased further. In late September, another major production area-Shaanxi also conducted the policy, which pushed the ferrosilicon price reached the peak point during this year. We sold ferrosilicon 72%min 10-60mm at RMB17,000/t (USD2,672/t) EXW D/P in late September. For Q4, the demand from steel mills shrank. As the Chinese government ordered steel mills to have the output in 2021 no more than last year, most steel mills had to decrease output in Q4 to comply with the policy. Because the crude output in the first three quarters 2021 already reached around 80% of the whole output in 2020 based on the high profit. Consequently, most steel mills began to ramp down outputs since October. The sharply decreased demand of ferrosilicon from steel mills dragged ferrosilicon prices to slip quickly. Prices of ferrosilicon 72%min 10-60mm restlessly kept slipping from RMB16,000/t (USD2,514/t) EXW D/P in late October to RMB8,400-8,500/t (USD1,320-1,336/t) EXW D/P in early December. In December, the price still kept slipping but with much narrower paces as the price already approached to the production cost. Until the end of December, our ferrosilicon 72%min 10-60mm prices hovered at around RMB8,200/t (USD1,288/t). Supported by the increasing purchases from steel mills before the Spring Festival, prices of ferrosilicon 72%min 10-60mm rebounded to RMB8,400-8,500/t (USD1,318-1,333/t) at the end of January. For us, we kept stable output in Q1, Q2 and Q3, but the Qinghai government conducted energy consumption reduction in the middle of October, and our output in October also decreased by around one third. But since last November, the power supply in Qinghai returned to regular level with higher charge. Our current price of ferrosilicon 72%min 10-60mm standst at RMB8,400/t (USD1,318/t) EXW D/P and RMB9,000/t (USD1,412/t) EXW D/P for ferrosilicon 75%min 200-500mm.

Asian Metal: What are the key factors to impact the ferrosilicon price trend and what are those key factors would influence the market in 2022?

Mr. Xu: The government's energy consumption reduction policy in 2021 played an important role for the price fluctuation during the whole year. The policy would sustain in 2022 and the supply and demand from steel mills would both keep stable or slightly down against 2021. I hope Chinese government policy in 2022 would benefit the price to keep relatively stable in long-term instead of sharply jumping up and down.

Asian Metal: During the Chinese Spring Festival holiday and the Winter Olympic Game, did your company stop production or decrease output? How do you foresee the ferrosilicon price trend in Q1 2022?

Mr. Xu: So far, we didn't get any order to stop production from the local government, and we plan to run regularly during the Spring Festival and the Winter Olympic Game. I sold out all the output in February, I suppose most peers kept tight spot supply as well. Ferrosilicon prices would keep stable or soften during the Winter Olympic Game upon the remaining tight spot supply even though the demand would keep sluggish during the holiday and the Winter Olympic Game. But the Winter Olympic Game would end on 20th February, and the demand would rebound quickly in March as most steel mills would ramp up outputs. Prices of ferrosilicon in China would go up in late February and maintain the upward trend in March.

Asian Metal: What's the next plan for your company?

Mr.Xu: We manage to feed our regular clients' requirements currently with our five furnaces, and we don't have plan to establish new furnaces. We don't have plan to do export business. While we hope to cooperate with more magnesium ingot plants in the future.