Hu Yude: Cobalt salt industry enters meager profit era, adjustment inevitable

Asian Metal: Thank you for accepting our interview! We know that Xinwei manufactured cobalt salts products previously and then added the production lines of cobalt cathode. “Heng Xing” cobalt cathode, which is produced by Nantong Xinwei Nickel & Cobalt Hightech Development Co., Ltd. was successfully registered on LME on January 18, 2011. Please talk about the current products pattern of your company.

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Hu: At present, cobalt chloride accounts for about 60% of our output, while cobalt sulfate and cobalt cathode take up around 10-20% and 20-30% respectively. We do not sell cobalt tetroxide in domestic market and begin to export cobalt tetroxide in small volumes to Japan and South Korea. We also export cobalt sulfate to those two countries. Our total output will adjust according to the demand. The production lines of cobalt chloride and cobalt sulfate are together, and it is easy to transfer. This is our new technology and we can produce the two products at the same time.

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Asian Metal: Please share with us about your working experience and the obvious change in cobalt industry in recent years.

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Hu: I entered cobalt industry in 2006, and joined Xinwei at the end of 2008. In recent several years, the production capacity is expanded continuously. In my view, the situation of oversupply will exist for a long time. 2011 was the year when cobalt market turned from short supply to oversupply and the market changed from a seller’s market to a buyer’s market. Competition becomes intense among manufactures.

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Asian Metal: Because cobalt supply is unceasing increasing in recent years and cobalt price also decreases in general. Please share your views on the current cobalt market.

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Hu: Weak market is mainly affected by the recession of domestic and international economic environment. Demand is slow in cobalt market. From 2011, the situation of oversupply emerged and it is a period that every industry must go through. It is the time for the industry to reshuffle. The companies with high cost and unreasonable management structure will be weeded out. At the moment, a lot of wet smelting cobalt enterprises are adjusting with some downsizing, some reducing output and some halting production.

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Asian Metal: Please talk about the current situation of cobalt salts enterprises, such as the situation of production, sales.

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Hu: In the first half of this year, most of cobalt salts enterprises were at a loss since most companies imported lots of the cobalt concentrates and it needs several months for the cobalt concentrates to be transferred into finished products. As cobalt price goes down in general, many companies begin to lose money. Oversupply is serious in cobalt salts market and most enterprises cut output. Taking our enterprise as an example, we cut our cobalt chloride output to 400tpm, down from 700-800tpm previously. In addition, we have inventory every month. The operating rate of cobalt salts factories is about 50-60% as a whole.

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At the present time, cobalt market has entered the meager profit era and I think it will need 1-2 years for the market to adjust and then the market will pick up. I think lithium battery industry will drive cobalt market. I am optimistic about the development of lithium nickel cobalt manganese oxide and Samsung and LG have purchased the raw materials in large volumes.

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Asian Metal: How do your company to cope with the slow cobalt market?

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Hu: What we can do is reducing cost from production, processing, etc.. We devote ourselves to technology innovation. Furthermore, we also do some business about nickel.

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Asian Metal: At the present time, the ration of imported cobalt concentrates is decreasing, while the ration of imported intermediate products is increasing. Please talk about the trend of raw materials in the future.

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Hu: From the second half of 2010, we began to use both cobalt concentrates and intermediate products. In 2011, we imported large volumes of intermediate products from Glencore and we also bought some from Wanbao. Now, we use the two kinds of raw materials.

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The yield of intermediate products is higher than that of cobalt concentrates (The yield of cobalt concentrates is 92-93%, while it is 94-95% for intermediate products.). There is less sludge to use intermediate products and we tend to use intermediate products because of the strict environmental protection. Considering of the cost purely, it is almost the same to use those two kinds of raw materials.

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Asian Metal: Xinwei is one of the biggest companies in cobalt salts industry. Please share with us about the advantage of your company.

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Hu: Xinwei insisted on producing cobalt salts from the beginning of the factory. In cobalt salts market, out output is the biggest in Chinese domestic market and we produced 800tpm at the most. We mainly own four advantages. Firstly, the personnel collocation is reasonable, so the management cost is low. Secondly, we have technology advantage. We have 10-20 patents on utility model and technology. Thirdly, our financial cost is relatively low because we almost do not have bank loans. Fourthly, we have low cost advantage on raw materials. We buy cobalt concentrates from Glencore and Trafigura and we also cooperate with Chinese enterprises who collect cobalt concentrates in Africa.

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Asian Metal: How about the planning and development direction of your company?

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Hu: We plan to extend the production line in the future. I think many producers would like to manufacture products from cobalt concentrates to lithium cobalt oxide.

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Asian Metal: Thanks again for your cooperation! Respectfully wish your corporation progresses day by day.

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Hu: Thank you!

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