Shi Xin: Zinc oxide enterprises development focuses on improvement of product quality

Asian Metal: Good day, Mr. Shi. Thank you for accepting this interview. Zinc price keeps at a low level this year. Would you like to talk about the trend of zinc ingot price in the following months?

Shi: zinc price kept fluctuating at the low level in the recent three months. Although zinc smelters reduced production in succession, it could not offset the surplus of the international market. In addition, the Chinese domestic economic growth rate is slowing down gradually, so it is hard for zinc price to get effective support, and I predict the price will run at a low level for greater part of H2 this year. If the zinc price keeps fluctuating at a low level for a long time, most zinc oxide producers’ profits will decline and impact negatively on investment and production projections for Q1, and perhaps extends to Q2, in 2014.

Asian Metal: Zinc oxide market kept sluggish since early this year, especially the price of zinc oxide remained at a low level. What is your take on this?

Shi: The development of zinc oxide industry has not been smooth in the recent three years. The demand of zinc oxide keeps stable or nearly flat basically this year with no shift in aggregate demand. The supply exceeds demand slightly. Furthermore, we find that the market is worse than expected this year as downstream industries go down this year impacted by weak economy. The demand for zinc oxide from rubber industry decreased since last year, and the demand from electron industry also declined. I think the future market trend appears less optimistic and we hold conservative attitude given the trends in the past three years.

Asian Metal: The supply exceeded demand in Chinese domestic zinc oxide market in the past years. What prediction do you have for the future zinc oxide market?

Shi: From the present situation, the demand for zinc oxide is unlikely to exceed the supply for the following reasons: poor self-discipline of the industry, low national industrial policy barriers in China, simple technical skill of the products and low technical content. However, as the current bank lending is tightening, and the requirements for environmental protection is stricter than ever it has been, and zinc oxide market competition is more fierce, some small and medium-sized enterprises may cease production and drop out zinc oxide market due to tight fund and decreased profit margin. The capacity of zinc oxide will decrease in the future market, but it is still hard for the demand to exceed the supply.

Asian Metal: It is said that there are many zinc oxide plants in Gaoyi. How do you see future development direction of zinc oxide market in Gaoyi?

Shi: There are about 27-28 zinc oxide plants in Gaoyi Hebei through preliminary estimate, and the whole operating rate is low. Zinc oxide market competition is very fierce and the transaction price makes a new low record in the recent two years. Those will impact zinc oxide enterprises in Gaoyi. In addition, there are many small and medium-sized enterprises in Gaoye, which have limited ability for resisting pressure. If the market continues to keep sluggish, I predict about 1/3 of zinc oxide plants will halt production in the next 3-5 years.

Asian Metal: There are a few of enterprises expanding or building additional production capacity this year. Do you have anything in the pipeline for capacity expansion?

Shi: We have no concrete plan for investing in capacity expansion in the next two years. The development space of zinc oxide industry is limited, and we will mainly consolidate and widen the cooperation with consumers. Considering the future development, very few zinc plants enlarge production in China this year, instead that there is idle-capacity in many zinc oxide plants. However, most producers transform combustion apparatus and use natural gas instead of coal for enhancing competitiveness and reducing production cost in 2013.

Asian Metal: Zinc oxide has many excellent properties and wide application. Which industry is your zinc oxide used in at present?

Shi: Our zinc oxide is mainly sold to rubber and tire industry before the financial crisis of 2008. However, consumers from rubber and tire industry always delay payment and lower transaction price, so we give up some consumers with outstanding payment for developing. We mainly sell zinc oxide to electron industry and phosphating industry now. Nevertheless, electron industry goes down slightly this year and the demand for zinc oxide is weak.

Asian Metal: Facing the increasing fierce competition in zinc oxide market, do you have any advice to active companies in the industry?

Shi: The competition is stiff and fierce. There will be no improvement without competition. Different companies face different challenges and perhaps problems. However, improving product quality is key element for enterprises development. In addition, enterprises should give full play to own leverage to focus on different market and seize the market opportunities.

Asian Metal: Thank you for sharing your opinion with our readers and industry players.

Shi: Thanks! We appreciate supports from Asian Metal.