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Interview with Jeffrey Ma, General Manager of Umicore FuHong (Hunan) Zinc Co.,Ltd
Umicore FuHong (Hunan) Zinc Co.,Ltd, an individual proprietorship enterprise invested with around USD28 million by Belgian Umicore Group, is located in Xingcheng town, Wangcheng county, in Hunan, covering an area of more than about 20,000 square meters. The company is the largest zinc powder producer in China, and also a major producer that earns foreign exchange through exportation of its products in Hunan. The super fine zinc powder produced by the company is mainly used in anti-corrosive paint and galvanized products. Fuhong’s high quality zinc powder is popular in both domestic and overseas markets. With the full production capacity of 22,000tpy, Fuhong sold about 20,000t of zinc powder in 2006 with sale around RMB500 million, turning over RMB30 million in taxes. ...
Positive trends expected to see in zinc powder market in 2010
----Interview with Jeffrey Ma, General Manager of Umicore FuHong (Hunan) Zinc Co.,Ltd
1. What do you think of the current economy? Do you think that the economy in China is recovering? Can the recovery of economy in China push up the other countries to shake off the shadow of economic crisis?
We see first signs of a recovery in some areas of the Chinese market supported by massive stimulus efforts of the Chinese government. However, it is too early to judge if this move is sustainable. We further believe that a full recovery of the Chinese market can only happen once the exports from China, which are still some 20% below the previous year, will pick up in a sustained manner. A recovery of the Chinese economy will certainly help to stimulate the world economy recovery.
2. Has the economic crisis dampened the demand for zinc powder? How much will the demand decline this year?
The world economic crisis has had a significant impact on demand for zinc powder in China. China is the world leader in the manufacturing of sea containers (90% of world production) and these steel containers are protected by zinc paints containing a big part of zinc powder. The slowdown of the Chinese export activity and the general reduction of worldwide trade combined with technical changes of the paint producers have reduced the total production of this industry. Other industries consuming zinc powder are still growing but are far from compensating the loss in the container sector.
This major correction has already started in 2008 (second quarter) and continues in 2009. We estimate that the demand of zinc powder has dropped by a 35-40 % in the global market in 2008 and will further deteriorate in 2009.
3. How about the production in Umicore Hunan Fuhong Zinc Chemical CO., Ltd? Is the output of zinc powder lower than that in the same period of 2008? Many small-sized zinc powder plants reduced production in China this year. In such a situation, did your company increase the market share? What is your production target in 2009?
The production of Umicore Fuhong had also decreased following the market trends. Our production in 2009 will be lower than the same period of 2008.
4. How does your company combat with the economic crisis, which has spread fast since late 2008?
Umicore Fuhong is monitoring very closely its costs and we are also working on different programs to improve the efficiency of our operations. At the same time, we have invested in the medium and long term sustainability of our activity by investing in health, safety and environmental matters to make sure that we shall have the best operations when the market recovers. Our target is to inform the different stakeholders about the advantages of using our products and of becoming a long term partner of Umicore Fuhong.
5. What is your forecast about the zinc ingot market and zinc powder market in the second half of 2009?
Global demand for zinc has collapsed in recent months. As a result, prices have dived into the cost curve. As high cost producers have come under pressure, there have been huge cuts in production. However, the resulting surplus at global level is not looking very severe. China’s official stockpiling of 159000t by the federal government and more by provincial governments has also taken up some of the surplus. As a result, sentiment is improving and the zinc price has gone up in recent weeks, helped by hopes that the world economy is bottoming out and by strength in copper prices. However, low utilization rates from producers are likely to limit the upside for zinc prices. Zinc producers are expected to increase production if zinc prices go up.
The zinc powder market will only recover significantly when the export activity of China and the General Trade will come back. We expect that it will take longer than 2009 and hope to see positive trends in 2010.
6. Your advices for other zinc powder producers.
The sustainability will very soon be a critical aspect in the zinc powder industry. The industry will have to invest massively to become sustainable in the long term and it will be a major challenge for the different small and medium-sized companies to realize the change.
We see first signs of a recovery in some areas of the Chinese market supported by massive stimulus efforts of the Chinese government. However, it is too early to judge if this move is sustainable. We further believe that a full recovery of the Chinese market can only happen once the exports from China, which are still some 20% below the previous year, will pick up in a sustained manner. A recovery of the Chinese economy will certainly help to stimulate the world economy recovery.
2. Has the economic crisis dampened the demand for zinc powder? How much will the demand decline this year?
The world economic crisis has had a significant impact on demand for zinc powder in China. China is the world leader in the manufacturing of sea containers (90% of world production) and these steel containers are protected by zinc paints containing a big part of zinc powder. The slowdown of the Chinese export activity and the general reduction of worldwide trade combined with technical changes of the paint producers have reduced the total production of this industry. Other industries consuming zinc powder are still growing but are far from compensating the loss in the container sector.
This major correction has already started in 2008 (second quarter) and continues in 2009. We estimate that the demand of zinc powder has dropped by a 35-40 % in the global market in 2008 and will further deteriorate in 2009.
3. How about the production in Umicore Hunan Fuhong Zinc Chemical CO., Ltd? Is the output of zinc powder lower than that in the same period of 2008? Many small-sized zinc powder plants reduced production in China this year. In such a situation, did your company increase the market share? What is your production target in 2009?
The production of Umicore Fuhong had also decreased following the market trends. Our production in 2009 will be lower than the same period of 2008.
4. How does your company combat with the economic crisis, which has spread fast since late 2008?
Umicore Fuhong is monitoring very closely its costs and we are also working on different programs to improve the efficiency of our operations. At the same time, we have invested in the medium and long term sustainability of our activity by investing in health, safety and environmental matters to make sure that we shall have the best operations when the market recovers. Our target is to inform the different stakeholders about the advantages of using our products and of becoming a long term partner of Umicore Fuhong.
5. What is your forecast about the zinc ingot market and zinc powder market in the second half of 2009?
Global demand for zinc has collapsed in recent months. As a result, prices have dived into the cost curve. As high cost producers have come under pressure, there have been huge cuts in production. However, the resulting surplus at global level is not looking very severe. China’s official stockpiling of 159000t by the federal government and more by provincial governments has also taken up some of the surplus. As a result, sentiment is improving and the zinc price has gone up in recent weeks, helped by hopes that the world economy is bottoming out and by strength in copper prices. However, low utilization rates from producers are likely to limit the upside for zinc prices. Zinc producers are expected to increase production if zinc prices go up.
The zinc powder market will only recover significantly when the export activity of China and the General Trade will come back. We expect that it will take longer than 2009 and hope to see positive trends in 2010.
6. Your advices for other zinc powder producers.
The sustainability will very soon be a critical aspect in the zinc powder industry. The industry will have to invest massively to become sustainable in the long term and it will be a major challenge for the different small and medium-sized companies to realize the change.