Zhang Aiheng: To establish secondary lead recycle base in Central Plaint by expanding lead industrial chian

Asian Metal: Mr. Zhang, thank you for accepting this interview and would you briefly introduce the current business and the positioning of secondary lead business in the future?

Zhang: As it well-known, the related ministries and commissions in China have kept strengthening the regulation of secondary and lead acid battery industries, indicating some problems such as irregular recycle market and massive small smelters in secondary lead industry. Therefore, regular enterprises fail to produce with full capacity, resulting in losses. As a micro enterprise, seeing the weak macro economy as weak non-ferrous market with declining prices, out company also suffered pessimistic scenario but we are trying to overcome difficulties and to develop further for maintaining regular production and business.

Paying much attention to secondary lead business, the company invested over RMB46M for environmental protection regulation to improve technical data for self development. Furthermore, industrial chain will be expanded further to increase added value for strengthening competitive edge. As the government will issue policies to support developing regular secondary lead enterprise, the development is optimistic, and we will endeavor to produce with full capacity as soon as possible to make contributions to regular development.

Asian Metal: We have known that half of large secondary lead producers in developed nations previously had secondary lead businesses, a third were previously lead battery plants, and a sixth were started with secondary production. To sum up, lead ore smelters have competitive edge in secondary lead business, and do you think Jinpeng Lead Industry has advantages in this area?

Zhang: The parent company, Anyang Yubei Gold & Lead Co., Ltd. is a lead ore smelting enterprise, and lead products from our company make raw lead smelting products series more complete. Besides, each department educes advantages for complement. For instance, the parent company could process smelting scrap from our company and deliver some lead product to us for extensive processes, which are advantages we have.

Asian Metal: After the tax rebate policy being canceled in 2010, large domestic secondary lead enterprises with production qualification invested large sum of money to upgrade facilities, but profits was dim. The policy was rolled out again previously, but most enterprises did not get tax. What led to the situation and how could the policy influence the development of secondary lead industry?

Zhang: Firstly, the current scenario is over-capacity and fierce competition in regular enterprises and vicious competition in illegal small smelters, which improves production cost in regular ones; in addition, the grim macro economy depresses real enterprises and the soaring labor cost also weights on these enterprises, resulting in weak profit. I have known that the rebate tax policy for renewable resources has not implemented and situation varied in each region as it relates to local policies and finance. Of course, the policy could support the development of secondary lead industry, and I hope the rebate ratio could be raised as it is positive to regular enterprises’ development in the undeveloped industry.

Asian Metal: Seeing massive irregular secondary lead smelters occurred in recent years, what policies do you think is positive and are there any defects considering the sound development of secondary lead industry?

Zhang: This is an existing problem that we have repeatedly reported to related authorities which are taking actions actively, such as tax rebate policy and promoting regular enterprises list management system in secondary lead and lead acid battery industry; as to defects, authorities should strengthen the regulation of illegal enterprises. Of course, the problem exists in every region with different situation and regulation.

Asian Metal: Some illegal secondary lead enterprise shocked margins and raw material procurement in large enterprises given simple facilities and low costs. What measures does Jinpeng Lead Industry take to ensure raw material supply and steady growth of profits?

Zhang: Our company does not compete with small smelters due to large difference between. As to raw material procurement, smelting enterprises do not have pricing power unless monopoly. The regulation of recycle net is a good solution that has been talked about, but operability is crucial. Meanwhile, we pay attention to expanding industrial chain and improve technical content in product to maintain profits.

Asian Metal: Although invested massive capital in environmental protection and production since 2012, large secondary lead enterprises leaded by Jinpeng Lead Industry failed to improve profits significantly due to the weak industry. Enhancing profitability is the key to development of all enterprises, and whether the industry could have a short prime-time in the near future in terms of the overall situation and why?

Zhang: The weak scenario is unlikely to recover in the near future but we still have confidence towards the future development.

Asian Metal: The FED (The Federal Reserve) plans to quiet QE3 in H2, and most economists believed that the US may implement the Strong Dollar between 1998 and 2000 in the coming 2-3 years, which will shock the non-ferrous metal industry, and what do you think about it? Overseas lead mines slowed down expansion, releasing the oversupply, and US and European nations reduced subsidy depressed the enthusiasm from downstream enterprises, so selling prices in ingot market were stronger than those in markets of other metals recently. What do you think about the electrolytic lead and secondary lead markets in China?

Zhang: Whether US quitting QE3 depend on the recovery of US economy, and the quit may be delayed if economy remains grim. Personally, the reduction in domestic stock market and future market in London was slightly aggressive. Policies implemented by US will influence the market and also emerge uncertainties as time goes on. For instance, the appreciation of prices of resources for production in China also supported prices. While domestic prices remained relatively unchanged although LME metal prices slumped recently. Therefore, the Strong Dollar should be interpreted rationally without exaggerating its influences.

Just as I mentioned above, the appreciation of resources for production supported prices, but weak consumption weakened the appreciation, resulting from prices at a fluctuation dilemma.

Asian Metal: Thank you for accepting the interview and wish you every success in work!

Zhang: Thank you!