Zhang Guanghe: Pursuing long-term development in magnesia market with superior quality

Asian Metal：Good morning, Mr. Zhang, and thanks for accepting the interview. First of all, could you give us a brief introduction of your company and yourself?

Zhang：Our company established from 1995. Under the group, there are six mines, eight production companies, three trading companies, one international freight forwarder agency, and one product management office. Our products are widely applied in industries like iron and steel, non-ferrous metal, metallurgy, casting, construction material and so on. Meanwhile, our products are also very popular in Southeast Asia, Europe and America.

As for me, I am the general manager of Guangyi Mining Products Group Co.,Ltd. and have engaged in refractory industry for over 30 years. I developed more than 10 types of long-lived refractory like long-lived lining material through long-term shop floor working and rich experience. I published many writings on the industry and was repeatedly invited to national and provincial annual meetings and technical exchange meetings to deliver keynote speech. Many of my writings have been collected to symposium.

Asian Metal：Global economy keeps sluggish this year. Please talk about the macroeconomic environment in 2013.

Zhang：This year, global economy keeps very sluggish, and the prospect is not optimistic as well. Economy makes slow progress in Europe and America, and Chinese domestic steel industry, real estate and so on are going through the difficult period. Lots of Chinese enterprises face the problem of loss money and inventory backlog. According to the dull market, enterprise leader should view all things from broader prospective and find solutions. I think the most important thing is to guarantee the quality of products.

Asian Metal：Entering 2013, steel market keeps sluggish, and refractory market is also impacted by the dim situation. Could you talk about current refractory market and the major problems which enterprises are faced with?

Zhang：Sluggish movement of steel industry caused demand shrink for refractory market and this will influence the whole market for long-term. I think there are lots of problems existing, and one of the most important problems I think is that steel mills just look for lowest prices and consider the prices more than the quality when they do the biding for refractory. When the sale prices are lower than the cost, the products will not own good quality and longer usage period. Meanwhile, this also has great impact on the cutthroat competition. No matter how cruel the bidding is, and how hard for sale, we will guarantee the quality of our products. Though profits become fewer sometimes, we will not lower our product quality.

Asian Metal：How do you think about the condition of supply and demand of magnesia market, and does your company also reduce output under the quiet market?

Zhang：Demand for magnesia keeps weak this year, and our company also reduced output to meet the sluggish market. Influenced by the gloomy economic situation, magnesia purchasers become fewer and fewer, and the whole demand reduces a lot compared with that of former years. It’s not optimistic for both domestic and export market. In addition, we have other factors which also have impact on the production cost in Liaoning area, like the resource tax and higher manpower cost.

Asian Metal：Currently, Chinese magnesia capacity is oversized, and downstream market also reduces output. Magnesia industry is likely to adjust to changing demand. Do you also think that the market will develop into integration of enterprises gradually?

Zhang：I think the integration of enterprises is the general trend in the future. Because current magnesia production just rests on rough machining, and the entire technical content stays at a low level. Most enterprises only can produce low-grade products, and competition becomes fiercer. If the whole industry keeps running in this way, it’s just waste of resources and energy, and has no advantage for the whole market. So integration is profitable for both promoting the quality of magnesia and the long-term development.

Asian Metal：High-purity magnesia can instead of fused magnesia in some degree, and what is your opinion on this?

Zhang：High-purity magnesia can instead of fused magnesia in some particular range, and it will not influence much for the demand of fused magnesia. But as for fused magnesia, I think our products still have large gap compared with fused magnesia in other countries and the international standing is not satisfied. So we have to keep improving the quality of our products. Meanwhile, excess capacity and cutthroat competition also influence the development of products.

Asian Metal：Export quotas of silicon carbide and bauxite were canceled this year, but magnesia export quotas still have this year. What is your opinion on the magnesia export quotas policy?

Zhang：Magnesia export quotas policy is made for long-term consideration and is on the basis of energy conservation and market requirement. I think it is good for resource protection and further development. This year, magnesia export market moves slowly, I think it is decided by the global economy, and it’s not limited in China. So our company should arouse employee’s enthusiasm to maintain current production and pull through difficult time. Make the best use of everything under the gloomy situation. At the same time, enterprises should consider research and development, and also increase the technological content of the product to gain success.

Asian Metal：How about the operation condition of your company, and do you have any plans for technical improvement and product up-gradation?

Zhang：Pursuing technical improvement and depending on quality to gain success are our aims from the beginning of setting up our company in 1995. We pay more attention to the products from the research to production application, and explore the performance of the products and increase the quality is the priority among priorities. Magnesia is a kind of advanced refractory material, and can be used in a wide range of applications. But now, most of magnesia products stay at the low-grade state, and most enterprises do not make the best use of it. From my point of view, improve magnesia quality according to the specialty of MgO, refractoriness, and melting point, and then can make the best use of it. Meanwhile, we can also provide better refractory materials for downstream consumers, and prolong the lifetime of kiln lining.

Asian Metal：Please talk about your expectation on magnesia market in Q4 and whether it can improve the rest of this year.

Zhang：I think it’s hard for the whole market to warm up within this year. According to current situation, steel mills run under their production capacity, and demand for crude steel is not strong. Refractory market will keep in dull status and hard to recover in short-term market. Meanwhile, how to get the payment back is another problem under the sluggish market.

Asian Metal：Do you have any suggestions to the government or market participants?

Zhang：China Refractories industry Association has made lots of programmes to develop refractory industry and I think these programmes are feasible. But whether enterprises can follow the spirit to practice, it’s still very hard to realize. China Refractories industry Association makes enterprise development program and adjusts industrial structure on the macroscopicl views, but more enterprises just pay attention to immediate interests and ignore long-term development. So all the enterprises should enhance concept on further development and increase enforcemen。Finally, if enterprises want to have long-term development, we should observe overall situation and holding the market objectively. See more, learn more, and do not stand still and refuse to make progress.

Asian Metal：Thanks again for accepting the interview and wish your company better development!