Zhang Yahong: Aluminum fluoride market to remain in depression in 2013 facing serious overcapacity

Asian Metal: Thank you for accepting our interview. Throughout the year of 2012, aluminum fluoride price fluctuated a lot and what do you think is the reason?

Zhang: The first reason that the aluminum fluoride price goes down is the declining raw material price. Influenced by the economic situation, the fluorspar price used to remain at RMB1,700/t (USD273/t) and the sulfuric acid price went down to RMB220/t (USD35/t), so the aluminum fluoride price failed to get support. Secondly, the price is closely related to the supply-demand relationship. If the operation rate is high, the sufficient stocks will weigh on the price. Besides, some producers get into a panic facing the falling price and they may sell the products at a lower price. Conclusively, overcapacity is the most serious problem. The current operation rate remains at 50-60%, which is quite low.

Asian Metal: How about the current production cost?

Zhang: The full cost now is RMB8,000/t (USD1,286/t). The aluminum fluoride price is pushed up by the fluorspar price, but the profit is obtained by fluorspar producers. Meanwhile, both sulfuric acid and aluminum hydroxide prices increase and the current sulfuric acid price is more than RMB400/t (USD64/t). Now the aluminum fluoride price is RMB7,600-7,700/t (USD1,222-1,238/t) delivered.

Asian Metal: How do you think of the aluminum fluoride price in 2013?

Zhang: I am afraid the market of 2013 will be worse than it was last year. Given the new capacities in both Northwest China and South China, the situation is more serious. As a result of the overcapacity, some plants will be eliminated just like the situation four years ago. This is the law of market competition and only with the production cost lower than the average social labor cost, can an enterprise become competitive.

Asian Metal: Facing the serious overcapacity, there are still new capacities under construction in some areas. What do you think is the reason?

Zhang: There exists the blindness in the market. People who don’t know the market want to take part in, while the ones who are involved in the market cannot quit due to the high cost. For example, it will cost RMB100 million to build one production line of 30,000tpy. In addition, according to some local policies, the fluorspar resource will only be consumed in local market, which makes the project of hydrofluoric acid and the aluminum fluoride the only outlet. Local Development and Reform Commissions think the aluminum fluoride market is of high profits, so more new projects have been approved. Actually, we should avoid such kind of blind investment.

Asian Metal: As the leading enterprise of the aluminum fluoride market, do you have any proposals for the market?

Zhang: As a council member unit of the Aluminum Fluoride Trading Association, we have responsibility to call for the society that we should avoid the blind investment, which leads to a waste of resource. If more new capacities come on stream, the market will be worse. I once heard that one local Development and Reform Commission approved a new aluminum fluoride project of 30,000tpy, but I think it should be the state commission to decide whether the project should start operation or not. According to our statistics, the aluminum fluoride capacity in China will reach 1,300,000tpy in 2013, which can meet the demand of the whole world. So the government should be stricter with those new projects.

Asian Metal: Facing the sluggish market, what is the outlet of the aluminum fluoride enterprises?

Zhang: Firstly, we should lower the production cost and enlarge the market share. Secondly, we must pay attention to the difference generated by regional sales and purchase to lower the freight.

Asian Metal: What is the market strategy of your company in 2013?

Zhang: Still, the Chinese domestic market and the overseas market each accounts for 50% of whole sales in 2013. If the company becomes enough competitive, we may consider increasing our production. There is one characteristic in aluminum fluoride market---the regional sales and purchase. When the market price is near the cost line, RMB50 (USD8/t) can make a difference, so we pay much attention to the freight. We purchase raw material in the limited radius, because though the price may lower in somewhere else, it is not proper for us to buy, considering the long distance. The rule can also apply to the sales. For example, if we sell the products to Henan, the freight is RMB100/t (USD16/t) higher than delivering to the plants nearby.

Asian Metal: To which countries do you export your products? Will the company increase the export volume in the future?

Zhang: We mainly export aluminum fluoride to Australia, India, North America, South America and also the Middle East. The smelting plants in Middle East are just like those in Northwest China, who have the cheap resource. Also, aluminum fluoride plants should be located in the places that are abundant in raw material resource. Although we have the plan to enlarge the overseas market share, it depends on the international economic situation. Some producers spare no effort to enter the export market even though they may suffer losses, which benefits foreign customers.

Asian Metal: What was the annual production of your company in 2012? Does the company have a plan to increase production in 2013?

Zhang: The full aluminum fluoride capacity is 180,000tpy, while we ran at the production of 90,000tpy in 2012 and the annual output was 80,000t. We have no plan to increase production since now we have no advantage in raw materials.

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

Zhang: Thank you!