12th Rare Earth Summit
May 27-28, 2021
Hangzhou, Zhejiang, China
11th Aluminum Raw Materials Summit
May 20-21, 2021
Hangzhou, Zhejiang, China
9th Magnesium Summit
April 15-16, 2021
Hangzhou, Zhejiang, China
13th World InBiGeGa Forum
March 25-26, 2021
Hangzhou, Zhejiang, China
7th World Antimony Forum
June 13-14, 2019
Changsha, Hunan, China
7th Refractory & Abrasive Materials Summit 2019
May 23-24, 2019
Qingdao, Shandong, China
10th Aluminum Raw Materials Summit
May 16-17, 2019
Zhengzhou, Henan, China
11th Rare Earth Summit
May 9-10, 2019
Qingdao, Shandong, China
8th Magnesium Summit
April 11-12, 2019
Zhuhai, Guangdong, China
12th World InBiGeGa Forum
March 14-15, 2019
Zhuhai, Guangdong, China
6th World Manganese & Selenium Forum
May 21-22, 2018
Hainan Sanya, China
Interview with Zhu Qiming, vice president of Sichuan Mingda Enterprise Co., Ltd
Sichuan Mingda Enterprise Co., Ltd, located in Ebian County, Leshan City, Sichuan Province which is near to Kunming-Chengdu line, is a private enterprise on the basis of modern enterprise system. The company focuses on electric power development, ferroalloy production, industrial and civil buildings, as well as real estate development, commercial storage and transportation, international trade. It has about 1,300 staffs and railway special lines, as well as 5 whole-owned or holding subsidiaries such as Sichuan Mingda Metallurgical Enterprises Co., Ltd, Sichuan Mingda Ebian Alloy Co., Ltd, Sichuan Mingda Ebian Electric Power Development Co., Ltd, Sichuan Mingda Construction Engineering Co., Ltd and Sichuan Ebian Mingda Material Trade Co., Ltd.
Zhu Qiming: Healthy development of chrome market requires immediate solutions to importing issues
----Interview with Zhu Qiming, vice president of Sichuan Mingda Enterprise Co., Ltd
Asian Metal: Mr. Zhu, very nice to meet you! Thanks for accepting our interview. Firstly, could you share with us your comments on the current macroeconomy?
Mr. Zhu: Sure. Generally speaking, the current situation is not so satisfactory but it will recover slowly instead of worsening.
Firstly, the government carries out tight currency policy this year and there are obvious signs for synergistic effects occurring in November and December. Both steel market and ferrochrome market get significantly influences. But the central bank decreased the RRR by 0.5% recently, symbolizing that the government are paying more attention to the substantial economy and tight currency policy ends. The government will keep strong currency policy in the later period. Hence, domestic economy is likely to improve in Q1 instead of worsening. Two main reasons are as follows: firstly, capital is sufficient as banks increase their loan; secondly, economy is expected to rise slightly due to the traditional “good start” in changeover of local governments.
From international aspect, there are obvious signs for negative factors from European debt crisis to end. The economy will recover in the coming year and continues to rise from a low level in the beginning of next year.
Asian Metal: How is your company going now? How are the operating rates represented in conference for domestic large-scale plants?
Mr. Zhu: We have only two submerged arc furnaces of 16,500KVA and 7,500KVA under normal production, as well as a refining furnace. Operating rate is blow 30%. The figures of most large-scale plants, such as Shanxi Jinzhong Wanbang Industry and Trade Co., Ltd., Jilin Ferroalloy Co. Ltd., Sichuan Leshan Xinhe Electric Power Comprehensive Opening Co., Ltd., Xinganglian Metallurgical Co., Ltd., Sichuan Tianyi metallurgy Group, Sichuan Ehui Ferroalloy Co., Ltd., Ningxia Tianyuan Manganese Industry Limited, Sichuan Mingda (Group) Enterprises Co.,Ltd., Shanxi Hengshan Industrial Co., Ltd. and Pinglu Prosperity Stainless Steel Burden Co., Ltd., also keep at a low level of 50-70%. Higher operating rate means more losses. Hence, some plants have to reduce production in order to stabilize the market. Tight electric power supply is another reason for plants to decrease operating rate except sluggish market situation. The company is bearing great pressure from power shortage due to the dry season and high cost of large power grid even we own power stations.
Asian Metal: Smelters are expanding capacities in spite of weak market. What influences do you think will bring by the increasing capacities?
Mr. Zhu: Expanding capacity is a big problem at present. Both large-scale plants such as Shanxi Jinzhong Wanbang Industry and Trade, Sichuan Tianyi metallurgy Group, Ningxia Tianyuan Manganese Industry Limited and small-scale plants are increasing production capacities. For instance, the capacity of smelters in Sichuan Shimian county can reach about 100,000tpy. Considering the current situation, domestic market will not be significantly influenced as demand is a bit higher than supply due to insufficient operating rates. China consumes more than 4 million tons of ferrochrome per year, 50% of which is self-sufficient while the other 50% from overseas market. However, on the international market, supply exceeds demand. Impacts from expanding capacity will gradually occur in the later period.
Asian Metal: How is the current relationship between demand and supply in ferrochrome market?
Mr. Zhu: Large-scale plants hold small quantities of inventories from 2000-3000t to 10,000t, under normal condition. Many plants are under negative inventories situation, having signed contracts with mills. Import volume of HC ferrochrome has decreased by 40-50% since the beginning of July for domestic mills and most mills are consuming inventories at present. Some mills invite tenders frequently, symbolizing that mills hold insufficient inventories and plan to take position in time.
However, ferrochrome plants hold large quantity of inventories in hand. According to statistics, many plants hold about 2 million tons of inventories such as Shanxi Jinzhong Wanbang Industry and Trade, Jilin Ferroalloy, Sichuan Leshan Xinhe Electric Power Comprehensive Opening, Xinganglian Metallurgical, Sichuan Tianyi metallurgy Group, Sichuan Ehui Ferroalloy, Ningxia Tianyuan Manganese Industry Limited, Sichuan Mingda (Group) Enterprises, Shanxi Hengshan Industrial, Pinglu Prosperity Stainless Steel Burden, China National Minerals and Sinosteel Raw Materials. The current inventories can maintain above three-month production. Adding that there are large quantity o inventories at port, domestic ferrochrome is likely to maintain about 8-month of production.
Hence, chrome ore price is unlikely to increase especially for international market even though ferrochrome price rises due to the supports from demand and high cost. I hope domestic consumers depend on inventories and purchase in spot market as domestic chrome ore inventory keeps at a low level instead of importing from overseas market in order to depress the price in the international market.
Asian Metal: Prices of chrome ore at ports went up these days. Are you going to replenish the inventory?
Mr. Zhu：We will replenish the inventory due to fewer stocks. Prices in spot market are cheaper than those of future. Though chrome ore trader may make loss or have less profit if they make deliveries now, they will make few deliveries under the pressure of funds.
Asian Metal: Can you make some predictions on the market before the end of the year and next year?
Mr. Zhu：The market will hit the bottom and be stable before the end of the year, but large increase is impossible. The stocks at ports are accumulated and downstream demand lacks strong support. The real estate market is sluggish as the only hope is indemnity housing building. Despite low operating rate and slow funds in later days, the actual operating rate cannot lift the chrome market.
The market next year will not be quite optimistic. One big problem is the change of the office, after which the government will introduce some favourable policies, so the market in H1 will go up slightly. The first year after the change will be the one with stable economy, instead of rapid growth in economy. Policies will make effects in 2013, so large increase will not take place next year. Many medium and small enterprises are closed, which are not in line with what the media reports and will also affect national policies. In general, the market will not have a significant improvement next year, but it will be better than that of this year.
Asian Metal: Are there some development plans in Sichuan Mingda (Group) Enterprises Co., Ltd.?
Mr. Zhu：We have no immediate expansion plans for production not because of weak market but for no guarantee of power supply. The power price of state grid is RMB0.53/KWH in our place, which we can not afford. And the power produced by our own power plants can not meet the need. We are considering buying some small power plants to gain more electricity.
Asian Metal: Do you have any suggestions on the healthy development of chrome industry?
Mr. Zhu：Domestic ferrochrome plants are affected by several factors. Firstly, the import volume of China accounts for over 75% of the total volume in the world, but China has no voice for not owing reserves and the import market is disordered. Secondly, power supply is monopolized by the State and plants have no rights of power. Thirdly, steel mills lower the price but the payment is always acceptance bill by D/A payment.
The major problem lies in overseas mine. More concentrate is added to that of lumpy chrome ore and this phenomenon is worsening. Besides, future chrome ore price is always higher than that in spot market. Overseas market follows the Chinese market trend with advancing increase and hysteretic decline. Domestic steel mills, ferrochrome plants and chrome ore traders make losses, while only overseas mines are gaining profits. Hence, we should unite to get more rights.
In addition, I think our government should carry out national reserves on ferrochrome. Military, aerospace, chemicals, infrastructure and people’s life cannot be separated from stainless steel or ferrochrome. National reserves not only avoid the loss caused by foreign supply reduction, but also regulate the market by adjusting inventories, which will play an important role in stabilizing domestic market.
Asian Metal: Thanks for Mr. Zhu to share with us and we also hope that Sichuan Mingda (Group) Enterprises Co., Ltd. will have a good future.
Mr. Zhu：Thanks.
Mr. Zhu: Sure. Generally speaking, the current situation is not so satisfactory but it will recover slowly instead of worsening.
Firstly, the government carries out tight currency policy this year and there are obvious signs for synergistic effects occurring in November and December. Both steel market and ferrochrome market get significantly influences. But the central bank decreased the RRR by 0.5% recently, symbolizing that the government are paying more attention to the substantial economy and tight currency policy ends. The government will keep strong currency policy in the later period. Hence, domestic economy is likely to improve in Q1 instead of worsening. Two main reasons are as follows: firstly, capital is sufficient as banks increase their loan; secondly, economy is expected to rise slightly due to the traditional “good start” in changeover of local governments.
From international aspect, there are obvious signs for negative factors from European debt crisis to end. The economy will recover in the coming year and continues to rise from a low level in the beginning of next year.
Asian Metal: How is your company going now? How are the operating rates represented in conference for domestic large-scale plants?
Mr. Zhu: We have only two submerged arc furnaces of 16,500KVA and 7,500KVA under normal production, as well as a refining furnace. Operating rate is blow 30%. The figures of most large-scale plants, such as Shanxi Jinzhong Wanbang Industry and Trade Co., Ltd., Jilin Ferroalloy Co. Ltd., Sichuan Leshan Xinhe Electric Power Comprehensive Opening Co., Ltd., Xinganglian Metallurgical Co., Ltd., Sichuan Tianyi metallurgy Group, Sichuan Ehui Ferroalloy Co., Ltd., Ningxia Tianyuan Manganese Industry Limited, Sichuan Mingda (Group) Enterprises Co.,Ltd., Shanxi Hengshan Industrial Co., Ltd. and Pinglu Prosperity Stainless Steel Burden Co., Ltd., also keep at a low level of 50-70%. Higher operating rate means more losses. Hence, some plants have to reduce production in order to stabilize the market. Tight electric power supply is another reason for plants to decrease operating rate except sluggish market situation. The company is bearing great pressure from power shortage due to the dry season and high cost of large power grid even we own power stations.
Asian Metal: Smelters are expanding capacities in spite of weak market. What influences do you think will bring by the increasing capacities?
Mr. Zhu: Expanding capacity is a big problem at present. Both large-scale plants such as Shanxi Jinzhong Wanbang Industry and Trade, Sichuan Tianyi metallurgy Group, Ningxia Tianyuan Manganese Industry Limited and small-scale plants are increasing production capacities. For instance, the capacity of smelters in Sichuan Shimian county can reach about 100,000tpy. Considering the current situation, domestic market will not be significantly influenced as demand is a bit higher than supply due to insufficient operating rates. China consumes more than 4 million tons of ferrochrome per year, 50% of which is self-sufficient while the other 50% from overseas market. However, on the international market, supply exceeds demand. Impacts from expanding capacity will gradually occur in the later period.
Asian Metal: How is the current relationship between demand and supply in ferrochrome market?
Mr. Zhu: Large-scale plants hold small quantities of inventories from 2000-3000t to 10,000t, under normal condition. Many plants are under negative inventories situation, having signed contracts with mills. Import volume of HC ferrochrome has decreased by 40-50% since the beginning of July for domestic mills and most mills are consuming inventories at present. Some mills invite tenders frequently, symbolizing that mills hold insufficient inventories and plan to take position in time.
However, ferrochrome plants hold large quantity of inventories in hand. According to statistics, many plants hold about 2 million tons of inventories such as Shanxi Jinzhong Wanbang Industry and Trade, Jilin Ferroalloy, Sichuan Leshan Xinhe Electric Power Comprehensive Opening, Xinganglian Metallurgical, Sichuan Tianyi metallurgy Group, Sichuan Ehui Ferroalloy, Ningxia Tianyuan Manganese Industry Limited, Sichuan Mingda (Group) Enterprises, Shanxi Hengshan Industrial, Pinglu Prosperity Stainless Steel Burden, China National Minerals and Sinosteel Raw Materials. The current inventories can maintain above three-month production. Adding that there are large quantity o inventories at port, domestic ferrochrome is likely to maintain about 8-month of production.
Hence, chrome ore price is unlikely to increase especially for international market even though ferrochrome price rises due to the supports from demand and high cost. I hope domestic consumers depend on inventories and purchase in spot market as domestic chrome ore inventory keeps at a low level instead of importing from overseas market in order to depress the price in the international market.
Asian Metal: Prices of chrome ore at ports went up these days. Are you going to replenish the inventory?
Mr. Zhu：We will replenish the inventory due to fewer stocks. Prices in spot market are cheaper than those of future. Though chrome ore trader may make loss or have less profit if they make deliveries now, they will make few deliveries under the pressure of funds.
Asian Metal: Can you make some predictions on the market before the end of the year and next year?
Mr. Zhu：The market will hit the bottom and be stable before the end of the year, but large increase is impossible. The stocks at ports are accumulated and downstream demand lacks strong support. The real estate market is sluggish as the only hope is indemnity housing building. Despite low operating rate and slow funds in later days, the actual operating rate cannot lift the chrome market.
The market next year will not be quite optimistic. One big problem is the change of the office, after which the government will introduce some favourable policies, so the market in H1 will go up slightly. The first year after the change will be the one with stable economy, instead of rapid growth in economy. Policies will make effects in 2013, so large increase will not take place next year. Many medium and small enterprises are closed, which are not in line with what the media reports and will also affect national policies. In general, the market will not have a significant improvement next year, but it will be better than that of this year.
Asian Metal: Are there some development plans in Sichuan Mingda (Group) Enterprises Co., Ltd.?
Mr. Zhu：We have no immediate expansion plans for production not because of weak market but for no guarantee of power supply. The power price of state grid is RMB0.53/KWH in our place, which we can not afford. And the power produced by our own power plants can not meet the need. We are considering buying some small power plants to gain more electricity.
Asian Metal: Do you have any suggestions on the healthy development of chrome industry?
Mr. Zhu：Domestic ferrochrome plants are affected by several factors. Firstly, the import volume of China accounts for over 75% of the total volume in the world, but China has no voice for not owing reserves and the import market is disordered. Secondly, power supply is monopolized by the State and plants have no rights of power. Thirdly, steel mills lower the price but the payment is always acceptance bill by D/A payment.
The major problem lies in overseas mine. More concentrate is added to that of lumpy chrome ore and this phenomenon is worsening. Besides, future chrome ore price is always higher than that in spot market. Overseas market follows the Chinese market trend with advancing increase and hysteretic decline. Domestic steel mills, ferrochrome plants and chrome ore traders make losses, while only overseas mines are gaining profits. Hence, we should unite to get more rights.
In addition, I think our government should carry out national reserves on ferrochrome. Military, aerospace, chemicals, infrastructure and people’s life cannot be separated from stainless steel or ferrochrome. National reserves not only avoid the loss caused by foreign supply reduction, but also regulate the market by adjusting inventories, which will play an important role in stabilizing domestic market.
Asian Metal: Thanks for Mr. Zhu to share with us and we also hope that Sichuan Mingda (Group) Enterprises Co., Ltd. will have a good future.
Mr. Zhu：Thanks.