Liu Yuezhu: Demand unlikely to recover, Chinese magnesium industry should improve product and service quality for better financial rewards
----Interview with Liu Yuezhu, General Manager of Shanxi Wenxi Zhenxin Magnesium Co., Ltd.
Established in August 2003, Shanxi Wenxi Zhenxin Magnesium Industry Co., Ltd. is a modern enterprise involved in mining, magnesium metallurgy, and the manufacturing of magnesium alloy, magnesium powder and other related products. Located in Wenxi county, Shanxi province, the company is endowed with rich resources and convenient transportation access. Following more than a decade of development, the company now consists of six branch companies that cover an area of 16,000 square meters. With more than 1,500 employees and total capital of RMB200 million, the company is now capable of producing 30,000tpy of crude magnesium ingots, 16,000tpy of magnesium alloys, 8,000tpy of calcium metals, 8,000tpy of magnesium powder and 8,000 restoration tanks per annum. The company has gained a global sales network extending to Europe, the Middle East and Eastern Asia, where its products are greatly appreciated. Maintaining a healthy development momentum, the company is seeing continual economic growth, gradual improvement in the production environment and consistent strengthening of its comprehensive strength.
Asian Metal: Good morning, Mr. Liu! Thank you for granting this interview. Could you please give us a brief introduction to the production and operating conditionsin your company?
Liu: Zhenxin Magnesium has been in existence since 2003, and following more than ten years’ development, we are now capable of of producing 30,000tpy of crude magnesium ingots, 16,000tpy of magnesium alloys, 8,000tpy of calcium metals, 8,000tpy of magnesium powder and 8,000 restoration tanks per annum. Right now all of our plants are in full operation, except for the calcium metal plant.
Asian Metal: As we enter the fourth quarter of 2015, magnesium ingot prices are dropping continually due to oversupply and poor demand. Some magnesium producers have joined together to resist lower prices; what do you think about this? And how do you predict the market will fareduring the rest of the year?
Liu: In my opinion, the reduction in prices should be a pure market movement whose roots can be found in oversupply and poor demand. To artificially prevent the prices from declining instead of making efforts to improve thefundamentals, I consider to be a cure of the symptoms, not the disease, which might be effective in the short term, but will not make any difference to the market in the long run. Personally, I don’t anticipate any recovery in the market during the rest of Q4 and even afterwards because the core problems —poor demand and oversupply — still exist.
Asian Metal: Magnesium ingot prices have been hovering at low levels in recent days, with producers in Shanxi having long suffered negative profits. How has your company managed to ensure stable output and reasonable profits in such a difficult market?
Liu: We've performed well financially as our operation has been completely based on capital generated by ourselves instead of sourcing it from outside. Those impacted most by the economic slowdown were the enterprises that had been weak in capital flow and had high production costs.
Last March, following the deterioration of the market, we made a timely adjustment to our strategy: from “enterprise-development-oriented” to “customer-demand-focused”. Guided by the demand from customers, we have tried hard to raise the quality and diversification of our products so as to ensure price competitiveness. What’s more, we have marketised our internal operation and concentrated on controlling the cost so as to achieve rational profit margins in the most severe of market environments.
Asian Metal: You entered the magnesium alloy sector back in 2014. What’s worth mentioning is that your company has ensured a relatively high operating rate and better sales in spite of the uninspiring situation in the downstream casting, extrusion and 3Cmarkets. So could you please tell us about the measures you have taken to expand the market share in this sector?
Liu: Against the market features of magnesium alloy products, we have highlighted “good product quality and after-sales service” as the key points in promoting sales, and have stuck to the principle of “expanding market share and attracting customers with good quality and services without playing tricks”. Also, in specific production practice, we have always kept good quality and serviceto the fore and would even sacrifice everything else for that. Just as we have promised to our customers, Zhenxin Magnesium will try to provide the best services, the most stable product quality and the most effective guarantees. I think it is those principles and efforts that have gained us our good reputation, which has constantly helped us expand our market share in spite of the short time we have been in the market.
Asian Metal: Is your company also involved in the exporting of magnesium ingots and magnesium alloys, and what are your advantages in the export market?
Liu: We do have a branch company specialising in international trading, but we haven’t gotten started yet on the business of exportingmagnesium ingots.
Asian Metal: Now that the end of 2015 is approaching, many participants are watching the future market trendclosely. So what’s your opinion about the magnesium and magnesium alloy markets in the first half of 2016, how do you predict they will fare?
Liu: Presently, the market is overwhelmed by the available products and most smelters arebarely managing to survive. As far as I am concerned, the magnesium ingot market willscarcely improve without major changes in government policy. But the case is different for the magnesium alloy market, which is very likely to witness more sales next year as demand is expected to improve.
Asian Metal: As a long-established magnesium plant, you have toughed out several crises in this industry. So how does your company see itself several years from now?
Liu: Guided by the slogan of “lowering costs, ensuring survival and seeking development”, we have been in this industry for more than a decade, which has enabled us to gain a wealth of experience. Now that the prospects for the magnesium industry are clear, our development goal is to “enter the alloy industry within two years and occupy the die-casting industry within five years”, which means that we will focus on the magnesium alloy business in the coming two years under the principle of “quality goes before quantity” and try really hard to forge our own brand. And we believe this concentration on quality and service should help usto stride forward and broaden our outlook.
Asian Metal: Thank you, Mr. Liu, for granting us this interview. We look forward to a better future for Zhenxin Magnesium!
