Miao Yalei: Government regulation urgently needed to deal with disorderly competition in white fused alumina market
----Interview with Miao Yalei, General Manager of Xingyang Jinbo Abrasive Co., Ltd.
Located in Xingyang Wulong Industrial Zone, Henan province, Xingyang Jinbo Abrasive Co., Ltd was established in 1995 with a total investment of RMB250 million. The company is one of the key manufacturers of refractory raw materials and abrasives in Central China. With a comprehensive production capacity of 35,600tpy and export sales of RMB105 ...
Asian Metal: Hello, Mr Miao, thank you for taking the time to participate in this interview. First, could you please give us a brief induction to your company’s main business?
Miao: Currently, our major product is white fused alumina and we have eight tilting furnaces with a combined capacity of about 60,000tpy. With an annual capacity of about 33,500t of white fused alumina, our plant runs on the valley power supply at present and has produced roughly 26,000t of the material so far this year.
Asian Metal: The price of white fused alumina in China has been falling since early this year, and many plants have started to reduce their operating rates, leading to a decline in exports and profits. Has your business been affected by this situation?
Miao: Our sales volume has seen a decrease compared with that in previous years. At present, we’re focusing on our export business with the drop in profits due to fluctuations in the exchange rate, rising labor costs and so on. Currently, white fused alumina from China has no great advantage over that from other countries in Southeast Asia, so the Chinese white fused alumina export market is in a grim situation. We mainly export the material to Brazil, France, Japan, Germany, India, Turkey, Australia and a few other countries at the moment. As demand in some regions is shrinking, our exports have decreased by 10.31% compared with those in Q3 of last year.
Asian Metal: Many producers have indicated that the price of white fused alumina is close to cost at the time being, so their profit margins are slim. In your opinion, what is the rough production cost of white fused alumina in China?
Miao: Currently, the mainstream price of Chinese white fused alumina is close to cost with little room for further decline in the future. Some carbon and graphite electrode plants have suspended production for rectification due to environmental issues, resulting in a tighter supply of graphite electrodes. In addition, the price of alumina, which is the raw material for the production of white fused alumina, is also close to its cost and unlikely to witness a sharp decline in the future.
Asian Metal: The price of alumina in China has been on the rise since September to October of last year with a total increase of RMB200-300/t. Will the same trend happen this year?
Miao: At present, both the import prices for Chinese-origin alumina are seeing a downward trend. Personally, I think there is little room for the alumina price to slide. However, from September to October of this year, the alumina price is unlikely to witness the same substantial increase as was seen in the same period last year. The short-term tightness in the alumina supply, which was caused by unavoidable factors (several alumina plants halted production for rectification due to safety incidents), was the main reason for the price rise in September. Last year the tight supply was caused by unpredictable accidents, not the expansion in demand, but this year the market is seeing a different situation. Every year from September to November, in view of the inconvenience of transportation in winter and other factors, which is liable to disrupt the supply of raw material, large electrolytic aluminum plants in Northwest China usually make replenishments for winter operation over one or two months, which can increase the demand for alumina temporarily, resulting in tighter supply for a short period. However, this year the alumina price is expected to witness a slight increase or remain flat from September to October.
Asian Metal: In August, due to environmental issues, many brown fused alumina and white fused alumina plants in Henan stopped production for rectification. Will the whole-sale suspension of production lead to a tighter supply in the domestic market, and possibly push up prices?
Miao: The local government is intensifying its environmental protection checks, which is a good thing for the masses. This move will also prompt fused alumina plants to indulge in self-examination, as well as self-correction, and try their best to improve and perfect their environmental protection equipment. However, this move is having a great impact on enterprises that arrange production regardless of the market demand and have no awareness of environmental protection. For example, the supervision department asked some plants to halt production for rectification because their furnaces for smelting brown fused alumina were big. At the same time, the government strengthened the supervision and management on some carbon plants, rubble powder plants, cement plants among others in Henan and required some of them to stop production for rectification. With smaller electric furnaces, most white fused alumina plants are well equipped with environmental protection facilities and some of them are still in operation, so the market supply won’t become too tight. The environmental protection check also put forward strict requirements on our company that we should not only meet the environmental standards, but set an example for other plants. Therefore, we are continually improving our environmental protection management levels in response to the government’s call. Of course, some plants have shut down because they are under financial pressure or their environmental protection facilities are unable to meet the standards. On the whole, the output of white fused alumina so far this year has seen a decline from previous years.
Asian Metal: A lot of white fused alumina companies have now been forced out of production due to environmental protection issues or low profits. Does this mean there will be a reshuffle in the industry?
Miao: As some companies have suffered severe market shocks, coupled with low levels of self-management, poor quality products and other factors, a considerable number have gone out of production. However, the impact they are suffering will only last for a short time and the trouble is just temporary. I don’t think it will result in a reshuffle.
Asian Metal: As demand for white fused alumina on both the Chinese and international markets have been falling all year, producers of fireproofing materials and steel mills are under pressure from the reduction in orders and cash flow. However, this year, the government has launched a number of positive measures. Do you think these will boost the white fused alumina market?
Miao: I feel the effect of the series of measures is not very clear and it may require some time. In order to develop better, I think some large companies can spend the "winter period" making alliances and cooperating. But in the end, if we want to become an excellent company, or even a "century-old" company, we need to continually improve our management levels and enhance the core competitiveness of our company. Only in this way can we go further.
Asian Metal: Do you think the white fused alumina market will improve later this year?
Miao: The overall economic situation is challenging right now and demand from downstream customers is sluggish. Therefore, the white fused alumina market will remain at a difficult stage later this year. But in my opinion, the market might see some improvements in one or two years. Currently, China's white fused alumina industry is in an unsettled state with disordered and vicious competition. I hope the government may release some corresponding policies to regulate the market; moreover, associations should be established to regulate the industry and respond to the market as well. Strong companies can also work on combining and integrating their resources to enhance the core competitiveness of China's white fused alumina, which will help Chinese companies to compete with similar products from other parts of the world and then win the international community's recognition and praise for China's industrial products.
