Price advantage of imported secondary aluminum alloy ingot to weaken in Q4 2020
----Interview with Peng Baotai Chairman Jiangxi Baotai Nonferrous Metals Group Co., Ltd.
Jiangxi Baotai Nonferrous Metals Group Co., Ltd. (hereinafter referred to as Baotai Group), formerly known as Yingtan Xingfa Nonferrous Metals Co., Ltd., was founded in 2002. The group company was formally established on March 31st, 2009, surrounded by mountains and rivers. The company has six subsidiaries with more than 800 employees, covering an area of more than 500mu. Its output value in 2019 was RMB7,300 million (USD1,067 million) with the tax payment of RMB645 million (USD94.3 million), and that in January-June 2020 was RMB3,700 million (USD541 million); the output value in the first half of this year is about 17% higher than that in the same period of last year.
Asian Metal: Thank you for accepting our interview, Mr. Peng. Could you please introduce your company briefly?
Mr. Peng: Baotai Group is a large-scale regional recycling base approved by the Ministry of Commerce, and has got the approval from the Ministry of Industry and Information Technology to enter the steel scrap processing industry and aluminum industry. It is a national high-tech enterprise and a large taxpayer in Yingtan City, Jiangxi. Baotai Group has a number of independent intellectual property rights, including 3 invention patents, 134 utility model patents and 20 appearance design patents, and it put the patents into practice to optimize production process, achieving great economic benefits. The company has advanced production equipment and testing system, and passed the ISO9001 quality system certification, ISO14001 environmental management system certification, clean production enterprise certification and provincial green factory certification. "Baotai" trademark is a famous one in Jiangxi province, and "Baotai" brand aluminum alloy profile is also famous in Jiangxi.
Asian Metal: The biggest problem that the domestic secondary aluminum alloy industry faced in the third quarter is the impact of the imported material. How about the impact on your company?
Mr. Peng: Since the fourth quarter of last year, the import volume of secondary aluminum alloy ingot has been increasing month by month, from 15,000 tons per month in the third quarter of last year to 131,000 tons in June this year. It is worse for the domestic secondary aluminum alloy industry, which has already seen oversupply. Most domestic enterprises' sales of the material have been affected to some extent, and our sales are not spared, but the influence is generally controllable.
Asian Metal: How do you minimize the negative impact of imported secondary aluminum alloy ingot?
Mr. Peng: Bulk metals have financial properties, so the price competition is one of the means to confront with the imported secondary aluminum alloy ingot. We reduced our selling prices of secondary aluminum alloy ingot within the affordable range for downstream customers to promote the competitiveness of our products.
Asian Metal: The imported secondary aluminum alloy ingot basically lost price advantage in August. Will it continue to impact the Chinese market in the fourth quarter?
Mr. Peng: With overseas demand for secondary aluminum alloy ingot increasing, the price of imported secondary aluminum alloy ingot will rise gradually. From August, the imported material gradually lost its price advantage. However, under the impact of the COVID-19 pandemic, it is difficult for foreign manufacturers to resume work or production in a short time to reach the level of the same period last year. Therefore, imported secondary aluminum alloy ingot in the fourth quarter will still have a certain price advantage in Chinese market, and will continue to hit the Chinese market. But the price gap has narrowed, so the impact would also shrink compared with the first half of this year. Domestic enterprises which produce secondary aluminum alloy ingot will still face the impact of imported material.
Asian Metal: Since the second half of last year, the supply of aluminum scrap in China has been tight; although it eased in the third quarter, the overall supply is still short. What's your opinion on the supply in the third and fourth quarters?
Mr. Peng: In the third and fourth quarters, the aluminum scrap supply in China will remain tight. First of all, the output of aluminum scrap in China cannot meet domestic demand; Secondly, the import volume of aluminum scrap has been greatly reduced, which leads to the continuous and more serious shortage of the material in China.
Asian Metal: How do you deal with the shortage of aluminum scrap in China?
Mr. Peng: First of all, our business started from the scrap aluminum industry and we have a recycling network established over several decades; in terms of raw material supply, we have a huge advantage over our peers. Secondly, as we purchase aluminum scrap all by cash, suppliers are more inclined to trade with us.
Asian Metal: How does your company grow stronger in the increasingly fierce competition environment and what are your advantages in the secondary aluminum alloy ingot industry?
Mr. Peng: In face of the fierce competition environment of the secondary aluminum alloy ingot industry, we should strengthen technical research and development to continuously improve the quality of our products and reduce the production cost. First of all, through years of efforts, our equipment has reached the leading level in the domestic industry, which results in better product quality and lower production cost. Secondly, through decades of hard work in the aluminum scrap industry, we now have a huge recycling network, which can provide us with cheaper and abundant raw materials for production. Finally, our company implements flat management, which means the management cost is lower than our peers.
Asian Metal: What do you think of the supply and demand of secondary aluminum alloy ingot in the third and fourth quarters? Do you have any plans for new projects in the future?
Mr. Peng: It is difficult to change the situation that the supply of secondary aluminum alloy ingot exceeds demand in the third and fourth quarters. This has been a long-standing problem, and we still have to face the impact of secondary aluminum alloy ingot imported from Southeast Asia and other regions on the domestic market. The demand in the third and fourth quarters will be better than the first and second quarters but lower than same period of last year. As for new project, we have a set of new equipment with a designed capacity of 180,000 tons and a total investment of RMB60 million (USD8.77 million), which will be put into production in September. After that, we will not invest in new projects in the near term. The main reason is that the production capacity of secondary aluminum alloy in China has been seriously excessive. Later, our investment focus will turn to the copper industry. We have acquired 110mu of land for now, mainly investing in copper plate and strip, phosphor copper ball, and aluminum ash treatment projects.
Asian Metal: Thank you very much for accepting this interview. Wish your company a more prosperous future.
Mr. Peng: We also thank Asian Metal for providing us with metal information. Wish your company a brighter future.
