----Interview with Yongxing Sheng
Vice general manager
Liaoning Wangcheng Magnesium Industry Group Co., Ltd.
Liaoning Wangcheng Magnesium Industry Group Co., Ltd. was established in 2004 with a registered capital of 80 million yuan. With the leading quality of its magnesite in China, the company has become a major producer of magnesia products in the industry and its caustic calcined magnesia granules and magnesia powder enjoy a high reputation in the domestic and foreign markets.
Asian Metal：Welcome to the interview by Asian Metal Mr. Sheng. Please introduce your company first.
Mr. Sheng：Our company is located in Dadianzi Village, Dafangshen Town, Xiuyan Manchu Autonomous County, Anshan City, Liaoning Province. The quality of our magnesite resource is unique. The group has six subordinate enterprises, and the business content covers all kinds of magnesia production and magnesia brick production. At present, the company has 50 million tons of magnesite reserves with MgO content over 47%, which is the best magnesite quality mine in China. Currently, the company has 31 caustic calcined magnesia kilns with an annual output of 200,000t; 20 electric fused magnesia furnaces with an annual output of 60,000t; 2 high-purity vertical kilns with an annual output of 100,000t; and 2 dead burned magnesia kilns with an annual output of 30,000t. The company has export rights and its alkaline refractory products are mainly supplied to domestic and foreign glass factories with kilns, steel mills, cement factories and so on. Besides, our caustic calcined magnesia powder can be processed as an animal feed grade additive, and further processed as a food grade additive.
Asian Metal：What are the main reasons for the falling prices of magnesia since this year?
Mr. Sheng：In my opinion, the dim market demand is the main reason for the falling prices of magnesia since this year. The downstream industries of magnesia are mainly steel mills, cement factories and glass factories, and these major industries are closely related to the building materials market. At the beginning of this year, although the epidemic prevention and control was fully relieved, the economic recovered slowly and the performance of the real estate industry continued to be depressed, leading to the fact that most steel mills suspended production or reduced production so far. Therefore, the demand for raw materials reduced sharply. Besides, there is excess capacity in the magnesia industry, resulting in the prices of magnesia to keep dropping. In terms of specific products, the market performances of caustic calcined magnesia and dead burned magnesia are relatively better this year, and that of fused magnesia is not good. The main reason is that the application range of fused magnesia is relatively single, which is the supply of refractory brick to steel mills; While caustic calcined magnesia and dead burned magneisa can also be applied to cement plants, glass factories, and non-ferrous metal steel industries. Besides, caustic calcined magnesia can also be used for industrial desulfurization and denitrification, agricultural feed and so on.
Asian Metal：How about the operating rates of magnesia enterprises in 2023?
Mr. Sheng：The prices of magnesia continues to decrease and the market demand stays dim, leading to the low operation rates in the industry. As far as I know, the operating rate in the first half of the year was slightly above 30%. However, no matter caustic calcined magnesia, dead burned magnesia or fused magnesia enterprises, the operation rates basically maintained at about 20-30% in the second half of the year. Almost no enterprises can reach full production. For us, the output of each production line reduced by nearly 40% YoY.
Asian Metal：In the third quarter of this year, some mining enterprises stopped magnesite sales due to the issue of mining rights, but the prices of magnesia still did not increase, what are the main reasons?
Mr. Sheng：After all is said and done, the demand matters. As demand weakened, most producers reduced purchase volume of raw materials. Some of active producers would not purchase raw materials under existing circumstances because of the depressed market and sufficient raw material inventories, not to mention those who remained suspended. Now on the market, there are many enterprises, in order to control costs, would mixed with flotation powder and fine concentrate to reduce the consumption of magnesite in the production of fused magnesia, large crystalline magnesia, which also greatly reduces the demand for magnesite, and this also provides space for the further price decline of magnesia. Although the physical and chemical indexes can reach the standard, the granule size is not fully guaranteed and the folding resistance is weak, so the bricks made of this would be easy to break into powder, which will shorten the service life of steel furnace. This is also the reason why we insist on using magnesite as the raw material. There are few enterprises using magnesite as raw material on the market now because of the high cost and limit resource.
Asian Metal：Whats your forecast of domestic magnesia price trends in the fourth quarter?
Mr. Sheng：Although the current market demand remained sluggish, we expected that the prices of magnesia would stand firm in the fourth quarter in view of the high production cost. In terms of specific products, we expected that the prices of fused magnesia 97.5%min large crystal would remain at about RMB5,300/t (USD726/t); those of caustic calcined magnesia would maintain at nearly RMB900/t(USD123/t); and those of dead burned magnesia 97%min would keep at around RMB2,200/t(USD301/t). These are already the lowest levels in the past three years, and if the prices continue to fall, most companies would stop production.
Asian Metal：Please briefly introduce the export situation of magnesia this year and forecast the export situation in the fourth quarter.
Mr. Sheng：Our caustic calcined magnesia is mainly exported to Japan, high-purity magnesia and large crystalline magnesia are mainly exported to Japan and the United States. Due to the global recession, our exports to Japan and the United States fell by about 40% in the first nine months of this year. Japan and the United States are big importers of magnesia, and the prices of magnesia have fallen all the way this year, it is not difficult to conclude that the export volume and amount of magnesia exports this year would be much lower than that in 2022. Entering the fourth quarter, because the summer break in Europe ended, and foreign clients have the habit of replenishing more stocks before the Christmas holiday, the export situation would get better. Because the economic recovery prospects are more optimistic than other regions, the Southeast Asian market is likely to maintain good demand in the fourth quarter.
Asian Metal：What is your company's future plan?
Mr. Sheng：First of all, we would guarantee the current business and the product quality so that our clients are willing to maintain cooperation with Wancheng. Secondly, the company is ready to start the operation of two new high-temperature tunnel kilns with an annual production capacity of 60,000t of magnesia bricks. The project is under construction and would be put into operation on January 1st next year. The extension of the business to the downstream of the raw material factory is not the mainstream trend, because the production process of the brick factory and the sales channel are new areas for the magnesia producers, and the investment is huge, not every enterprise can get involved. Only powerful enterprises are qualified to face challenges. We have invested 200 million yuan on the project and the investment would certainly increase next year. These are not things that mediocre companies can manage.
Asian Metal：Thanks Mr. Sheng for participating in this interview, I wish the company's business thriving.
