Supply and demand determines market prices and alumina prices in H2 may see no significant improvement
----the general manager of Lingchuang Zhonghe International Trading Co., Ltd.
Liulin Senze Coal & Aluminum Group is a large private enterprise established by the young entrepreneur Liu Jinping, also the legal representative of the company. With coverage of 58,000 square meters, more than 1,700 staff and 650 technicians, the company has fixed assets of RMB890 million and has achieved annual sales of RMB350 million and annual profits and taxes of more than RMB35 million.
Asian Metal: Mr. Liu, thanks very much for giving this interview. Would you please give us a brief introduction to your company’s main business?
liu: Liulin Group was basically formed as an integration of energy and chemicals, metallurgy, tourism, catering and business, with a running capacity of 700,000tpy for alumina at present.
Lingchuang Zhonghe is strategically targeted at establishing itself as the top comprehensive service provider of basic materials in Shanxi, self-operating and trading products of all kinds, while taking charge of external operations, sales agents and imports and exports of Senze Group’s major products – accompanied by internal trading, imports and exports and related transportations of the major products of alumina, electrolytic aluminum, bauxite, coke, steam coal, liquid caustic soda, lime, building materials, clinker, refractory materials and industrial raw materials and auxiliary material.
Asian Metal: What has been the significance and impact on your company of establishing “Lingchuang Zhonghe International Trading Co., Ltd.”?
liu: Amid the downward trend for the market economy, it is important to increase the competitiveness of enterprises, looking for business opportunities in the market, changing the mode of trading and transferring operational ideas.
Based on the group entity, we are capable of marching into the financial fields of coal and aluminum plate by learning from our predecessors.
Asian Metal: Alumina prices were on a downward trend in late May, but aluminum ingot prices were firm at above RMB12,500/t. What’s the main reason behind this situation in your opinion?
liu: The market prices largely depend on supply and demand. Aluminum bar plants accelerated their growth in capacity from 2015, which resulted in electrolytic aluminium plants reducing their aluminum ingot output and turning to selling liquid aluminum. Therefore, demand for aluminum is still limited, based on sliding stocks, providing support to prices for the material.
Asian Metal: Alumina prices have increased for four consecutive months in 2016 with alumina plants largely resuming production, which has resulted in sliding prices from June onwards and marginal profits for plants. However, some producers still chose to expand production. What is your solution to this problem? Any plans to expand production?
liu: We’re mainly putting our efforts into product quality and sales service. The transportation cost determines our sales channel, but we are also striving for a wider sales radius. For example, we may seize a mutual benefit by way of goods replacement. We mainly supply to Yulin, Ningxia and Inner Mongolia, based totally on road transportation, and we are also cooperating with Kuaicheng Logistics Co., Ltd.
Our total running annual capacity will be capable of reaching 1.3 million tonnes after we put 600,000t of new capacity into operation in 2017, which will be helpful in reducing production costs and our bauxite is still based completely on self-supply.
Asian Metal: The first half of 2016 has passed, so what’s your prediction on alumina demand in H2 of 2016 based on the current market deals?
liu: The speed of alumina resumptions in H1 along with the output increases have been much faster than electrolytic aluminium capacity has been released, leading to changes in the relationship between demand and supply, and the increasing supply of alumina will definitely bring a downward trend for prices. New capacity will be put into production in late H2 as planned, which we believe will have a limited influence on output in 2016. We are looking forward to alumina demand being triggered after electrolytic aluminium capacity is resumed or put into production in the future.
Asian Metal: What’s your opinion on the future alumina prices in H2 of 2016? Will they break RMB1,550/t?
liu: Electrolytic aluminum prices remain firm and I believe the price will not fall below RMB1,550/t. However, I think the price will see no major improvement in H2, 2016 barring any sharp output reduction or significant event.
Asian Metal: What is the development direction for Senze Coal & Aluminum and Lingchuang Zhonghe in the future?
liu: Based on coal and aluminum, Senze Group will maintain a strategy of diversification, with the market as our orientation, innovation as the impetus and social responsibility as the core of the cultural enterprise. The company will uphold its basic integrity, continuing to establish and improve modes of operational management that are characteristic of the times, our industrial specialties and regional features, striving towards a solid team that can build the company up over a century. Relying on premium brands, the company will deliver to consumers and society quality services, better operation and social interest.
