Policies heavily restrain development of non-aluminum industry related to alumina

Asian Metal: Thank you very much for accepting our interview, Mr. Xu. Firstly, could you please introduce your company briefly?
Mr. Xu: Our company, Shanghai Xinzi Metal Material Co., Ltd., is a large comprehensive industrial company. And our products mainly include two series: one is the alumina and aluminum hydroxide series, which covers materials such as industrial grade alumina; refractories; ceramics grade, electronic high-frequency insulation grade, fine polishing material grade, glass and water purification material grade, insulation-flame retardant-fill-artificial marble grade aluminum hydroxide; the other is the aluminum series, which includes aluminum ingot, different specifications of cast aluminum alloy and wrought aluminum alloy.
Asian Metal: The environmental protection inspections impacted Shandong greatly; did that affect the company’s sales?
Mr. Xu: Our current monthly transaction volumes of alumina, aluminum hydroxide, aluminum ingot and alloy rods are 5,000t more, 6,500t more and 1,000t respectively; the month sale value is about RMB50 million.
Monthly sales this year decreased by about 35% compared with the same period last year. We have many non-aluminum customers in Shandong who mainly consume ceramics, refractories, water purification material, filter material, glass and flame retardant. However, as air pollution prevention and control measures for Beijing-Tianjin-Hebei took affect, downstream companies such as ceramics, foundry, abrasive and refractory all shut down. Specifically, 80% of ceramic frit companies had shut down and about 60% of water purification and flame retardant companies closed with 65% of ceramics companies halted production. Even for companies didn’t shut down, they are required to move to the assigned industrial parks. Therefore, about 65% of non-aluminum companies have shut down on the whole; others need to move or upgrade facilities saw insufficient operating rate. Furthermore, some companies might quit due to high costs caused by the environmental problem and relocation cost. As a result, demand from downstream consumer declined, which had posed heavy sale pressure for us.
Asian Metal: Shandong Qixing Group suspended alumina production. Will that have a positive effect on alumina and aluminum hydroxide prices in Shandong?
Mr. Xu: Alumina prices moved up significantly in 2016, promoting companies which shut down before recovered with capacities picking up. Although Qixing shut down, its capacity increased by 6 million tons this year more than last year. Supply of aluminum hydroxide had exceeded demand in the first half year, and the prices went down sharply in March; market players became panic about the market and it is unlikely to hold the price of RMB2,400/t.
Asian Metal: According to the current market situation, do you think the alumina market will improve in the later half of the year?
Mr. Xu: Opportunities come together with challenges. Although the alumina market saw overstock, the de-capacity of supply and de-stocking polices have been implemented and companies reached agreement on working together; thus, alumina prices may rebound rapidly in H2.
Asian Metal: So do you have some plans?
Mr. Xu: The market competition is getting fiercer and fiercer, and customers also raise high requirements on product quality, prices and services. So we changed our sales strategy in time, strengthening the communication with customers, providing excellent services and developing the high-end market. Facing with frequent control from the government, we will take active measures to cope with all kinds of difficulties and enhance our core competitiveness to strive for a better future.
Asian Metal: Thanks for the interview again. Wish your company prosperous!