Prebaked anode prices expected to rise on tight supply amid the heating season

Asian Metal: Mr. Zhang, thank you very much for this exclusive interview with Asian Metal. First of all, please give us an introduction to your company and its main business.
Mr. Zhang: Thank you very much for the interview. MC Zhenjiang Anode Solutions was founded in January, 2008 with shareholders including Jiangsu Surun High Carbon Products Co., Ltd. and Mitsubishi Corporation. Jiangsu Mitsubishi is an anode producer with capacity of 300,000tpy and business covers both the domestic market and overseas market. Our anode exports increase year by year and we will export about 120,000t of the material this year, which will be increased to 150,000t next year. Our anode has been highly praised by consumers at home and abroad.
Asian Metal: How about the environmental situation in Jiangsu?
Mr. Zhang: In recent years, the Jiangsu has taken the lead in ecological civilization construction and environmental protection, but the situation has not fundamentally changed in respects of heavy industrial structure, high-intensity development and high emissions. The ecological environment remains the prominent weakness for the construction of a comprehensive well-off society. As a result, the Jiangsu provincial Party committee and the provincial government carried out the "263" action plan in late 2016. The province set up a "263" special action leading group and established the inspector assessment, accountability and other system of "263" special action. Environmental panels continued to deep into districts, city, province, East China and the nation. Inspection, exposure, disposal, rectification and reexamination remain in process.

Asian Metal: What response has your company made to the increasingly stringent environmental requirements?
Mr. Zhang: As far as the enterprise is concerned, our emissions must be standard discharged and on-line monitored in respect of environmental protection. China will be stricter in environmental requirement, which will be normalized and nationalized. In order to adapt to the adjustment of national policy, we have invested RMB20-30 million this year with the second sets of desulfurization, denitrification and dust removal device for the enterprise's long-term development, which is designed in accordance with current special emission standards (particulate: 10 mg/m³, sulfur dioxide, nitrogen oxides: 100 mg/m³ and nitric oxides: 100 mg/m³) in Shandong province and expected to be completed in late the year.
Asian Metal: Qualified carbon enterprises amid “2+26” cities in special emission standards have been required to cut output by 50% in heating season and the production reduction is 30% for electrolytic aluminum enterprises. Could you please share your opinion about the possible effects to be imposed on future supply and prices on the anode market?
Mr. Zhang: According to current statistics and market demand, the anode supply will be tighter in accompanied with higher prices if anode and electrolytic aluminum producers strictly restrict production. However, I think the supply shortage will not be severe. The production limitation in heating season is 50% based on established capacity. As the average operating rate from current anode producers is about 80% and thus the production reduction should be only 30% for “2+26” cities, which will affect 3.3 million tons of annual capacity; as for electrolytic aluminum, the current operating rate is next to full capacity and 3.5 million tons of annual capacity will be reduced if the limitation reaches 30%. Based on these statistics, the anode supply will be tighter, but electrolytic aluminum plants have stockpiled anode stocks for the heating season. Thus, I believed that the anode supply would be tighter, but the price might see no sharp increases, which may be in the range of RMB200-300/t (USD29.99-44.99/t) in the heating season.
Asian Metal: The supply of calcined coke has been tight in the Chinese market since early 2017 and many new calcinators have been established currently, centering in Shandong province. Somebody believed that the tight calcined coke supply would be relieved and what’s your opinion?
Mr. Zhang: I think the tight calcined coke supply would be relieved to some degree, but calcined coke producers can make handsome profit currently. Although they established many new types of equipment, their operating rate wouldl see no sharp increase to guarantee profit as the environmental inspection is strict and some enterprises would be forced to shut down production due to substandard emission. The calcined coke market would hardly see supply surplus in the heating season. Thus prices would not decline before the Chinese Spring Festival and it will be satisfactory if the price can hold stable. Just from the perspective of profit for per ton, the demand for pet coke will decline significantly in Q4 and the price may decrease accordingly, leading to reduced production cost for calcined coke. As a result, calcined coke producers would see higher profit although calcined coke prices remain firm.

Asian Metal: The current prebaked anode market is favorable and some outdated equipment will been eliminated due to enhanced environmental inspection. Does your company have any plan to add new equipment or expand capacity?
Mr. Zhang: We have no plan to add new equipment at present. New equipment requires quantities of capital investment and it will take some time to establish the equipment and put them into operation. However, the anode market started to turn better from H2 2016 with many uncertainties and our Phase II project was put into operation from early 2016. Thus, the expansion plan would be seriously considered.
Asian Metal: What is your prediction on the future anode market?
Mr. Zhang: There are many uncertainties involved in current market, depending on the implementation of the national environmental protection policy. If the "2+26" cities indeed see strict production restriction in winter, the anode market would be better.

Asian Metal: Thank you again for your exclusive interview with Asian Metal network. Wish your business thriving!