Magnesium market to see active transactions in Q4 on tight supply
----Interview with Li Pei Vice President Fugu Yihe Magnesium Co., Ltd.
Fugu Yihe Magnesium Co., Ltd. is located in Xinmin town, Fugu county, Shaanxi province, and its construction started in June 2011. The whole construction process consisted of two phases. When phase-one construction was completed in late 2012, one rotary kiln and twelve reduction furnaces were built, enabling the company to start basic production in January 2013. Phase-two construction started in April 2014, and when it ended in late April 2015 one more rotary kiln and ten more reduction furnaces were built. By then, all production lines of the company were put into place. As a medium-sized joint-equity company integrating magnesium and coking businesses, the company has RMB170-million fixed assets and 460 employees. It has a designed annual production capacity of 30,000t of magnesium metal, 900,000t of coke and 50,000t of tar. In 2017 its turnover reached RMB390 million and contributed a tax of RMB8.08 million.
Asian Metal: Thanks for taking our interview, Mr. Li. Please give a brief introduction about the latest development of your company?
Mr. Li: Thank You. I am glad to have the opportunity to be interviewed by Asian Metal. Thanks for your endeavor to magnesium industry and valuable information for us. Our production capacity of magnesium ingot is 30,000t, 20,000t of ferrosilicon and 50,000t of tar oil and 900,000t of semi-coke. Our production is very stable and operation rate reaches 98% at present.
Asian Metal: Looking back to magnesium ingot prices over past three quarters of 2018, mainstream prices kept increasing. Can you analyze the situation?
Mr. Li: According to rising magnesium ingot prices in past three quarters, here are my opinions: firstly, the demand from domestic and overseas markets was strong; secondly, due to the appreciation exchange rate of US Dollar against RMB, magnesium ingot export volume increased; thirdly, restricted by the strict environmental protection policy, some plants in Ningxia, Shanxi, Inner Mongolia suspended their production or decreased their output, the supply of magnesium ingot tightened and prices also surged; fourthly, Shaanxi plants kept selling and held light stocks, so there was little room for prices to go down.
Asian Metal: It is off season during summer break, but magnesium ingot prices kept the upward trend in Q3 of 2018 and market transactions were active. What are the main reasons?
Mr. Li: In Q3 of 2018, mainstream magnesium ingot prices went up continuously. Take our plant for example, on account of the hot temperature in summer, we suspended our production for half a month on the equipment maintenance. In addition, we were lack of workers during hot summer, so our operation rate decreased accordingly. Other peers also confronted the same situation, so the supply of magnesium ingot decreased and prices moved up.
Asian Metal: Commenting on the supply state, how about Shaanxi's operation rate? What about your bottlenecks of production?
Mr. Li: Frankly speaking, most Shaanxi plants' operation rates are above 70% and the production state is good. Only few plants confronted funds issue and suspended their production for a long time.
As for the production bottleneck, we are lack of workers. If we could improve our technology and decrease labors, our output would increase and production would be more stable.
Asian Metal: Currently, Chinese magnesium ingot plants get good profits, and do you plan to increase your output?
Mr. Li: At present, our plant is in a full production state and would maintain the current situation.
Asian Metal: Entering 2018, environmental protection policy is very strict, and how about your environmental protection facilities? Do you need to add new equipment? Will environmental protection policy affect magnesium ingot price trend?
Mr. Li: Yihe Magnesium put into RMB20 million to build environmental protection facilities and finalized the construction of the refining desulphurization equipment, recycling tank, new waste residue plant. Currently, our plant meets the environmental protection requirements of government.
As for the future trend, I think strict environmental protection policy would influence the supply of magnesium ingot and prices would keep rising in the following months.
Asian Metal: How do you think about magnesium ingot price trend in Q4 of 2018 and what about reasons?
Mr. Li: Actually, I think prevailing Chinese magnesium ingot prices would increase in coming Q4 of 2018. Main reasons are as follows: firstly, restricted by the strict environmental protection policy in cold winter, the supply of magnesium ingot would keep decreasing and prices will go up accordingly; secondly, buyers from domestic and overseas markets would place orders actively in Q4, and prices would increase.
Asian Metal: Thanks again for taking our interview. Wish your company better development in the future.
Mr. Li: Thanks! Let's work together and look forward to a better tomorrow. In addition, we also expect that Asian Metal sticks to the principle of objectiveness and timeliness to serve clients with better information about the magnesium market.
