Ferrochrome market to stabilize
----Interview with Yang Lifu
Chairman of the board
Yingkou New Type Silicon Products Co., Ltd.
- Established in June 2003, Yingkou New Type Silicon Products Co., Ltd., a Sino-foreign joint venture, is located in Dashiqiao, Liaoning with factory area of 34,533 square meters and 140 employees. The company has two furnaces of 12,500kva which were put into operation in February 2004, mainly producing HC ferrochrome with an annual capacity of 50,000t.
- Asian Metal: Mr. Yang, thanks a lot for the interview. Please give us a brief introduction about your company.
- Mr. Yang: Our company mainly produces HC ferrochrome with advanced equipment and strong technical force. Now we have one chief engineer, six senior engineers and four engineers who have been engaged in production of ferrochrome for many years. The rate of main production equipment in good condition in this company is above 98%, and it is also equipped with a professional inspection organization and testing personnel. The company has long - term stable raw material suppliers to guarantee the steady output. In order to ensure the quality of products, every batch of products of the company has been strictly controlled by the process flow, the product analysis report is made for each batch of products, and the ex-factory products are inspected again.
- Asian Metal: The prices of HC ferrochrome rose by about RMB300/t (USD43.5/t) in September compared with those of the beginning of this month. What do you think is the reason? Will this be a turning point for the ferrochrome market this year?
- Mr. Yang: I think there are two main reasons for the rise. The first is supply and demand. In early September, the ferrochrome prices hovered at low position. In addition to Inner Mongolia, other production areas suffered from high power cost or environmental inspection. The production rate is low and the output reduced. Approaching the end of this month, the tight supply became more serve with increasing demand from the steel mills. Moreover, the production cost climbed in September as the prices of chrome ore at Chinese ports and other auxiliary materials like coke were rising, especially the prices of South African chrome ore concentrate 40-42% rose from the lowest RMB29/dmtu (USD4.2/dmtu) to RMB32/dmtu (USD4.6/dmtu).
- The prices of HC ferrochrome went up by RMB300/t (USD43.5/t), which basically offset the increase of raw material costs, and the profit of ferrochrome producers hardly increased. I think in the second half of this year, the chrome market will mainly be stable and the prices still have room to climb. Chrome ore prices would hardly drop in the rest of this year. Besides, the exchange rate of currencies is another cause for concern. Stronger RMB performance would be a firm support for domestic chrome producers.
- Asian Metal: Generally speaking, the ferrochrome market stays weak this year and the prices continue to decline. What do you think is the main reason for the current downturn?
- Mr. Yang: Supply and demand determines the price. In the case that the steel mill's demand for ferrochrome has not increased, the excess output in the ferrochrome market will inevitably lead to low prices, which is the most fundamental reason.
- Asian Metal: Your company is in Liaoning. There are fewer producers in Northeast China, but the production cost in this area is higher, which leads to limited competitiveness in the national market. Please talk about the advantages and disadvantages.
- Mr. Yang: You need consider the national chrome market as a whole. Northeast China is not the central region of ferrochrome demand. Our electricity prices are very high, which is our biggest constraint in optimizing production costs. Our company is almost the only producer of HC ferrochrome in Northeast China for the moment. Of course, we also have some production advantages. First of all, Yingkou is a refractory base with low cost of refractory, which allows us to lower the requirement of chrome ore. Secondly, Yingkou is "one city with two ports" with low transport costs.
- Asian Metal: Environmental inspection is also a theme of current ferrochrome industry. What do you think of it?
- Mr. Yang: I think the environmental impact on the ferrochrome market is basically coming to an end, and the impact will gradually weaken. Just as the so-called "great wave sweeping away small sand", only the good plants survive. The strict requirement of environmental inspection promotes the upgrade of the equipment and the eliminated capacity will be slowly supplemented by the market. The equipment upgrade not only meets the environmental protection requirements, but also improves the recycling and utilization of raw materials from the perspective of cost. Environmental protection is an important issue that benefits the country and the people. Any enterprise that wants to develop in the long run should pay more attention to it.
- Asian Metal: What is your future development plan?
- Mr. Yang: I hope the government could give us more support to reduce the power prices. We will make better products based on the environmental requirements. I also hope that the scale of the factory will steadily expand in the future.
