Chinese magnesium powder market to see scarce deals in Q4 on weak demand from steel mills
----Interview with Juncai Chai
General Manager
Shanxi Fuhengdi Metal Material Co., Ltd.
- Shanxi Fuhengdi Metal Material Co., Ltd. was established in 2007 and has been more than 10 ten years. With an annual production capacity of 13,000t of magnesium powder, 5,000t of magnesium chips and 5,000t of passivated magnesium powder, Fuhengdi owns 10 magnesium powder production lines, 4 passivated magnesium powder production lines, and 2 magnesium chips production lines.
- Asian Metal: Mr. Chai, thanks for taking the interview by Asian Metal. Please introduce your business briefly.
- Mr. Chai: Thanks! Shanxi Fuhengdi Metal Material Co., Ltd. was named Wenxi Shengfu Magnesium Powder plant before. It was built in 2007 and operated by more than 10 years. Currently, Fuhengdi owns 10 magnesium powder production lines, 4 passivated magnesium powder production lines, and 2 magnesium chips production lines.
- Asian Metal: Who are your main customers? How do you distribute the sales in the domestic and foreign markets?
- Mr. Chai: Our products are mainly sold to domestic and foreign steel enterprises, chemical enterprises, pharmaceutical enterprises and fireworks plants. With regard to our sales distribution, we sell about 60% of our products to domestic market and 40% to the foreign market.
- Asian Metal: Environmental protection and safety supervision are big issues to magnesium powder plants. Taking the 70th anniversary of this year as an example, it is very common for magnesium powder factories to suspend production or reduce output before the festival. How about your production state at that time?
- Mr. Chai: In the recent years, the requirements on the environmental protection and safety supervision are very strict in magnesium powder industry. In order to meet the environmental standards, our company upgrades the equipment, strengthens the environmental awareness among workers and increases workers’ safety training. During the 70th National Day holiday, our plant is in the normal production state and our production hadn’t been influenced by the related policies.
- Asian Metal: Please introduce about your production cost for magnesium powder. In addition, how do you guarantee the low cost?
- Mr. Chai: The main production cost are as followings: pure magnesium ingot, electricity, salary and equipment wastage. We have the special person to purchase magnesium ingot and control the cost for raw material. In addition, we also deal with the off-peak power consumption to reduce the production cost.
- Asian Metal: Entering Q4 of 2019, magnesium market is in a harsh state due to gloomy economy. How about magnesium powder industry and how do you think about the market demand?
- Mr. Chai: This October is the worst period for us to go through. Domestic steel mills reduce the output, meanwhile, medicine and chemical plants stop production or move down their output obviously. Given this situation, the consumption for magnesium powder move down largely and our orders reduce.
- Asian Metal: Currently, the price of magnesium ingot has a far-reaching influence on magnesium powder market. How do you purchase magnesium ingot and how do you think about the price trend for upstream magnesium ingot prices?
- Mr. Chai: Currently, we purchase magnesium ingot in line with the deals for magnesium powder. Taking oversupply state but limited buying activities in magnesium ingot market into consideration, I hold pessimistic attitude towards the market trend in Q4 and think prices for magnesium powder would show a softening trend.
- Asian Metal: What are the main factors to affect magnesium powder prices? How do you think about the price trend for magnesium powder in the remainder of Q4 in 2019?
- Mr. Chai: The main reason to influence the price of magnesium powder is the price trend of upstream magnesium ingot. At the same time, the demand from downstream steel mills in the domestic and foreign markets is also a major factor to affect the price of magnesium powder. As for the price trend in the Q4, from my perspective, the target prices of foreign customers in the remainder of Q4 are all lower than the current price level, so the overall prices for magnesium powder would show the downward trend.
- Asian Metal: Do you plan to start the production of differentiated products to avoid price competition among homogenized products? In addition, do you plan to increase your output to reduce the production cost?
- Mr. Chai: Actually, we don’t have exact plan to increase the output in a short time. Our target is “low cost, living, development”. Regarding customer as God, we have been in this industry for more than 10 years. We believe high quality, good service and high credit could make us strong and walk further.
- Asian Metal: Thank you very much. We wish Fuhengdi Magnesium a more prosperous future!
- Mr. Chai: Thanks for your attention to Fuhengdi Magnesium. 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 in providing clients with better information about the magnesium market.
