Tin scrap market has huge potential under intensifying competition
----Interview with Yu Yuanqing
General Manager
Dongguan Yihui Industry Co., Ltd.
- Dongguan Yihui Industry Co., Ltd. is a tin ingot and tin solder product producer integrating smelting and electrolysis. The production and quality of its products are in strict accordance with the ISO9001 standards and SGS environmental protection certification, and all technical indicators have reached European and American and other international standards. Yihui Industry serves the majority of users with its super-standard quality and sincere service. Its products are highly praised by users, and it is a benchmark enterprise in the industry.
- Asian Metal: Hello Mr. Yu, please first introduce your company.
- Mr. Yu: Our company was established in 2012 and has a hisitory of over ten years. It mainly engages in the recovery and reuse of tin-bearing waste, including smelting, electrolysis, as well as the production and sales of tin solder products. With an annual production capacity of 5,000 tons of tin ingots and a total of two production lines, the company produces about 400 tons of tin ingots a month at present. Except for the sales of tin ingot, our company also produces tin solder products such as tin wire, tin bar and solder paste, with a monthly output of about 200 tons in total. In addition, our company also produces tin ball, anode rod and other products for specific downstream customers. At present, the company has an annual output of nearly 10,000 tons of tin and tin products, and the monthly turnover records over RMB100 million (USD15.66 million).
- Asian Metal: Who are your company's downstream customers?
- Mr. Yu: Our downstream customers are mainly divided into two categories. One is the downstream customers who directly purchase tin ingot, mainly including tin material and tin chemical plants; the other is the downstream customers of tin products, mainly including electronics factories, handicrafts plants and electroplating factories. Tin ingot customers are mainly distributed in East and South China, and tin products customers are mainly concentrated upon South China, covering Jiangsu, Zhejiang and Fujian. In particular, the proportion of South China's customers account for more than 60%. Downstream clients are not only our consumers but also our suppliers of raw materials.
- Asian Metal: As the consumption area of tin ingot but also the supply region of tin scrap, the tin solder production status is particularly critical in South China. Please tell me about the current production situation of local companies.
- Mr. Yu: South China is the main processing region of tin products in China. However, with the changes in market conditions in recent years, the pattern of local production enterprises has also been adjusted with various degrees. First, in the past two years, some companies were eliminated from the industry because of strict environmental protection inspections. Under environmental protection inspects, the current tin processing companies under operation are companies that meet national standards, have stable production and own excellent product quality. Second, the epidemic that began at the beginning of last year led to a sharp decline in orders from local export-oriented companies. As the direct and most important terminal of tin solder products, the decline in orders directly affects the consumption of tin solder. The imbalance between production and sales leads to overcapacity of tin solder and fierce competition, and some companies lowered their TCs to compete for orders. Third, the prices of tin ingot have soared since the beginning of this year. During the middle period of the year, foreign tin ingot prices stood at USD35,000/t, while the prices of Chinese tin ingot was RMB170,000/t (USD26,622/t). The price difference between domestic and foreign tin ingot caused that a large number of domestic tin ingot were exported, driving domestic prices to rise. Such supply and demand structure change triggered the imbalance of supply and demand for a while: on the one hand, local tin product companies' costs increased, and on the other hand, they could not find raw materials. The raw materials of smelters come from these downstream companies, and the decrease in the number of tin solder companies has directly led to a decline in the supply of tin-bearing waste, which intensified the market competition.
- Asian Metal: The shortage of tin scrap supply results in the intensified competition among smelters. What do you think of the future of tin smelters?
- Mr. Yu: This is indeed the current problem, and the tight supply of tin raw materials will inevitably lead to intensified competition among smelters. At present, all smelters are calling for adjustments in TCs, as some enterprises with insufficient raw materials have started vicious competition for production. The state also introduced a series of measures for order adjustment, including environmental protection inspections and hazardous waste transfer regulations. Only the establishment of an orderly supply and demand environment and a healthy competition order can guarantee the standard and stable development of the tin smelting industry. If tin smelting TCs do not increase, many smelting companies will find it difficult to survive. As a manufacturing country, tin solder and tin chemical products are indispensable supporting resources in China. Only when TCs rise and smelting companies have production profits, production enthusiasm just can be improved, stable production and sales can be achieved, and downstream industries can obtain sufficient raw materials to ensure the demand. This is not just a link for smelters, but an adjustment of the industrial chain, and the only way to promote the stability of the industrial chain.
- Asian Metal: Under such fierce competition, do you consider transformation?
- Mr. Yu: There are two reasons for the intensification of competition. First, the current utilization of tin scrap is not high. Most producers only use scrap from tin soldering plants and electronics factories with relatively simple pre-treatment processes, and these products can be used as raw materials when they are fed to electric furnaces. In addition, there are still a large number of tin compounds that have not yet been developed and utilized on a large scale, which will also be the main resource in the consumption of tin scrap in the future. Second, most companies have seen the development potential and substitutability of tin scrap in the future. With the exploitation of tin resources, there are currently few open-pit tin mines in the world, and most of them are mined underground. The high mining costs, low product grades and poor safety make everyone actively seek new alternatives, and there is no doubt that tin scrap is the best choice. It is precisely because of the huge potential of tin scrap that we have been committed to the development of tin products based on tin scrap. We will continue to study technology, pioneer and innovate, improve craftsmanship, pursue the quality, and strive for tin ingots and tin products that use tin scrap as raw materials to be much better.
- Asian Metal: What do you think are the advantages of tin scrap as smelting raw material over traditional tin ore?
- Mr. Yu: First of all, as a raw material for tin smelting, tin scrap processing is more complicated but the recovery rate is high. Under the current smelting level, the recovery rate can be more than 95%, and the higher one can reach 98%, while the recovery rate of tin ore smelting is less than 90%. In addition, the cost is low. The mining of tin is difficult, and the raw materials are not easy to obtain, while tin scrap is a "waste product" produced in production, and its utilization is a process of turning waste into treasure. For suppliers, sales enthusiasm is higher. Furthermore, as there are other valuable metals in the tin scrap, they are separated during the production process, and other valuable metals can obtain additional profits. This is the place that tin ore can not match.
- Asian Metal: What is the current proportion of tin ingot with tin scrap as raw material in tin ingot production? What do you think of this proportion?
- Mr. Yu: At present, the proportion of tin ingot produced by tin scrap is about 20%, and the national output records about 30,000 tons a year. But this proportion is gradually increasing. It is believed that with the industrial adjustment brought about by the upgrading of technology and the adjustment of TCs, the proportion of tin scrap consumption will eventually be the same as that of tin ore.
- Asian Metal: The price of tin ingot fluctuated up in the third quarter. How do you think the market trend in the fourth quarter?
- Mr. Yu: There are reasons for the increase in tin prices in the third quarter. Mainly because of the supply contraction and the release of consumption, the imbalance between supply and demand has caused prices to rise sharply. I think that the country is currently implementing the dual energy consumption control policy, and tin prices will slowly adjust to around RMB280,000/t (USD44,016/t) in the fourth quarter. This price will not be achieved overnight, but will undergo a long-term fluctuation process. The prices of tin ingot will fluctuate between RMB270,000-290,000/t (USD42,282-45,414/t) in the past month.
- Asian Metal: What is the impact of high tin prices on downstream consumption and market deals in the fourth quarter?
- Mr. Yu: With high tin prices, downstream consumers cautiously enter the market to make purchases, most of which maintain the procurement and arrange the production based on orders, and build stocks carefully. As a result, when the demand continues to flow into the market, prices will move up rapidly due to short-term supply shortage, leading to extremely unstable market product prices. The situation is expected to improve in the fourth quarter, because some downstream export-oriented enterprises will usher in the peak production season and actively stock up for production in the fourth quarter. It is expected that the market deals will remain stable in the fourth quarter, and the trading activeness will be better than the third quarter.
- Asian Metal: Please talk about your views on the trend of tin prices in the first quarter of next year.
- Mr. Yu: This year, tin prices have experienced a roller coaster-like market, which is another big fluctuation after 2008. It is expected that with the gradual recovery of demand in the first quarter of next year, smelters will also be in stable production. However, the tight supply of raw materials is difficult to alleviate in the short term. Prices of tin ingot are expected to rise to RMB300,000/t (USD46,980/t) again on the basis of the status quo in the first quarter of next year. In the post-epidemic era, market deals in the Chinese environment will show stable, firm and long-term development. At present, the state is actively encouraging small and medium-sized entities. Everyone is very motivated and confident in the market next year. China's tin industry is self-sufficient, self-produced and sold, and has strong ability to resist risks and fluctuations. Therefore, without a financial crisis, the price will not fall below RMB200,000 (USD31,320).
- Asia Metal: Thank you for your wonderful answer!
- Mr. Yu: Thank you to Asia Metal.
