----Interview with Huanqun Zhang
General Manager
Gejiu Qiandao Metal Co., Ltd.
Gejiu Qiandao Metal Co., Ltd., established in June 2017 and located in Gejiu City, Honghe Prefecture, Yunnan Province, China, is a large company which integrates non-ferrous metal trade and processing. The company mainly purchases tin raw materials and has in-depth cooperation with domestic and foreign mineral processing enterprises. The supply of goods mainly comes from domestic and many overseas countries. After several years of efforts, the company has become a leader in the industry and occupies an important position in the tin industry.
Asian Metal：Welcome to the interview hosted by Asian Metal Mr. Zhang. Please introduce your company first.
Mr. Zhang：The Company was established on June 29, 2017 with a registered capital of about RMB6,000,000(USD861,000). The business scope covers fields of non-ferrous and ferrous metals, and the main business is trading tin concentrate and tin ingots. Our regular monthly trading volume of tin concentrate is about 2,000 metal tons. Our customers are mainly upstream mines, 95% of which are in Myanmar, and downstream smelters in China.
Asian Metal：Domestic tin prices fell sharply from May to August this year, what’s the main reason for this and how did your company respond?
Mr. Zhang：In fact, the inflation rates in various countries stood high before May, resulting in constantly high prices of tin ingots. With the rise of inflation, various countries, especially Western countries dominated by the United States, took tough interest rate hikes to curb inflation, leading to a rapid decline in tin prices; In addition to that the overall shrinking market demand this year, resulting in the price crash. From August to mid-November, although prices were still in the downward range, the overall rate of price decline slowed. After the tin price fell sharply, we used the method of "locking price" to settle with the smelter to avoid great loss.
Asian Metal：How did the TCs change during the price fall?
Mr. Zhang：The TCs has been going down from RMB27,000/metal ton(USD3,874/metal ton) in early May to RMB17,000/metal ton (USD2,439/metal ton) currently (based on 40%min). The TCs are affected by the price of tin ingots and supply-demand relationship. The average tin recovery rate stands at 97.5%, that is to say 2.5% of the metal tin would be lost in the refining process. So the higher the tin prices are, the higher the loss will be, and vice versa. So if the tin price goes down, the TCs will go down, and vice versa. Then supply-demand relationship is also one of the influencing factors. If the current supply of tin ore exceeds the market demand, the tin price falls, the TCs will inevitably decrease, and the tin price rises, the TCs will also appropriately rise. The prices of tin ingots continued to fall in November and production needs to be continuous, smelters cannot easily suspend production, refineries are competing for raw materials, so the supply keeps tight, the TCs probably would have further downward space.
Asian Metal：You just mentioned that supply and demand are also important factors affecting the TCs, so how is the current domestic supply of raw materials?
Mr. Zhang：We face short supply currently. When the tin price was high, the profitable grade of raw ore mined only needed to be 0.3%-0.4%min. However, with the tin price sustained falling down, the grade of raw ore mined needed to reach 0.7%-0.8%min to be profitable, but this grade of ore accounted for only about 60% in the vast majority of mines in China. So there will be a significant reduction in exploitation, especially after tin prices fell below RMB200,000/t(USD28,699/t) in early July, there had been a significant decline in exploitation. In addition, there is no obvious price gap between domestic and foreign tin prices, so I estimate that the import quantity of tin ore and tin ingots will not be too much in November. After mid-November, the tin price has pulled back, and the prices went up to about RMB180,000/t(USD25,829/t), so I estimate that if the tin price can return to about RMB200,000/t(USD28,699/t) in December, it probably relieves some of the supply pressure.
Asian Metal：Myanmar is an important supplier of raw materials to our country, and your main partners are also in Myanmar. Would you please introduce the situation of Myanmar mines?
Mr. Zhang：The mining area of Myanmar mainly includes the mining area of Loi-kaw, Myeik and Dawei in the south and the familiar Wa mining area in the north. The mining volume of Wa State mining area is in a downward trend. Wa state, for special geographical and historical reasons, levies more taxes than other parts of Myanmar, including corporate sharing, raw mining sharing and fiscal revenue. With the long mining life, the grade and output of the mine declined during the past years; The mining volume in several southern areas is in a upward trend due to abundant resources and low exploitation rate. Tin concentrate supply has increased from 500 metal tons a month in 2017 to 1,500 metal tons a month now. Our company would cooperate with some local mines directly, providing them with technology and guiding to exploit.
Asian Metal：In addition to Myanmar mines, African and American mines are currently circulating in the domestic market. Please talk about the current development and problems of African mines and American mines.
Mr. Zhang：African and American mines are generally of higher grade and low impurity contents, both averaging around 68-72%min of tin. The problem with African mining is that few companies have won international membership certificate, without which their mines cannot be exported. This certificate is also in response to the EICC department of the United States (American Electronic Citizen Coalition) audit. EICC is a non-governmental organization in the United States that determines the entry threshold for tin concentrate exports to ensure that the mining of tin concentrate is not controlled by illegal armed forces and avoid mineral resources becoming an economic source for illegal armed forces. If it is not approved, the tin concentrate that you export cannot be sold in the international market even if it goes to the smelter to make tin ingots. South America is dominated by Brazilian mines, which enters our country in a small but stable amount.
Asian Metal：Since your company also cooperates with many mines in Myanmar and provides technology for joint exploitaion, what good methods do you have to improve the grade and cost control of tin concentrate?
Mr. Zhang：To be honest, the most important way to control the cost is to optimize the mineral processing. For example, the grade of Wa mining area is relatively low, which is destined to go through two processes in beneficiation, namely re-separation and flotation in order to control the recovery rate. Most of the selected ore grades are about 10-20%min, and after the selection, the Chinese smelters can reprocess it to 40%min before it can be smelted in the electric furnace. The process is complex. The mines in the southern region of Myanmar are mostly associated with tungsten and tin, and the ore grade is higher than that in Wa State, which will save some processes to control costs. The higher grade of ore in Africa means better cost control. Therefore, our company attaches great importance to the situation of the raw ore zone in the mining area so as to lay out our beneficiation method and recovery process.
Asian Metal：In the fourth quarter, especially in mid-November, tin prices showed a trend of recovery. Do you think tin prices would return to the previous "bullish tin" state in the Q4?
Mr. Zhang：From the macro point of view, the US interest rate hike is expected to delay. However, from the fundamentals of supply and demand in the market, there is little change and the demand is relatively weak. We estimate that the tin price will remain between RMB170,000/t(USD24,394) and RMB200,000/t(USD28,699/t) until June next year.
Asian Metal：What are your company's plans in the next year?
Mr. Zhang：Our main task next year is to lay out the mineral resources in Africa. There was a delay due to the epidemic. Previously, we had been through intermediaries to do mineral trade in Africa, without going deep into Africa itself. Now we have carried out preliminary research and exploration in the coming three years. Relevant personnel have been trained and are expected to go to Africa early next year to conduct field visits and carry out relevant business.
Asian Metal：Thanks for your excellent sharing and we wish Qiandao a prosperous business.
