Zinc alloy market sees slack consumption
----Interview with Wenjie Liang
Vice General Manager
Foshan Guihe Metal Trading Co.
- Founded in 1989, Guihe Metal Co., Ltd. is a major private enterprise that specialized in producing zinc die-casting alloys. The company is located in Lishui Town, Nanhai District, Foshan City, Guangdong Province. The company mainly provides specific models of zinc alloy, Zamak-3, # ZznAl4Y 5 and #ZznAl4Cu1Y. With a total area of 60,000 square meters for industrial zone and modern production equipment, which has an annual output of 100,000 tons, the company ranks top in Guangdong Province.
- Asian Metal: Hi Mr. Liang. Welcome to Asian Metal's interview. Please introduce your company first.
- Mr. Liang: Guihe was established in 1988. To produce high quality zinc die casting alloys, we have been devoted to professional technology and good services during the past 30 years. At present, the annual production capacity of zinc die-casting alloy could reach 100,000t, which could rank top three in Guangdong market. And our industrial zone covers around 60,000 square meters. The company mainly purchases zinc ingot 99.995%min from smelters and traders in South China and produces zinc die-casting alloys including but not limit to Zamak-3, Zamak-4, Zamak-5, etc. Our die-casting clients mainly come from zipper and lock industries.
- Asian Metal: Since the fourth quarter of 2021, the domestic and overseas prices of zinc ingot climbed under the reduced inventory, which brought pressure on production costs for zinc die-casting producers. How did you deal with the raw material purchasing?
- Mr. Liang: Normally we would buy the same volume of raw material zinc ingot when selling out the corresponding batch of zinc alloy. But our company held bullish attitudes to the market and increased the inventory for both zinc ingot and zinc die-casting alloys in Q4 last year. But for our customers, they used to prepare much zinc die-casting alloys inventory for the consumption during Chinese spring festival holiday, but they decreased purchasing or did not buy in Q4 2021 as they watched the market under the high prices of zinc ingot. Considering that our company has confidence for resumption work after spring festival holiday and our customers mostly would replenish stocks, we increased our zinc ingot and zinc alloy inventory.
- Asian Metal: Then how's the zinc die-casting alloys consumption in Guangdong market in the first quarter of 2022?
- Mr. Liang: The result was almost the same as we predicted because we visited our customers in February and it seems that they could resume work basically. But their operation rates remained at about 50% to 60% due to the slack consumption under high cost of zinc ingot. They adjusted their purchasing strategy and seldom built much raw material inventory.
- Asian Metal: Did producers raise TCs of zinc die-casting alloy under the shrunkun price gap between zinc and aluminum, as well as the climbed energy cost?
- Mr. Liang: Obviously, producers want to increase the TCs, but we have to consider various factors before we act. Besides other production cost structures like Aluminum and energy prices, we would also take market competition into consideration. Almost all the producers struggled to remain the original TCs of zinc alloy even if prices of natural gas, the major energy consumption, increased from RMB3.5/m3 late last year to RMB4.3/m3 recently because nobody would like to raise the TCs at the expense of order loss.
- Asian Metal: How do you like the zinc alloy consumption in Q2 2022.
- Mr. Liang: Under Covid-19 and international conflicts, I predict that the consumption of zinc alloys would not increase much in Q2. We could say that that the consumption of zinc die-casting alloys remains slack according to the deals in Q1, although the government set a goal of 5.1% for GDP. Ideally theconsumption in Q2 might increase by about 20%-30% if COVID-19 could be controlled well.
- Asian Metal: What's your prediction for zinc die-casting alloy price trend in Q2?
- Mr. Liang: Prices of zinc die-casting alloy changes following those of zinc ingot and would increase with fluctuation in Q2 with the recovery of zinc alloy consumption according to our experiences. But we would also take the fluctuation of natural gas prices under the international conflicts into consideration. As far as I can say, prices of zinc die-casting alloys might decrease in Q2 as the supply of zinc ingot in Europe would go up in Q2 when the region relies less on natural gas, while the zinc ingot smelters in China could remain stable output.
- Asian Metal: Will your company consider lauching new projects in the future?
- Mr. Liang: The company would continue focusing on zinc die-casting alloys production at the moment and try to provide products with higher quality. But we are going to establish a trading company for sales of zinc ingot and zinc alloys to strengthen the influence of our company.
- Asian Metal: Thanks for your attendance and sharing. Wish your company a prosperous business.
- Mr. Liang: Thanks Asian Metal for sharing this channel to pass our voice. Also thanks your efforts in providing timely information and analysis for various metals.
