Tin concentrate supply stays tight
----Interview with Chao Deng
General Manager
Honghe Gejiu Hongning Mining Co., Ltd.
- Gejiu Hongning Mining Co., Ltd. was established in January 2022 and is located in Gejiu City, Honghe Prefecture, Yunnan Province of China. The company's business covers processing of overseas raw material, sales of metal and ore, etc. The company has in-depth cooperation with domestic and foreign mines and mineral processing enterprises. With good reputation and high quality products, the company won unanimous praises in the industry.
- Asian Metal: Thanks for accepting interview by Asian Metal Mr. Deng. Please introduce your company first.
- Mr. Deng: Our parent company Shanghai Kegein Industry & Trade Co., Ltd was founded in 2004 and is mainly engaged in oil and commodity trading. Then, we brought into contact with the non-ferrous metals industry and established Gejiu Hongning Mining Co., Ltd. in January 2022. The company's main business is trade of tin, tungsten, lead, zinc, copper and other mineral products. We are mainly engaged in the domestic and overseas trade of tin ore, tin medium ore and tin ingot. Overseas trade business mainly covers Myanmar, Laos, Vietnam and other Southeast Asian countries, Brazil, Venezuela, Chile and other South American countries, Nigeria and other African countries. The domestic market covers Yunnan, Jiangxi, Hunan, Guangxi and other provinces. We also have offices in these provinces to provide support for raw material procurement. At present, our monthly concentrate trade volume could reach nearly 900-1,000 metal tons and we maintain long-term cooperation with major smelters in Gejiu. For imported tin ingot trade, we mainly cooperate with solder factories, tin material factories and chemical plants in Yangtze River Delta and Pearl River Delta. We plan to increase our trade volume by 20% YoY.
- Asian Metal: According to the China Customs data, the amount of imported tin concentrate last year increased by 32% YoY and the increase appeared obvious especially in the first half of the year. What do you think are the main reasons for the increase?
- Mr. Deng: I think there are three reasons. Firstly, since the prices of tin ingot exceeded RMB300,000/t (USD43,461/t) in January 2022, the TCs for tin concentrate 40%min remained at RMB28,000/metal ton (USD4,044/metal ton) until April 30th, 2022, resulting in large profits for the mine owners and they can gain considerable profits only by exploiting low-grade crude ore, which accounts for a relatively high proportion of total minerals. The quantity of tin ore would of course increase spurred by sustained high prices. Secondly, in the same period, the window of import continuously opened, leading to continuous flow of tin concentrate into the domestic market. Thirdly, in the first half of 2022, the RMB exchange rate against the US dollar was much lower than that in the second half of the year. Thus, driven by this profits, domestic and foreign traders spontaneously increased their proportion on import.
- Asian Metal: Since the import volume increased last year, what is the current supply situation of tin concentrate in China? Has the previous tight supply situation been eased?
- Mr. Deng: In 2022, China imported add up to 243,757 tons of tin ore-sand and concentrate, up by 32.26% YoY. Among them, Myanmar, Indonesia, Australia, and the Democratic Republic of the Congo are the main sources of imports, while Laos and Vietnam, as new sources, also increase the volumes significantly. However, presently the tight situation of supply has not been eased. On the one hand, after the tin ingot prices rose rapidly and continuously under the tight supply from 2021, smelting capacity has been expanded, resulting in mismatch between the raw material side and the smelting side. The increase of exploiting low-grade ore has pushed up the mining cost of the industry. At the same time, the cost of processing low-grade ore by smelters has also risen, squeezing processing profits. On the other hand, starting from March 2022, after a sharp drop in tin ingot prices, smelters faced with an aggravated cost problem and chose to increase production in order to reduce costs with economies of scale. As a result, the demand for ore or concentrate increased further, and the situation of tight supply has been difficult to ease. At present, the TCs of tin concentrate 60%min has fallen to RMB10,000/metal ton (USD1,444/metal ton), indicating that the current tin concentrate supply still keeps tight.
- Asian Metal: Transportation is also an important factor affecting supply, Myanmar, as the largest exporter of raw materials, it’s land transportation was not smooth during the whole of last year, but since January 8th of this year, Ruili port resumed customs clearance, how does this affect the China-Myanmar tin concentrate trade?
- Mr. Deng: Imports from northern Myanmar (Wa State) are mainly through MengA port in Menglian County, Pu'er City, while imports from southern Myanmar are mainly through Ruili port. Although the customs clearance of Ruili Port has resumed, the situation is still out of control due to the civil war and turmoil in the south of Myanmar. So we still needs to ship the products to Xiamen, Huangpu, Nansha, Zhanjiang and other ports to reach China, we predict that the situation is expected to continue for another six months.
- Asian Metal: With the advent of the post-epidemic era, market participants are paying more and more attention to overseas mines. What is the situation and operation mode of your company's overseas mines? Many domestic companies also want to invest on overseas mines and dressing plants, do you have good suggestions or precautions?
- Mr. Deng: The operation mode of our overseas mines mainly depends on introducing advanced domestic exploration and mining teams through resource sharing and mutual benefit to jointly develop mines in a cooperative and profit sharing mode. At present, the outputs of cooperative mines are basically stable with gradual increase. The major cooperative mines are in Brazil, Zambia and Nigeria. Overseas resources are indeed abundant, but according to our own experience, the most important point is to pay attention to the policies of settled countries, especially the political situation, export policy, taxation, local environmental protection, safety supervision, fire protection, management mode and so on. So when you layout overseas market, do a good research especially on these mentioned points in advance in order to avoid blind investment. I would like take Brazil and Nigeria as examples. Brazil's mining law stipulates a mining warrant issued by the government to explore and develop mineral resources. Mineral rights of solid minerals mainly include exploration license and mining concession certificate, both of which are indispensable. While in Nigeria, related preferential policies of the solid mineral exploration, development, and investment mainly include 100% control of the company by the solid mineral developers, free acquisition of shares of Nigerian enterprises in any convertible foreign currency with no restrictions on the remittance of investment income, the capital allowance for qualified capital expenditures of 95%, a three-year tax reduction period which can be extended for another two years, the exemption from tariff and import duties on mining operation machineries, free transfer of funds, tax credits for environmental and pension costs, more favorable policies on related exploration rights, mining rights, water prices, etc.
- Asian Metal: Overseas mineral resources are abundant, but domestic raw materials are still in short supply. How do you think about the price trend of tin ingot in the second quarter and the second half of the year?
- Mr. Deng: The prices of tin ingot have fluctuated considerably this year. The current prices of tin ingot would be supported by the news that Myanmar will stop mining after August this year. However, such support cannot be sustainable and the excessive inventory also limits the space of price increase. With regard to the demands from electronics, photovoltaic welding tape and other industries, the electronics industry is likely to bottom out in the second half of the year, which needs to be paid attention to. In the future of this year, market participants still hold strong expectations, but the weak realistic demand needs to be verified gradually. The prices would probably fluctuate above the cost to RMB230,000/t (USD33,219/t). Further price increase will be subjected to whether the marginal change on the demand side improves.
- Asian Metal: Combined with your forecast, what are the ways to improve the efficiency and profit of the mining trade business?
- Mr. Deng: We have passed the period of simple trading and now our trade is with combination of financial instruments. Since most of our trade business is in overseas market, we will continue to develop overseas markets this year. We will increase our purchase volume with lower profits to reach a goald of monthly trade volume increase of 15%.
- Asian Meta: What are your plans this year?
- Mr. Deng: Sustainable and stable development is the main keynote of our company this year. At the same time, we will send a large number of colleagues to overseas regions such as Africa, South America, Southeast Asia to cooperate with local governments and enterprises. We will continue to obtain mining rights, build dreassing plants on site, copy our sharing model of cooperation. This year, Morocco has been added to our list of overseas mine cooperation projects. Relevant personnel have arrived in Morocco and the project is under promotion.
- Asian Metal: Thanks for accepting the interview and wish a prosperous business to you.
- Mr. Deng: Thanks you.
