Promote downstream extension for magnesium industry
----Interview with Guiping Liu
General Manager
Xinjiang Banchao Group Co.
- Banchao Group is a modern industrial group based on magnesium metal smelting and oriented towards the diversified development of magnesium-based industries. The group is located in Erdaohu Industry Part of Hami City, Xinjiang upon foundation in 2016 with a registered capital of 100 million yuan. Owning more than 1,000 employees, Banchao Group adheres to reform and innovation, creates an open and inclusive business ecology, clarifies the strategic positioning of building a green, low-carbon recycling magnesium-based industrial cluster, promotes the development of the industry towards "clustering, refinement, and high-end", and builds magnesium-based industry synergy high-quality development system. After years of development, the group has a number of subsidiaries, like Hami Shengmei Magnesium Industry Co., Ltd., Xinjiang Banchao Magnesium Industry Co., Ltd., Xinjiang Banchao Supply Chain Co., Ltd. and Xinjiang Banchao New Materials Co., Ltd., etc.
- Asian Metal: Hello, Mr. Liu! Welcome to the interview by Asian Metal. Please introduce your company's business briefly.
- Mr. Liu: During the "14th Five-Year Plan" period, Banchao Group has obtained the government's approval to build the "Xinjiang Banchao Group Co., Ltd. Magnesium-based New Materials Circular Economy Industrial Integration Project". It plans to smelt existing magnesium metal and integrate its production capacity. It has also carried out technological upgrading and transformation to build a magnesium metal smelting scale with an annual output of 50,000 tons; the company's existing semi-coke project with an annual output of 600,000 tons has been upgraded to a comprehensive annual output of 1.2 million tons of clean carbon briquette from coal and 180,000 tons of coal tar. Utilization project: transform the existing 600,000 tons/year coke project into a 1 million tons/year clean carbon scale through capacity upgrading. The main raw materials and product accessories of the magnesium-based industrial park can form a green cycle and comprehensive utilization in the industrial park and surrounding areas. Relying on this project, the Group is vigorously developing investment cooperation related to the upstream and downstream industrial chains, forming a magnesium refining chain using the tail gas of processing as fuel "coal - blue charcoal - raw magnesium smelting - magnesium alloy casting and processing - wind power, A complete magnesium industry chain for photoelectric green and clean energy.
- Asian Metal: Since the first quarter, China's magnesium ingot prices has kept falling gently, so what do you think are the main reasons behind that trend?
- Mr. Liu: Firstly, stable production capacity and sufficient supply: In recent years, the production technology and production capacity of magnesium ingots have been continuously improved, resulting in sufficient market supply. When market supply exceeds demand, prices tend to experience downward pressure. If magnesium ingot manufacturers didn’t adjust production in time against changing market demand, it also leads to a backlog of inventory and low market prices. Secondly, price fluctuations affect downstream industries: In 2021, the price of magnesium ingots fluctuated significantly after a period of high levels. This instability makes it difficult for downstream companies to carry out stable production and long-term planning. Due to the instability of magnesium ingot prices, downstream industry chains such as magnesium alloys, related industries and other industries adjusted production plans and reduced consumption volume due to cost control and unclear future expectations, further reducing the demand for magnesium ingots. Thirdly, rising shipping costs: Rising global shipping costs will increase the transportation costs of bulk commodities such as magnesium ingots, which should theoretically push up their market prices. However, under the current circumstances, if downstream demand is weak, the increase in transportation costs cannot be completely passed on to consumers. Instead, cost pressure may cause some buyers to reduce purchases or switch to other substitutes, indirectly leading to a decline in magnesium ingot prices. Fourthly, weak global market: The global economic recovery is weak, especially the reduction in demand for magnesium ingots in industries such as manufacturing and construction, which has led to a contraction in investment in industries that have demand for magnesium ingots, such as the manufacturing and construction industries, thereby reducing the demand for magnesium ingots. demand, keeping prices under pressure. In the context of weak global market demand, even if the supply is stable or even slightly surplus, it will be difficult to support higher market prices.
- To sum up, the decline in magnesium ingot prices is the result of a combination of factors, including oversupply, instability in the industrial chain caused by price fluctuations, rising transportation costs and weak global market demand.
- Asian Metal: Currently, most factories in other regions are facing cost inversion and serious losses, and some factories have reduced production and suspended production to cope with the current crisis. What is the current status of your company? What are the advantages for your company to fight for the market downturn?
- Mr. Liu: Current normal production: During market fluctuations, maintaining stable production is our priority. Despite the current high-cost pressure and weak market demand, only continuous supply can quickly seize opportunities when the market picks up.
- The market downturn is short-lived, and companies are improving production efficiency and reducing production costs through the following ways: optimizing production processes and techniques, comprehensively sorting out, transforming and upgrading existing production lines, introducing advanced production equipment and technology. At the same time, through refined management, we reduce waste of raw materials and achieve energy conservation and consumption reduction. Secondly, give full play to the advantages of local resources: Based on the upgrading of low-rank coal in Xinjiang, make full use of tail gas to smelt magnesium metal, reduce energy consumption in the smelting process of magnesium metal, and reduce production costs. Thirdly, extend the industrial chain: Considering expanding the upstream and downstream industries, such as developing upstream to obtain more stable raw material supply channels, reduce the risk of cost fluctuations, and establish a long-term cooperation model with downstream manufacturers to reduce the impact of market price fluctuations on the downstream; Develop high value-added products or services to meet the needs of different customers and improve market competitiveness. Fourthly, carry out diversified operations: explore the research and development and application of new magnesium alloy materials, seek new business growth points, and diversify business risks. Fifthly, improve brand and service: Improve the quality and brand image of magnesium ingot products, provide high-quality after-sales service and technical support, enhance customer stickiness, and stabilize market share.
- Asian Metal: As far as I know, your company's magnesium alloy operations came online in December of 2023. How is it going now?
- Mr. Liu: The company started production of magnesium alloys last year to extend the magnesium industry chain and improve the market competitiveness. At present, AM60B model products have been gradually put on the market. Next, the company will continue to enrich and improve its product line to adapt to the diversified requirements of the market and will increase the overall market share and brand market influence.
- Asian Metal: Does your company have any plans to develop export business? How to plan the ratio of domestic sales to export sales?
- Mr. Liu: The export business company started to expand and export to Italy last year. This year, it will expand the export market, form two routes of domestic trade and foreign trade, and become a multi-channel service production enterprise. Xinjiang is located in the Belt and Road and Silk Road Economic Belt, the important location of the China-Pakistan Economic Corridor, and takes advantage of Xinjiang’s location advantages to gradually expand its business to Central Asia and Europe.
- Asian Metal: Entering late March, the mainstream prices for magnesium ingot increase slightly. How do you think the reasons for price increase?
- Mr. Liu: Firstly, some plants started to stop their production for equipment maintenance and the supply tightened. Additionally, given the rising gap for magnesium and aluminum, which also gave some opportunities for magnesium. Meanwhile, the rising upstream ferrosilicon prices also made the production cost level increase. Therefore, the mainstream prices showed the upward trend in late March.
- Asian Metal: What are your views on the market supply and demand trends and price trends in the second quarter of 2024?
- Mr. Liu: The magnesium ingot market is currently in a price game stage. The pressure on upstream production costs has caused two voices to appear in the market. On the one hand, due to increased costs, manufacturers tend to stick to prices, that is, "price increases" to ensure their profit margins and production enthusiasm; on the other hand, some companies may choose to moderately reduce production due to excessive cost pressure and adjust supply to cope with market pressure and prevent inventory accumulation and further price decline.
- At the same time, in response to the current market conditions, we will promote the magnesium ingot industry to extend the industrial chain downstream, such as developing high value-added products such as magnesium alloys and magnesium-based new materials, and improve the comprehensive utilization rate and economic benefits of magnesium resources, thereby realizing the development of the magnesium ingot industry. Transformation, upgrading and virtuous cycle development. This will not only alleviate short-term price pressure, but also contribute to the long-term stability and continued progress of the entire industry.
- Since the rapid increase in magnesium prices in 2021, it has affected downstream alloy consumption. Currently, magnesium prices have returned to normal and low levels, which is conducive to the development of downstream industries. It is believed that it will move towards a relatively normal level starting in April.
- Asian Metal: Thank you Mr. Liu for accepting the exclusive interview with Asian Metal. I also look forward to Banchao Magnesium embarking on a new journey and creating new brilliance in the future.
- Mr. Liu: Thank you Asian Metal for the exclusive interview. I hope Asian Metal will continue to provide timely, fair and comprehensive information for the magnesium industry.
