Asian Metal: Good afternoon, Mr. Chen. Thank you for granting this interview. Chinese manganese flake prices rebounded recently as a result of declining output during the summer, do you think the price increase will carry on in the next two months?

Chen: The current mainstream prices of Chinese manganese flakes are close to the level of RMB13,000/t, making it hard for them to increase any further, given that many plants are planning to resume or increase production, so the supply will increase in due course. I believe the mainstream prices will remain in the range of RMB12,000-13,000/t during the rest of 2014, with the low end limited by production costs, whereas, should the prices reach RMB13,000/t, supply will soon increase and drag the prices back down.

Asian Metal: Hunan and Guangxi rank first and second in operating rates among China’s leading southern manganese production areas this year. What is the largest obstacle for Hunan-based plants?

Chen: The market price and demand are fair to all in China, but the production cost varies from region to region. For manganese flake producers in Hunan, usage and supply of manganese ore is the biggest headache. Firstly, the grade of local manganese ore has dropped to 12-13%, forcing the plants to increase the usage. Secondly, the supply is tightening with the total quantity falling, pushing up the prices of manganese ore in Hunan. In short, the grade of manganese ore is lower than in other areas, while the price is higher.

Asian Metal: As grades of manganese carbonate ore are dropping, several manganese flake plants have begun to use overseas manganese ore for production in recent years. Will more plants use overseas manganese ore in the coming three to five years?

Chen: I have been to Australia and South Africa many times and also talked with some geologists, and it has been confirmed to me that 70% of the global manganese ore is manganese oxide ore, while China accounts for only 6% of the global manganese ore. What’s more, only Hunan and Guangxi within China have good quantities of manganese oxide ore, with the grade of most manganese ores below 20%, which is much lower than those in Australia, South Africa and other manganese ore producing countries. In addition, the potential for further development of manganese carbonate ore is quite limited in China with dropping grades and higher content of P and S. Therefore, Chinese manganese flake plants will have to use overseas manganese ore for production in the long run, and I also urge the government to encourage plants to import manganese in order to protect Chinese domestic manganese ore.

Asian Metal: But most Chinese manganese flake plants are unsure whether they can successfully switch to overseas manganese ore during production due to technical problems, so how did you make up your mind and overcome the difficulties in practice?

Chen: Chinese manganese ore prices surged to around RMB1,500/t in 2005 due to tight supply of the material. We began to do experiments at that time, trying to alter manganese oxide ore, after also seeing the grade of manganese carbonate ore dropping in China. We were successful in 2007 in arriving at a new invention with four patents including “Restoring manganese oxide ore by the inner heating method”, which allowed us to use overseas small ores at relatively low prices for production. From 2010 onwards, we began entirely adopting overseas manganese ore for production, enjoying the same cost as those who have their own manganese mines in China. We are now mainly using manganese ore 30%min from South Africa, Brazil and Turkey, and several other Chinese manganese flake plants, including Ningxia Tianyuan Manganee Co., Ltd., are also partly using overseas manganese oxide ore.

Asian Metal: Chinese manganese flake prices have shown a general downtrend in the past two years with poor market performance, so some participants are studying how to reduce the production cost further. How much do you think the production cost can be reduced in the next three years?

Chen: The average production cost has basically been stable over the past three years. Some manganese flake plants are trying to reduce power consumption in order to save costs. Nevertheless, the theoretical power consumption is 4,900-5,000kWh/t during manganese flake production, and the leading plants can ensure a comprehensive consumption of 6,300-6,500kWh/t right now, and I think this is close to perfection. With grades dropping while prices for manganese ore are increasing, I do not believe that there is much room for cost reduction.

Asian Metal: Production of 200 series stainless steel is unsatisfactory to manganese participants, many of whom worry about the market outlook for 200 series stainless steel compared to 300 and 400 series stainless steel, what’s your opinion?

Chen: The potential for further domestic application of 200 series stainless steels remains huge, as it can be used in doors, windows, pots, spoons, etc. On the contrary, 300 and 400 series stainless steels are mainly applied in manufacturing due to their higher prices and excessive Cr and P content. Consequently, I believe 200 series stainless steels have a bright future.

Asian Metal: We know a number of Chinese stainless steel mills are continuing to replace some manganese metals with low-carbon ferromanganese and high-silicon silicomanganese in order to reduce production costs, do you think this will reduce demand for manganese metals in China?

Chen: It is a fact that a number of Chinese stainless steel mills are replacing some manganese metals with low-carbon ferromanganese, high-silicon silicomanganese and even manganese nitrogen, as a result of the poorly performing steel market. However, manganese plays an important role in increasing the toughness and hardness of steel products, whose quality will definitely be affected if the manganese content is greatly reduced. Manganese metals contain over 95% manganese in China, while the content for silicomanganese or other manganese alloys is much lower, and they also contain too much C, Si, P and S, which are harmful to stainless steel production. Consequently, using these products in place of manganese metals has pretty much reached its limit, and demand for manganese metals will remain relatively stable in China in the next two years.

Asian Metal: Thanks for your time in giving this interview and we wish your company a bright future.