Asian Metal: Hello, Mr. Zuo! Thank you very much for accepting the interview of Asian Metal. Please firstly make an introduction to the background and the main business of Yibin Guangyuan Lithium Battery Material Co., Ltd.

Mr. Zuo: Founded in 2017 as a joint venture of Yibin Tianyun Group and Guoguang Electric Company Ltd., Yibin Guangyuan Lithium Battery Material Co., Ltd. has total registered capital of RMB600 million (USD84,769,709). Located in Yangchun Industrial Park in Jiang'an, Yibin, Sichuan, it is committed to R&D and production of lithium battery cathode material precursor.

Asian Metal: We learned that your company has newly built 20,000tpy of NCM precursor production capacity, but only 10,000tpy of it has been put into production. Would you please tell us whether your precursor production capacity would increase further in 2020 and what is the market positioning of your company?

Mr. Zuo: Our NCM precursor project totally has a designed production capacity of 100,000tpy and its construction is divided in three phases. With a planned investment of RMB900 million (USD127,154,563), the phase one project has a production capacity of 20,000tpy, of which the 10,000tpy has gone into production with the rest 10,000tpy in construction now and expected to be put into production in late 2020. We plan to build the phase two project of 30,000tpy from 2020 to 2022 and the phase three project of 50,000tpy from 2023 to 2025.

Mainly targeting high-end power market, we own a professional team to produce 5 series, 6 series, 8 series, NCA and other specifications of precursor. Our team includes three doctors, a Japanese expert consultant, a South Korean expert consultant and many masters and bachelors.

Asian Metal: We heard that you have been in the market for a long time. Would you like to make a brief introduction to the current output and supply-demand of NCM precursor and cathode material in China respectively?

Mr. Zuo: China has a total production capacity of over 500,000tpy of NCM precursor at present. In 2019, the domestic production capacity of the material was more than 260,000tpy, but the utilization rate was only about 50%. In addition, the output of cathode material in China was less than 200,000t in 2019.

The demand for NCM precursor from end users has been soft in 2020 due to decreased national subsidies on new energy vehicles and the delay in production resumption amid the spread of Covid-19 after the Spring Festival. We expect that some small consumers from battery industry would begin to reshuffle in 2020, and the battery production capacity and output will be further concentrated to some large enterprises.

Asian Metal: As we all know, aggressive competition is seen in the current new energy market, so what are the outstanding features of your NCM precursor and how does your company win the competition?

Mr. Zuo: Facing fierce market competition, we focus on offering a more comprehensive array of higher quality products that can better meet customers' need. The outstanding features of our products are mainly reflected in equipment and technology.

We use advanced equipment imported from South Korea, Japan, Germany and other countries. Adopting DCS, MES, LIMST, OA, ERP and other intelligent production and control systems, we have realized fully automatic production and are able to ensure that our products can meet the specific requirements of our customers. In addition, the NCA precursor we have produced by the technology (reactor structure and agitating blades) introduced from Japan has better sphericity and more even size of primary particles than domestic counterparts.

Asian Metal: It's very important to control production costs of precursor in order to make more profits as the demand from end users is soft while prices for raw materials nickel sulfate and cobalt sulfate go up. How does your company do to control production costs?

Mr. Zuo: Our auxiliary materials used to produce NCM precursor, such as water, nitrogen and electricity, are mainly supplied by our group company and thus we have certain cost advantages in this aspect. Meanwhile, salts used as raw materials, such as battery grade nickel sulfate and cobalt sulfate, are mainly obtained through direct purchases and occasionally through OEM business. The costs of these salts account for 80% of the total costs. We plan to sign long-term raw material purchasing contracts and do futures hedging business to reduce risks caused by fluctuated raw material prices; meanwhile, we also plan to extend strategic cooperation with upstream suppliers, who are producers of intermediate products and mineral products. Thus, we can further control our production costs.

Asian Metal: In recent years, extending the industrial chain and reducing the cost of raw materials have been the pursuit of the industry. What do you think of them in practice?

Mr. Zuo: The competition in the current NCM precursor and cathode material markets is intense as the two kinds of materials are in the middle position of the industry. We have started planning long-term cooperation with upstream and downstream companies since the establishment of our company and have negotiated with large downstream customers in domestic market. The 30GWH battery plant project we cooperate with others is expected to go into production in the first half of 2020. In addition, Guangzhou Libode New Material Co., Ltd. is one of our major customers.

Asian Metal: What do you think of the market prospect of precursor in 2020?

Mr. Zuo: We expect that China's precursor market would see fiercer competition in 2020. The government policy has a great influence on the development of battery industry and the national subsidies on new energy vehicles are likely to decline further in late 2020. Nevertheless, we expect that the output of NCM precursor would increase to 300,000t in 2020. There are two major factors to stimulate the demand of the material. The first one is the new guiding policy made by the government; the second one is the fact that Tesla's gigafactory in Shanghai has launched several new projects. Although the demand from Japanese and South Korean customers has declined affected by the spread of Covid-19, we expect that the output of cathode material plants invested by LG and other companies in China might increase. Thus, we forecast that the demand for precursor from downstream customers would generally increase.

Asian Metal: Thank you again for sharing your views with us and giving your support to Asian Metal. Wish both the new energy industry and your company a better future.