Asian Metal: Thank you for accepting this interview. Would you like to introduce the company briefly?

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Liu: Our group produces ferronickel at present and has a plant in Shandong. They have one furnace of 128m3keeping production. The output is abounding 2,000-3,000tpm of ferronickel 7-9%. Furthermore, we built a new plant in Dafeng Port, Jiangsu Province – Jiangsu Huaguang Nickel Industry. We will construct a furnace of 38,000KVA in first stage and plan to start production ferronickel 10%min in April or May next year with output of 10,000tpy. We consider building rotary kiln in second stage. Meanwhile, we plan to invest lateritic nickel mine and build smelting plant in the Philippines and Indonesia. I have been the first one who knows how to extract useful materials from chromium dregs, the fist one named ferronickel and the first one imported lateritic nickel ore from Philippines.

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Asian Metal: Would you like to talk about the first time when you produced ferronickel?

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Liu：We started to extract useful materials from chromium dregs and stainless steel scrap to produce stainless steel from 1987. In this case, we started to research ferronickel production. More than a decade ago, Albania gave China 800,000t of lateritic nickel ore in return for the assistance that the Chinese government had offered. At that time, we tried to use lateritic nickel ore as materials to produce ferronickel. We overcame many difficulties and produced 3,000t of low-grade ferronickel in 2000. However, most stainless steel plants were reluctant to use the new product at that time expect Fujian Wuhang and ZPSS, so we sold around 40,000-50,000t to them at first. Because of the decreasing production cost for stainless steel, most stainless steel plants started to purchase ferronickel and we signed a contract of around 460,000t of ferronickel with ZPSS in 2006.

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Asian Metal: As we know, lateritic nickel ore price remained at a low level in 2006, so more and more plants started to produce ferronickel and the output of ferronickel increased greatly. How about your plant production status at that time?

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Liu：We started to import lateritic nickel ore from Philippines and Indonesia in 2006 after we used up raw materials. At first, we purchased lateritic nickel ore 2.0%max at USD22/t FOB Philippines. Because of the low production cost, we got profits from ferronickel production. However, more and more plants started to import lateritic nickel ore and produced ferronickel, which pushed up the lateritic nickel ore price. The lateritic nickel ore import volume increased to 30,000,000t in 2007 and the price moved up to USD200/t. In this case, it was hard for us to get profits from ferronickel production. There were more than ten furnaces keeping ferronickel production, and we held a lot of lateritic nickel ore stocks in spot market. However, because of financial crisis in 2008, lateritic nickel ore price and ferronickel price moved down greatly and we suffered great losses. Meanwhile, NDRC controlled backward production equipment, and we had to halted some furnaces production. Anyway, we overcame the difficulties and kept production on going.

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Asian Metal：Ferronickel production kept at high level, and it was hard for producers to get profit. So how do you think high-grade ferronickel strengths?

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Liu: Impacted by the weak stainless steel market, nickel price remained at the low level. In this case, ferronickel market also kept sluggish, and most producers suffered losses. It is no good for the production standardization when different steel mills require different quality although the purchasing index from large steel mills affects the price for ferronickel. The quality and price fixing are determined by steel mills. However, some producers believed nickel price may rebound next year, so they insisted on production and the demand for ferronickel kept stable. All in all, ferronickel 9%min suited for stainless steel produce, so the demand for high-grade ferronickel may keep strong. I think the unified quality standard should be formed, which is to say large enterprises craft out the unified standard to secure the margin room. Thus, it is crucial to make unified standard for the ferronickel industry. The extensive production without unified standard and stable qualify is detrimental for the survival and long-term development of the industry.

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Asian Metal: Many ferronickel projects will go into operation in succession in coastal areas, and in your opinion, what advantage do mills in coastal areas have? How to develop in the future?

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Liu: Logistics production is one of import part for ferronickel production cost. The freight cost is relatively low in coastal areas near the port. Meanwhile, many stainless steel plants concentrate in South China, so it is easy for ferronickel producers in coastal areas to transfer ferronickel to stainless steel plant.

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Asian Metal: Prices for ferronickel drop markedly beat down by declines in nickel price, but production enterprises run with thin margins due to the high power charge. So may I ask how to curb the production cost of ferronickel? Furthermore, most producers pay attention to rotary kiln, and how do you consider the technological innovation?

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Liu: We can curb the production cost of ferronickel at much low level around RMB1,060-1,070/mtu (USD169-170/mtu) ex works this month due to the good technology and skilled labor. We refuse to hold stocks and are active to release stocks for regular customers. In this case, we have enough capacity for ferronickel plants production.

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Talking about the technological innovation, most production enterprises pay attention on seek the way to reduce the production cost and equipment improvement and so do we. We already succeed developing the small rotary kiln at present.

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Moreover, we support the China's mining and metallurgy research institute to conduct the ferronickel smelting equipment research. We tried to produce stainless steel with melted ferronickel directly and the stainless steel production cost would decrease if it was successfully.

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Asian Metal: Stocks of lateritic nickel ore keep at a high level, and the rainy season in Indonesia will come. So how does your company solve the problem of procuring the raw material? What is to be noted in buying lateritic nickel ore?

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Liu: It is important for enterprises to obtain cheap raw materials. We established a public company in Philippines and started to control lateritic nickel ore. From now on, we mainly procure spot material for immediate use at the port.

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Asian Metal: The stainless steel market remains sluggish and the demand for ferronickel keeps inactive, so how do you think the market supply and demand of ferronickel?

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Liu: The weak stainless steel market still impacted ferronickel price. Many new ferronickel project started production and increased the ferronickel supply. In this case, some ferronickel plants which have backward technology may weed out. Furthermore, we believe the demand for stainless steel may turn better in the following month supported by the economic incentive policy from Chinese government. Moreover, the supply for nickel is insufficient in China, and stainless steel plants prefer to rebuild ferronickel as materials for 300 series stainless steel production. In this case, the ferronickel demand may keep firm in the long term.

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Asian Metal: Some enterprises plan to establish smelters in Indonesia due to the new export policy of lateritic-nickel-ore in Indonesia. What is your plan in face of the current lateritic nickel ore market?

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Liu: We plan to invest ferronickel plants in Indonesia and Philippines, and already get world patent of ferronickel production in Indonesia and Philippines. We also warm welcome enterprise in domestic and aboard to join us and hope to establish the business relationship with us for nickel recourse.

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Our public company in Philippines established in October 2009, and planned to build a coking plant with the output of 220,000t. The plant has three furnaces and a power plant. We cooperated with mine in Philippine and considered to sell lateritic nickel ore at first. The ferronickel plant may start production in 2014.

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Furthermore, we have lateritic nickel mine in Sumatra and Kalimantan in Indonesia and sell coal of Kalimantan currently. The ferronickel plant will be built in Kendari and we plan to invest RMB200 million. Because of the poor infrastructures in Indonesia, we have to invest power plant and other infrastructures.

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Asian Metal: What is your opinion on the market trend next year as the ferronickel and nickel market keep inactive this year.

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Liu: Stainless steel price kept at a low level, so the entire ferronickel market and industry slowed down. We hold cautious attitudes towards ferronickel price next year, and believe the price may be hard to rebound greatly. Nickel price on LME may hover at USD17,000-18,000/t next year and the market may turn a little bit better. We ask participants to finish the ferronickel industry disorder, and establish standard to enhance the profit.

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Asian Metal: Thanks for participating in this interview and the support for Asian Metal. Wish your company a promising prospect!

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Liu：Thanks!

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