Asian Metal: Good day, Mr. Luo. Thank you for having the interview with Asian Metal. Can you share with us something about the current macro economic environment?

Luo: Ok. The global economy is not in good shape at the moment as initially anticipated and the price of almost all products has hit the bottom in recent several years and demand remains sluggish. It is rather a kind of Chinese economic crisis at a world level than the so-called European and American economic crisis.

Asian Metal: Of what impact could Chinese economic crisis have on global economy?

Luo: China issued RMB4000 billion (USD653 billion) to promote consumption during the economic crisis in 2008 and Chinese industry began to improve gradually and developed into a new high which also simulated economy in almost the whole world at the same time. However, the process did not eliminate economic crisis totally but created bubble due to lack of coordinated market discipline. When the bubble become big and almost at the edge of burst down, market discipline began to take effect and the economy which has reached the peak began to slump suddenly. As a consequence, the current crisis can also be called the Chinese economic crisis at a world level as Chinese economic bubble could also greatly impact global economy.

Asian Metal: This is not only a very novel but also a suitable concept. Then how can the current economic condition influence titanium slag market?

Luo: Take high grade titanium slag market as an example, the price reduced to RMB3,500/t during the economic crisis in 2008 and enterprises were at the edge of bankruptcy as their production costs were almost at RMB6,000/t. However, our government will not let enterprises to bankrupt in order to guarantee stability, employment and production, so the government issued RMB4000 billion. Though money supply increased and the Yuan(RMB) appreciated against major currencies, the price of products increased and that of titanium slag remained increasing. The highest price of high grade titanium slag was recorded in 2012 being at over RMB10,000/t. However, this was actually a bubble. Though the price has increased, the actual margin still kept at several hundreds Yuan. The shortcoming of bubble economy began to appear at the latter part of last year and the price of titanium slag slumped significantly as enterprises started operating in between losses and margins. For us, we incurred losses of RMB100-200/t a ton of titanium slag. As a consequence, enterprises will suffer more when they keep high output and sell more products.

Export is mainly influenced by RMB appreciation and dollar depreciation. Our company focuses on exporting high grade titanium slag to Japan and Japanese buyers pay with dollars. Dollar remains depreciating and RMB keeps appreciating at present with the exchange rate being at 6.12 or even 6 latterly. As a consequence, though high grade titanium slag price in domestic market is declining, the price is not in a downward trend but is becoming more expensive for Japanese buyers. As a consequence, the leverage of export price for Chinese high grade titanium slag is low and it is difficult for almost all domestic manufacturers to export now.

In this condition, it is becoming more and more difficult to sell in domestic market and to export. The price remains declining and enterprises incur more losses. Similar with high grade titanium slag, the acid slag market with greater output suffers more.

Asian Metal: Sales in domestic and overseas market are all meeting with great crisis. Could you please talk about factors that lead to this condition?

Luo: I think the most important reason is excess production capacity. As for acid slag, the shrink of real estate industry is fatal to the development of titanium dioxide market. What influence the titanium dioxide market directly is the demand slump for acid slag. The production capacity of titanium dioxide in domestic market is also excess over demand. The demand for titanium dioxide per year is 1.5-1.8 million tons while the production capacity for it is 3 million tons and many titanium dioxide enterprises are increasing their output. Many real estate dealers and brokers transfer their capitals to invest in producing titanium dioxide when the real estate industry shrinks which leads to serious excess production capacity. As a consequence, the price of acid slag has to reduce due to weaker demand for the material. Currently, the price of acid titanium slag keeps at only about RMB3,300/t.

As for high grade titanium slag, there were only a few decade-old of furnaces in the whole nation that were on operation in 2008. Our company had about 4 furnaces to produce high grade titanium slag at that time which was an enterprise of large scales. We also had our own mines for titanium concentrate 50%min and the high grade titanium slag that we produce can reach about 94%min. However, new high grade titanium slag plants in domestic market appeared one by one when the price of the material increased significantly in the latter part of 2010. There are only 56 high grade titanium slag producers in 2008 and they would get together to unify the selling price of titanium slag. However, there are about over 500 titanium slag plants in domestic market at present, so the market price is unlikely to unify and stabilize. The excess production capacity negatively impact on the sales of the material in domestic market and its export. Considering the sector-wide production capacity, our company is only a small scale producer.

Asian Metal: What about the condition of domestic titanium slag plants under such serious conditions?

Luo: Most titanium slag plants in domestic market have stopped producing presently as the market price is lower than their production costs. They will incur more losses if they produce more, so they choose to stop producing and take a wait-and-see attitude towards the market. Most producers hold prompt release inventories due to excess production capacity. As for high grade titanium slag, the pig iron market, its side products, is also not well with its price only being at RMB1,400-1,600/t and demand for the material is very weak. Some state-owned steel mills and private steel mills in Yunnan also have stopped producing, overhauled and techniques upgraded and reduced their output.

As a consequence, participants are pessimistic about the titanium slag market this year and next year. Producers should prepare as it appears hard times lie ahead. Moreover, with tight credit and capital, titanium slag producers are unlikely to get recoup their investment on schedule. Enterprises with loans and credits from private agents, even some producers that have set up for 20-30 years, begin to sell their stocks.

Asian Metal: Are you confident about the market in the near future?

Luo: As for me, I am optimistic about the market in the near future. For the long-term development, the overall development of titanium slag industry is very clear. Moreover, the market condition is also not well and it is the key moment for enterprises to over come difficulties. I think the market will improve again in 5 years at most as market economy has its own discipline. We can see the spring of titanium slag market at that time.

Our nation is encouraging urbanization and farmers increasingly have the purchasing power to live in buildings. As a consequence, lands are saved out which can promote the development of reals estate industry and some other industries. When farmers are freed from lands, labor is elaborated which is a great motive to industrial development. To be optimistic, Chinese economy can witness high growth rate and develop quickly again in 2-3 years.

Asian Metal: Could you please share with us some suggestions for the development of titanium slag market?

Luo: There are not serious problems in the production and supply of titanium slag in domestic market. There are many enterprises in domestic market that produce titanium slag with excess production capacity which create fierce competition. I think the best way is taking advantages of our own superiorities, improving products quality and making our products as the only choice for consumers. Only in this way can enterprise develop and industry improve.

Asian Metal: Thank you for sharing with us information about titanium slag market and your support for Asian Metal!