Asian Metal: Good morning, Mr. Shi. Thank you for agreeing to this interview. Would you like to briefly introduce current magnesium ingot market?

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Shi: The market runs steadily at present and producers in Shaanxi are operating actively while there is significant output reduction in other production bases due to cost problems. As a major magnesium ingot producing area, Fugu takes large market shares and plays important role in the market. It also helps to stabilize current magnesium ingot market.

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Asian Metal: Considering current economic situation, demand is still very weak in the market, especially in the export market. However, magnesium ingot price is pushed up by declining production and increasing labor cost in hot summer months. How long will the market keep upward and how far will the price go in your opinion?

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Shi: I do not expect big fluctuation as current price has been at high level but it is hard to estimate how long the price will keep firm. I think the price will hover at RMB17,000-18,000/t ex-works in a short time.

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Asian Metal: Many customers prefer to watch the market and postpone purchasing into August due to the sharp price increase. Would you mind giving an estimation about the market trend in August?

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Shi: The price is likely to hold stable in August. With prevailing production suspension in other producing areas, it takes time for producers in those areas to resume output even if the price keeps at high level. In addition, magnesium ingot production declines seriously in northern Shaanxi, which has lost much advantages. Supply will continue to be generally tight in August with the price fluctuating within a narrow range. Generally the price trend will keep firm. Although some buyers take watch-and-see attitude, we are not impacted seriously by it and will be reluctant to sell products due to no stocks and tight supply in the spot market.

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Asian Metal: Participants typically attribute magnesium ingot price increase to the poor sales of semi coke in Shaanxi and believe that the price increase of magnesium ingot will ease the pressure of semi coke sales. What is your opinion?

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Shi: There is no direct relation between magnesium ingot price and semi coke sales. We correct magnesium ingot prices is mainly because of insufficient supply caused by lack of coal gas which is resulted from sluggish semi coke market. In addition, it is hard to control every index in magnesium producing and the output is not easy to stay stable in hot summer months. Moreover, increasing labor cost pushes up production costs. Therefore, tight supply and increasing costs play an important role in price appreciation.

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Asian Metal: It is known that Shaanxi has advantages in producing magnesium endowed with its abundant semi coke and coke. But for now, these advantages have turned into obstacles. Would you like to describe the status of semi coke and coke market in Shaanxi? Will local magnesium enterprises ensure stable production impacted by the uncertain coke market.

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Shi: We are still working on semi coke market but current status is not really good. In raw coal industry, mines tend to reduce production with sales difficulty and price decline, which inevitable impacts semi coke supply. Semi coke sale is also dim as downstream metallurgical and steel markets show weak demand. Shaanxi ever had absolute advantages in cost by utilizing off-gas generated in producing semi coke in magnesium ingot production. But for now, this advantage has diminished and what we can do is just to save energy, reduce emission and use substitutes to ensure magnesium ingot output. However, it is high cost yet with no obvious effect. Magnesium ingot output will remain tight and the price will be bound to hike should semi coke market continue to be sluggish. But considering overall economic environment, the consistent price appreciation will encounter suspicion as all sectors are sluggish and show weak demand. So magnesium ingot price will fluctuate within a small range in the short-term.

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Asian Metal: Your company has been working on increasing export business. Customers have no strong interest in purchasing due to sluggish economy and large amount of products with low prices deters healthy development of magnesium metal export market. What measures will you take to handle these obstacles in the export market?

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Shi: Despite intention of increasing export business, we are focusing on stabilizing domestic market at present viewing on current situation. It is distant and difficult to explore export market and we have to learn and accumulate experience in early operation to deal with challenges and obstacles in the market fluctuation. In addition, we need to train marketing team with high plasticity and strong competitiveness and we will allocate more capital on domestic market due to its certainty. Moreover, we will strengthen examination on quality and create our own brand in the export market. Under current market norms, we will not take irregular measures to occupy more market shares or improve competitive force though that may be profitable. In fact, there have been some foreign traders coming to us for materials that can be traded without pay VAT this year. We just gave them a stern rebuff.

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Asian Metal: It is without a doubt that Shaanxi has obvious advantages in producing magnesium ingot and its export portion is gradually increasing. But Shanxi leads in the export market. What can be done to further increase export portion in Shaanxi-based magnesium industry?

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Shi: Firstly, we should train high-qualified marketing team. Compared with Shanxi, Shaanxi entered export market later and lacks experience on producing products and negotiating with foreign traders despite its fast development. As Shaanxi is taking more shares in magnesium market, we are training trade team and human resource with innovation and exploitation to encourage Shaanxi-based magnesium enterprises to walk abroad. It requires us to make it patiently. Secondly, Shaanxi Magnesium Association will work actively to stimulate local magnesium trade. At last, we need to change traditional management idea and join export market actually.

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Asian Metal: As cost advantage becomes more obvious, Shaanxi has had a say in magnesium market. Being one of major magnesium ingot producers in this region, what is your company's advantage in production and development?

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Shi: Firstly, our success depends on quality. Secondly, we have taken energy reservation and emission reduction as principle in production. Although we shut several converters due to semi coke limitation, we insist on environmental protection, energy reservation and emission reduction. So our overall production keeps relatively stable.

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Asian Metal: Shaanxi is famous for being price wind vane in domestic magnesium market, but that local participants correct offers according to their own stocks will always lead to consistent price fluctuation and watch-and-see approach from downstream customers. How would you comment on this phenomenon?

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Shi: In Shanxi, we have little chance to monitor the price but it is most traders who have a final say in price correction. We are trying to keep stocks at proper level to ensure stable price and our operating revenue.

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Asian Metal: Shaanxi Magnesium Association has given regulation and control on magnesium price for several times as the price continues to fluctuate and the market keeps flat, which attracts query of domestic and overseas traders with the belief that economic intervene is outdated under liberal economy system. However, we still can see some necessary measures do help the market to maintain healthy development when enterprises face survival crisis due to market chaos. Will price correction that the Association adopts for ensuring proper profit for magnesium enterprises be major efforts to maintain the market order in Shaanxi?

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Shi: I have different opinion on price manipulation by the Association. We really hope that magnesium ingot price to hover within a proper range, which will ensure a stable market. However, that traders enter into the market as fast as they leave it fluctuates the market and overall stocks volume. Shaanxi Magnesium Association just does what they can to ensure proper profit for magnesium enterprises. That is not to manipulate the price but help those enterprises to resist harm from traders. If the Association can control the price, it will not allow current low price of RMB17,500-18,000/t and it can hike the price again and again. In fact, we cannot control the price despite ensuring proper profit. Downstream demand determines price trend at any time in any situation. Shaanxi Magnesium Association will not play most important role in this progress.

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Asian Metal: Many participants ever treated magnesium market as “sunrise industry” and then “sunset industry” after various failure. What is your view on these words?

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Shi: “Sunrise industry” or “sunset industry” is dialectical. Vital development of magnesium market requires to strengthen its downstream application and take more market share. Then we should try to maintain cost advantage and stabilize magnesium ingot price, which is important for its healthy development. If all things above can be achieved, I will have enough confidence in the future market. In addition, substantial support from government will inevitably push the market development.

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Asian Metal: At last, what is your expectation on the market outlook?

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Shi: Shaanxi-based magnesium market should take energy reservation and emission reduction as a principle and try to get substantial support from local government. With regular production, sustainable development with environmental protection will ensure steady development of the market.

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Asian Metal: Thank you for agreeing to this interview. May your company outstanding achievement.

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Shi: Thank you! Jingfu Coal Chemical thanks Asian Metal for permanent support and help.