Asian Metal: Thank you for accepting this interview. Firstly, would you give our readers brief introduction of your company and its primary focus?

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Xu: Anqing Yuetong Molybdenum Co., Ltd used to be a subsidiary entity to Yueshan Copper and functioned as molybdenum producing line as we found molybdenum in copper mines. The plant was founded and constructed in 1987 and became operational the following year. However, Yueshan Copper had to file for bankruptcy due to the sluggish copper market in 2003 but had to remanufacture our molybdenum workshop before the announcement. Before full acquisition, the company had minority interest of about 1/3 shares and the parent company, Yueshan Copper at the time had the balance until we acquired the whole State-owned shares in 2004.
We just talked about the old plant that has been shut down and we are in the new plant now. Environmental regulatory authority required all chemical industries, including us, to relocate to chemical industry park. So we set out on a new plant and started construction in 2008, and by last July, we finished the whole project.
We have two main products right now. One is molybdenum chemicals, including ammonium molybdate (ammonium tetramolybdate, ammonium dimolybdate, ammonium heptamolybdate and ammonium octamolybdate), sodium molybdate, high pure molybdenum trioxide and their reagent grade products. Another one is non-halogen flame retardant, including MCA, MP and MPOP. Our annual capacity of molybdenum chemicals is 1,500 tons, which is less than the medium level in domestic market and that is 4,000-5,000 tons in Jinduicheng Co. Ltd and China Molybdenum Co.,Ltd. Now we are exploring new products considering current depressed molybdenum market. Non-halogen flame retardant has better outlook as it is the required standard to use in Europe and America though that is another thing in China. Non-halogenous element, functioning as fire retardant, is required in plastic, rubber and nylon. Our annual capacity for the material is 3,000 tons.

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Asian Metal: Molybdenum market has seen dim prospects in recent years and the price has declined continually since the second half of last year. What is your opinion on the current situation?

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Xu: Molybdenum price has experienced decline in recent years, and I do not think it has hit the bottom at the moment. Firstly, domestic molybdenum concentrate capacity is so large as it is 40,000-50,000tpy in Jinduicheng and more than 120,000tpy in China Molybdenum for molybdenum concentrate, and many large-scale molybdenum mines can also operate up to 5,000-6,000tpy in capacity. Thus the material is oversupplied terribly. Secondly, special steel industry account for over 70% of molybdenum consumption and it is the main force to push demand for molybdenum. However, steel industry is depressed this year and thus demand for ferromolybdenum, as the additive in steelmaking, declines consistently. Bids for ferromolybdenum have been below RMB110,000/t and then mines have no choice but to lower quotations.

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Asian Metal: We know that the lowest molybdenum price was around RMB1,400/mtu in the past years. Do you think the price will hit that level this time?

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Xu: The lowest price was at RMB1,450/mtu in the end of 2008 and the beginning of 2009. The market is in terrible depression again this year. So the price is likely to reach that level but I think it may not be lower than that.

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Asian Metal: Will the market be more sluggish than that in 2008 in your opinion?

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Xu: The depression is smooth compared with the sudden one in 2008, but it is hard to say if the market will be more depressed at the moment. It may turn better if government opts to undertake and implement new fiscal stimulus policies.

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Asian Metal: You have mentioned that excess capacity is the main problem in molybdenum industry. Will the sluggish market recover if government begins to control capacity?

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Xu: It is necessary to streamline molybdenum capacity right now. In fact, domestic stainless steel and special steel industry developed fast in the past two years and generated much demand for molybdenum. But molybdenum is still oversupplied due to increasing domestic capacity and export limitation, as Jinduicheng and China Molybdenum produced 170,000-180,000 tons last year. So if the government streamlines capacity at low level, molybdenum may see a little better market.

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Asian Metal: Domestic market has been less than stellar in performance this year, and looking at the export market, what is your take on current and future trend?

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Xu: It is the same thing in the export market. It is hard for molybdenum export in our country due to many restrictive measures like export license, quota and tariff, which will inevitably increase export costs. So we are not competitive in price in international market even if we obtain license and quota. On the other hand, Peru that did not find molybdenum ore previously and Chile that mainly has copper molybdenum ore are the regions with abundant molybdenum. With advanced technology, Chile can produce molybdenum of quite low copper content and gain better quality. As the material is a by-product ore of copper molybdenum, the production cost is very low and the price is more competitive. So our products cannot compete with them in international market.

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Asian Metal: On Chinese export limitation, America, Japan and Europe filed an appeal that required China to cancel export limitation to WTO recently. How do you comment on that?

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Xu: Molybdenum is a strategic resource and our government should have control on it, but I think it is not necessary to control its export. I believe that export quota and tariff are expected to be canceled and the market could be better if all restriction disappears.

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Asian Metal: How is your company going on in the current sluggish market?

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Xu: We can maintain regular operation now. We have two main sales strategies in the domestic market. One is to target producers of deep processing of molybdenum, including molybdenum powder, molybdenum bars, molybdenum wires and cemented carbide and the other one is the producers of chemical addictive, including catalyst, metal surface treatment agent, pigment and micro-nutrients. Each one takes half of our whole capacity and most major consumers at home purchase materials from us. Especially recently, I feel the demand from catalyst industry has been active.

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Asian Metal: What is your expectation of the market in H2?

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Xu: Premier Wen Jiabao noted recently that government will allocate more investment into infrastructure. That is to say new policies will be released to stimulate economy as high-speed rail projects, which were halted before, have been resumed. So we can believe that the price is possible to hit the bottom this year but it still takes some time to see whether it can rebound or not.

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Asian Metal: Thank you very much for granting this interview. Wish your company better development!

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Xu: We also thank you on your working visit to our company and providing us with accurate information and guidance. We do appreciate your professional care and conduct in the industry.

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