Asian Metal: Good day, Mr. Zhang. Thanks for taking the interview of Asian Metal. Firstly, please make a brief introduction of Chongqing Wujiang Industry Group Trade Co., Ltd.

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Mr. Zhang: Wujiang Trade is a professional trading platform built by Chongqing Wujiang Industry (Group) Co, Ltd., relying on Wuling Manganese Industry, Wuling Silicon Industry, and Wuling PV Material Industry as its industrial bases. It is centered on selling manganese and silicon metal, and also trades on selenium dioxide, refinery coke, and ferrochrome and so on. The plants of Wujiang Industry Group produce around 30,000t of manganese and 60,000t of silicon metal per year. Wujiang Trade sells around 70,000t of manganese and 80,000t of silicon metal per year.

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Asian Metal: Let’s talk about the silicon metal market first. Form the second half of last year, under the unfavorable global economy, the downstream industries for silicon metal kept weak, especially the polysilicon and organosilicon markets. The polysilicon prices in both domestic and overseas markets dropped too sharply and most plants reduced output or stopped production. There was no good news for the market recently. The European PV industry remained weak and some European countries reduced the subsidies for the PV industry. The polysilicon market is facing great challenges. The operating rate for organosilicon plants is still low. How do you think about the current downstream industries and their trend in the near future?

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Mr. Zhang: Chinese silicon metal market is under great pressure on the current supply and demand situation. On the one hand, the silicon metal capacity in China increases sharply this year, especially that in Xinjiang and Yunnan, which influences the market supply and demand balance. The production cost for silicon metal smelters in Xinjiang and Yunnan is relatively competitive, and the smelters in Guizhou and Hunan are under great pressure. On the other hand, the downstream polysilicon and organosilicon markets are weak and demand for silicon metal is low. Domestic silicon metal market is in oversupply. Moreover, the silicon metal export market is not strong and the market is facing fierce trading war. There is no signal for the silicon metal market to see improvements in a short term.

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Asian Metal: For silicon metal export, the smuggle in the market influences the market a lot. The quantity of smuggled materials from Vietnam increased sharply last year. Chinese silicon metal export volume decreased in the past several months as the demand from the overseas market decreased and there were many smuggled materials. Although the quantity of smuggled silicon metal from Vietnam decreased from March, but market participants claimed that the silicon metal export market did not see big improvements. How about the silicon metal export situation of your company?

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Mr. Zhang: We are under the pressure of the smuggle of silicon metal in the recent two years. Wujiang Trade used to export around 2,000tpm, but the volume shrank gradually due to the smuggle. Smuggle is common in the silicon metal export market now, and some big-scale suppliers with regular activities are having a headache. Recently, due to the governmental investigation, the smuggled activities in the market decreased but there was no substantial changes in the market and some major purchasers in the world are still purchasing silicon metal through irregular ways.

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Asian Metal: WTO adjudicated China to lower the silicon metal and manganese export tax, which is 15% and 20% respectively currently. Wujiang trade is exporting silicon metal and manganese, how do you think about this adjudication? If the export tax decreases, what influences it will bring to the silicon metal and manganese market?

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Mr. Zhang: WTO’s adjudication is actually the trading war of the US and Europe against China. Based on their own profits, they add “double-anti” on Chinese PV products and adjudicate China to lower the silicon metal and manganese export tax. Silicon metal and manganese industries are the high energy-consuming industries, and taking into consideration of the Chinese governmental policies on the energy-relevant industries, there is low possibility for China to open the export market without restrictions. If China has to lower or cancel the export tax, there should be some mating policies on the resources tax, which takes a while, so it is unlikely for China to lower or cancel the silicon metal and manganese export tax in a short term.

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Asian Metal: Let’s talk about the recent silicon metal market. From March until now, Chinese silicon metal prices kept dropping and many smelters, with relatively higher production cost, stopped production gradually. What’re the main reasons of the price drop recently?

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Mr. Zhang: There were two main reasons. Firstly, the demand remained low and the supply will increase gradually after South China enters the rainy season, when the power charge will decrease with the increasing hydro power supply and the operating rate will increase. Secondly, the downstream industries kept slow and demand for silicon metal was weak. The polysilicon and organosilicon markets were dull and plants made a loss, and the operating rate decreased sharply. The aluminum alloy industry was relatively stable, but the demand for aluminum alloy did not see sharp increase as the development speed of car industry slowed down.

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The supply for silicon metal increased, but the demand was decreasing, so the silicon metal market kept moving-down recently. Moreover, the price decrease of the raw materials of refinery coke and coal also accelerates the down-moving speed of silicon metal prices. Furthermore, many buyers are expecting lower silicon metal prices in the rainy season. In a short term, Chinese silicon metal prices will drop further. Later more smelters will stop production and the dropping margin for silicon metal prices will be small.

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Asian Metal: Yunnan and Sichuan enter the rainy season gradually and more smelters are likely to resume production with the decreasing power price. The smelters with relatively higher power price are facing greater pressure. Moreover, market participants think that even the purchasing volume from the domestic and export markets will increase a bit later, but it is difficult for the silicon metal prices to rebound in a short term in the rainy season. How do you predict about the future silicon metal market?

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Mr. Zhang: The purchasing for silicon metal may increase a bit in the near future, but the volume will not be bigger than that in the rainy season in the previous years. In the rainy season, with the power price decreasing and operating rate increasing, the output for silicon metal in Yunnan and Sichuan will increase, and smelters in Guizhou and Hunan, where the power price is higher, will face greater pressures. The increase of purchasing activities is difficult to push the silicon metal prices to rebound and there is possibility that the increasing output will drag the market down further.

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Many silicon metal producers rent furnaces in Sichuan and Yunnan. They have paid for the rent and will make a loss definitely if they do not produce materials in the rainy season. This aggravates the oversupply of silicon metal in the market.

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Asian Metal: For the silicon metal export market, the real demand has not recovered and overseas buyers expect lower silicon metal prices in Chinese rainy season. Moreover, the silicon metal export tax adjustment is unclear. Most overseas buyers are cautious in purchasing and the silicon metal export market kept inactive in the past several months. The silicon metal export market saw some orders for Q3 in May, but Chinese suppliers claimed that the prices were unfavorable. Market participants hold different attitudes towards the silicon metal market trend in the rainy season, but most participants hold pessimistic attitudes and the order prices for Q3 are lower than the current market prices. How do you think about the future silicon metal export market?

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Mr. Zhang: The silicon metal export market trend depends on the overall global economy situation. The silicon metal purchasing volume shrank in the past several months as the market inventory has to be digested and many buyers expected Chinese silicon metal prices to drop further in the rainy season. However, the European and U.S economy is recovering slowly and the silicon metal demand lacks of the momentum to be pushed up sharply. So many buyers are not optimistic about the future market and the prices for future orders are lower.

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Under the fierce competition, the silicon metal smelters with lower production cost have the pricing power. The overall silicon metal price trend in the rainy season in China depends on the smelters’ situation in Yunnan, Sichuan and Xinjiang and the market has possibility to move down further.

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Asian Metal: For manganese, we learned that most plants in Xiushan, Chongqing stopped production in May last year and some plants resumed production gradually recently. The overall manganese market was weak in the first half of this year, how do you think about the market in the later part of this year?

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Mr. Zhang: Xiushan is still one of the major manganese production areas in China, with the competition in the producing and production cost. In the past months, most manganese plants in Xiushan stopped production last year and only Wuling Manganese and Tianxiong Manganese were still in production. Recently, some plants resumed production gradually. The manganese plants operating rate in Xiushan will increase further in the near future due to the competitive manganese ore resources and the support of the Wujiang Industry

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Asian Metal: What’re your suggestions for the healthy development of silicon metal and manganese industries?

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Mr. Zhang: From our experience, there are some similarities in the development of silicon metal and manganese industries. China has dominance in the production of silicon metal and manganese throughout the world. There are many small-size plants in the silicon metal and manganese industries, while there is fierce and cutthroat competition in the market and some plants are making loss.

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Manganese market has come out from the cutthroat competition of small-size plants and reached large-scale production to some degree, and the market order is being set gradually. Silicon metal market is still in the former process of integration. Some investors invest in the silicon metal market, which makes the market in oversupply. We think that silicon metal market will also experience the process of competition and integration, then the market order will be set gradually and the market will run smoothly and healthily.

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Asian Metal: Thanks for your share. Wish a bright future of Wujiang Trade.

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Mr. Zhang: Thanks for the share of information on market and policies from Asian Metal, which helps us a lot in our operation. Thanks you.

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