Asian Metal: Hi, Mr. Zhang. Thank you very much for your doing this interview. Could you please introduce Xiyang Group and its business?

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Mr. Zhang: Haicheng-based Xiyang Group was founded in 1988. The company developed from producing caustic calcined magnesia first and then to producing dead burned magnesia and mid-grade magnesia, and it manufactures high-purity magnesia 97%min with high quality for over twenty years. Xiyang Group is the first private enterprise producing high-purity magnesia in Haicheng, and it produces one million tons of magnesium products per year. The company can get over 100,000t of export licenses, and export volume amounts to 200,000-300,000 tons per year.

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Asian Metal: Global economy remains uncertain in 2012, and demand for magnesia keeps weak in both domestic and overseas market. Could you please summarize magnesia market in Q1?

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Mr. Zhang: The whole market remained sluggish with few export volumes in Jan-Mar as most enterprises exported until early 2012 with surplus export licenses. Demand remained weak with large inventory, and export price of magnesia declined sharply in the second half of 2011, thus buyers from Japanese, South Korea, Europe and America purchased large inventory. Economy remains uncertain, and consumers are consuming stocks, thus export volume keeps at a low level. The whole market is worse than that in last year when economy was weak. Demand declines these two months as steel mills cut production or close in China.

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Asian Metal: Does the company think out any measure to solve the problems in the sluggish market in Q1?

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Mr. Zhang: We always hold meeting with several major magnesia enterprises to discuss measures of how the market will develop better. Demand remains weak in both domestic and overseas market, and plants begin to cut production. We are seeking a balance point, and the company will arrange production according to the development of the market with few inventories.

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Asian Metal: There were many export quotas surplus last year, what do you think about the adjustment of export quotas this year?

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Mr. Zhang: The second tender is normally in June or July. Minmetals Group organized a meeting recently, and almost 88% of the enterprises agree that it is better to tender is the latter half of the year after 90% of export licenses are used. There maybe no tender as economy remains weak with few movements, and the industry will develop well if tender is delayed or cancelled. Enterprises may decline export price sharply with cutthroat competition if there are more export quotas, while the market will see reasonable profits and prices for plants and consumers if tenders are delayed or cancelled.

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Asian Metal: Will export price of magnesia rise significantly if tenders of export quotas are delayed or cancelled?

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Mr. Zhang: Sure. However, export price is unlikely to rise by a large margin like before, and overseas buyers will purchase the material from North Korea, Turkey and other countries if the price is too high. It is reasonable if figures for heavy burned magnesia 90%min hold at USD300-350/t.

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Asian Metal: Do you think magnesia export quotas will be cancelled due to WTO adjudication in recent years?

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Mr. Zhang: I think export quotas are not likely to be cancelled in the near future. But if export licenses of bauxite will be cancelled in the next year, and other minerals will be cancelled gradually. If the export quotas are cancled, production cost will not be influenced too much, and export price will have competitive advantage in international market, while the price is unlikely to decrease largely. After that, the govenment may adjust and control the market in resources tax and environmental governance tax. However, negative influence will emerge, and some participants will move materials to earn money whether there is profit without export quotas, thus competition between enterprises will be fiercer with loss of national resources.

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Asian Metal: How do you think about the market in the latter of the year?

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Mr. Zhang: I have confidence toward the market, although the market keeps sluggish. Export volume in the second half of the year is larger than that in H1, and sales in Q4 are the best historically, thus export volume in Q3 will be better than that in Q1. The second tender will be held in June or July generally, and the market will be the same with that in last year if there will be tender in H2. Meanwhile, it will take a long time for domestic market to pick up due to uncertain economic environment.

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Asian Metal: Thank you for your acceptance of this interview, Mr. Zhang. I wish Xiyang Group a bright future in the industry.

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Mr. Zhang: Thanks.

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