Asian Metal: Hello, Mr. Han! Thank you very much for accepting Asian Metal’s interview! We hope to have a conversation with you on casting aluminum alloy ingot market. Firstly, how do you think of the secondary aluminum market in China? Is it moving on very slowly compared to some developed countries? How about the prospect?

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Mr. Han: To be frankly, compared to some developed countries, especially like Japan, our secondary metals industry is started much later. It is mainly because of the limited scraps metals recycling and the deficient system in the whole country. The consumption of secondary aluminum only takes up a small proportion of the whole aluminum consumption in China, much lower than the one that primary aluminum account for. Moreover, our scraps metal recycling system has been built up for only several years and it is still uncertain. It develops very slowly.

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Asian Metal: Surely. The government has also set up several major environmental protection industry parks in recent years, such as Ziya in Tianjin, Yingtan and Fengcheng in Jiangxi Province.

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Mr. Han: Some metals have entered into the period of recycling use. The government has put forward a series of policies and built up some secondary metals industry parks, which is an important step for establishing the aluminum scraps recycling system.

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Asian Metal: And referring to aluminum alloy ingot market, we would like to talk about the financial crisis. It impacted our casting aluminum alloy ingot market greatly, especially for the export business, do you think so?

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Han: The financial crisis impacted our domestic market slightly comparatively, but it did depress the export market a lot. The aluminum alloy ingot in China in mainly exported to Japan. As the Japanese automobile market has been shocked sharply during the financial crisis, the export volume of aluminum alloy ingot in our country also dropped greatly since the fourth quarter of 2008. Therefore, some casting aluminum alloy ingot plants of which products are for export mainly switched their sales to the domestic market, leading to the supply increase and weighing on the domestic market greatly. In addition, the financial crisis also weakened the export market of die-casting parts. Depressed by the softness of automobile industry in the overseas market, the export volume of die-casting pars also fell sharply.

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Asian Metal: And now it has entered into the fourth quarter, so are there any improvements for the demand of casting aluminum alloy ingot?

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Mr. Han: We do see some improvements. With the gradual recovery of automobile industry, the market started to turn better since the third quarter. We predict that the export of casting aluminum alloy ingot will restart soon.

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Asian Metal: Then, how about the production of aluminum alloy ingot in Chalco Qingdao Light Metals Co., Ltd.? What kinds of products does the company mainly produce?

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Mr. Han: The company’s annual capacity is 150,000t for casting aluminum alloy ingot. In fact, the plant has not reached full capacity so far. We mainly produce two types of products, one is casting aluminum alloy ingot, which is used for die-casting pars production of automobile, motorbike and some electric products; the other is wrought aluminum alloy that is used as raw material of aluminum sheet, strip, foil, aluminum door and window.

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Asian Metal: We learnt that Chalco Qingdao Light Metals Co., Ltd. also started to produce some aluminum alloy flat ingot, is that right?

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Mr. Han: Yes, we received some orders for the product recently.

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Asian Metal: Then how about the major products that Chalco Qingdao Light Metals Co., Ltd. will produce in the future? That’s to say, which kinds of casting aluminum alloy ingot will be yielded?

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Mr. Han: It would depend on the demand in the market. Undoubtedly, we would focus on the production of casting aluminum alloy ingot, like ADC12, AC2B and some other casting aluminum alloy ingot.

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Asian Metal: What about the current output? Has the sales condition turned better in your company?

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Mr. Han: It is nearly 5,000tpm now. We plan to promote the output to 8,000tpm since this quarter.

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Asian Metal: Then let’s talk about the market price of casting aluminum alloy ingot. Asian Metal learnt that, the prices of casting aluminum alloy ingot differ a lot in different areas or plants in China, especially for ADC12 casting aluminum alloy ingot. Have you concerned about the phenomenon?

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Mr. Han: The whole casting aluminum alloy ingot market is non-standard. Producers get the raw material, aluminum scraps in different ways, leading to the diversity of their production cost, and finally the market price appeared disordered. It seems common that the gap is as wide as around RMB1,000/t between the high end and low one.

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Asian Metal: Exactly. Some producers offer as high as above RMB16,000/t now while the others’ are only around RMB13,000/t. How do you think about it? Why does the big gap exist?

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Mr. Han: I’m sure that some deals were sealed at the price of slightly higher than RMB13,000/t. Some producers in Shandong and some other places use A00 aluminum ingot as the major raw material to produce ADC12 casting aluminum alloy ingot. Their offer of processing charge stays at above RMB1,000/t and the current price of aluminum ingot is around RMB15,000/t in China. That’s to say, their offers for the production are around RMB16,000/t now. However, producers mainly in Zhejiang, Guangdong, Sichuan and some other places use aluminum scraps to maintain the production. Some of them offer about RMB14,000/t while the others offer RMB13,800/t or lower now. In fact, the internal quality of the products also leads to different prices, but the major reason is the diversity of raw materials. If producers can get the aluminum scraps at low prices, their cost would be reduced greatly.

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Asian Metal: Then do participants conclude deals of ADC12 casting aluminum alloy ingot based on the offers of processing charge now?

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Mr. Han: Many plants do not consider about the processing charge when they conclude deals now. The phenomenon reflects that the competition becomes fiercer and fiercer in Chinese domestic market to some extent. In the past, the concluded price of ADC12 casting aluminum alloy is spot aluminum ingot price plus the processing charge, around RMB1,000-1,200/t mainly, but now the price of the former is even lower than that of A00 aluminum ingot.

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Asian Metal: It’s true. More and more producers use aluminum scraps to produce casting aluminum alloy ingot, so does it exert adverse effects on the quality of the product?

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Mr. Han: Generally speaking, it would not. It depends on the quality requirements from customers. However, some small plants use mixed aluminum scraps of high impurity and the quality is very poor.

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Asian Metal: Yes, there are many small and mid-sized casting aluminum alloy ingot plants in China, and the market appears disordered.

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Mr. Han: There are more than 2,000t casting aluminum alloy ingot plants in total in China. However, most of them are in small-sized, and the outputs are only around 5,000tpy or even below. There are only several plants of which capacity can reach 100,000tpy. Therefore, the government may put forward a series of policies to restrain the minimum capacity of new projects for casting aluminum alloy ingot.

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Asian Metal: When we contact some small and mid-sized casting aluminum alloy ingot plants, they would complain to us that their offers are uncompetitive as they cannot get cheap raw materials, that’s to say, the imported aluminum scraps. If they depend on the raw material recycled from the domestic market, they would not gain the upper hand. So what they should do, in your opinion?

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Mr. Han: I think the key point still goes to the raw material, trying to get cheap and good aluminum scraps. Relatively speaking, the aluminum scraps market in South China is more complete than that in other places of China. Major ports for aluminum scraps importation are located in Zhejiang and Guangdong where many casting aluminum alloy ingot plants are located.

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Asian Metal: Casting aluminum alloy ingot producers concern much about the anti-dumping investigation of Chinese aluminum wheel hub initiated by the European Union. How do you think about it? Would it do great harm to the export business of Chinese A356 casting aluminum alloy ingot?

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Mr. Han: It has not impacted the market very mush so far. In fact, the material exported to Europe takes up a small proportion of our total exportation. It is mainly consumed by the Asian market. Therefore, I think it would not impact the whole export market of casting aluminum alloy ingot much in the short term.

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Asian Metal: Mr. Han, The capacity of casting aluminum alloy ingot has expanded quickly and greatly in recent years. We learnt that the new project of casting aluminum alloy ingot with the annual capacity of 100,000t came on stream in Hubei Jinyang Metallurgic Company in late September.

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Mr. Han: Yes, the capacity of some new expansion projects in 2009 can reach 500,000tpy, and now the total capacity of secondary aluminum is around 3,000,000tpy in China. There are still many small-sized ones which cannot be calculated.

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Asian Metal: We remember that the capacity of aluminum ingot expanded too fast in China in 2007 and finally it depressed the aluminum ingot price. Likewise, if the capacity of casting aluminum alloy ingot increases very fast, can its price be forced to go down sharply?

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Mr. Han: Of course. The competition would become fierce undoubtedly if there is an oversupply of the material. Producers may try to lower their offers to attract customers. Therefore, The government may put forth a series of policies to restrain the minimum capacity of new projects. Some small-sized casting aluminum alloy ingot plants which are irregular and have no environment protection devices should be closed down as they would result in pollution and energy waste.

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Asian Metal: However, it would be difficult to achieve the goal and a long period of time would be needed as there are a number of small-sized casting aluminum alloy ingot plants in China.

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Mr. Han: Yes. The minimum capacity has promoted to 20,000tpy for new project of casting aluminum alloy ingot by the government. We predict that it would be raised further in the future. Let’s take the Japanese market for an example again. The total capacity of secondary aluminum is 2,000,000tpy in Japan, while there were only around 128 of casting aluminum alloy ingot plants before the financial crisis. Depressed by the financial crisis, some plants may have closed down. However, there are more than 2,000 of casting aluminum alloy ingot plants in China. Therefore, many plants in Chinese may be not very competitive.

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Asian Metal: How about the attitude that the Chinese government holds towards secondary aluminum market? What about the development direction?

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Mr. Han: The government emphasizes the environment protection and supports the development of secondary aluminum in China. I think we should pay more attention to the establishment of recycling system of metals. More regulation should be implemented to insure the healthy development of the market, especially for aluminum scraps recycle. Besides, we should keep a close eye on the environment protection.

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Asian Metal: Then how about the recovery methods for aluminum scraps in China now?

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Mr. Han: Some pretty dealers send the material to traders, and then many aluminum scraps consumers buy the material from trader to maintain the production.

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Asian Metal: Finally, would you like to give some suggestions for secondary aluminum industry?

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Mr. Han: Secondary metals industry is the one which benefits the nation and the people. It discharges few pollutants and consumes little energy. Therefore, it would be supported. Meanwhile, the government should put forward some relative policies to guide it to insure the healthy development of the industry in our country.

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Asian Metal: Well, we hope that the goal can be achieved in the near future. Thank you again for granting our interview. We hope that we can keep communication later. Wish your company a bright future in this industry!

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Mr. Han: Thank you! Bye-bye!

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Asian Metal: Bye!