Asian Metal: Mr. Li, thank you for granting us an interview. Could you please give us an introduction to Chongqing Bosai Minerals Group Co. Ltd.?

Li: Chongqing Bosai Minerals Group Co. Ltd. was established in 1994 with total capital of RMB3 billion and staff numbering 5,000, including around 500 foreign employees. With more than ten production and processing plants or branch companies in China and the Cooperative Republic of Guyana, we are selling our products to more than 30 countries and regions including Europe, America, Japan, India, and domestically in China. We now possess a comprehensive production capacity of 800,000tpy for aluminium oxide, 200,000tpy for electrolytic aluminium, 600,000tpy for aluminium-rich clinker, 200,000tpy for brown fused aluminium, 300,000tpy for coke, and 300,000tpy for raw coal. Among these, the production of aluminium-rich clinker and brown fused aluminium is ranked first in the world.

Asian Metal: We understand that Bosai is to build the largest manganese alloy project in Asia. Could you brief us about the project and your personal involvement?

Li: The project is named Chongqing Dalang Metallurgy Co. Ltd. It is located in Fuling, Chongqing with a total investment of RMB3 billion and advanced new technologies and new equipment. The project will be divided into two phases with a total production capacity of 1,000,000tpy for ferroalloys. Phase I consists of a manganese alloy capacity of 500,000tpy and an aluminum oxide capacity of 1,000,000tpy, and will be capable of achieving a yearly output value of RMB6 billion, leading to a tax increase of RMB200 million and creating 800 new job opportunities. After completion, the project will become the largest manganese alloy production base in Asia with the most advanced technologies and equipment in China and an environmentally-friendly circular economic structure. Phase II will build a high carbon ferrochrome plant with a production capacity of 500,000tpy. I am in charge of the planning and construction of the project, and have been busy with it recently.

Asian Metal: What about the specific situation on Phase I and its current progress?

Li: The production plant and relevant support facilities for Phase I will take up an area of 700 mu (about 470,000 m2), within which eight hermetic submerged arc furnaces will be built, including seven of 36,000kva for the production of silicomanganese and one of 36,000kva for the production of high carbon ferromanganese. In addition, a refinery of 9,000kva will also be built for the production of medium and low carbon ferromanganese. So the production capacity of silicomanganese, high carbon ferromanganese and medium and low carbon ferromanganese will be 360,000tpy, 90,000tpy and 45,000tpy respectively. The project is under base construction now and is expected to be put into test operation in December this year, but the formal stream production is not expected to happen until January to April in 2016.

Asian Metal: What advantages do Chongqing and Fuling have that made your company choose to locate your plant there?

Li: The reason why we choose Chongqing is that it has very good geographic and transportation conditions. Quite a few rivers flow through Chongqing, for example, the Yangtze river, Jialing river, Wu river, Fu river, Qi river, Daning river etc. And the most important is the Yangtze river, which is known as China’s “golden waterway” for its important functions of transportation and irrigation since ancient times. Heading east along the Yangtze river, a 10,000dwt steamboat can reach Shanghai, Wuhan and Nanjing; meanwhile, the opposite direction will lead us to Yibin, Sichuan. And we can also enter Sichuan and Guizhou provinces through the Jialing river and Wu river. What’s more, the railway starts in Chongqing, running all the way through China, Kazakhstan, Russia, Belarus and Poland, and ends up at Duisberg, Germany, having been formally opened to traffic in 2011, which makes it easier for us to export goods to Europe. And the raw materials such as manganese ore that we import from abroad will also be transported through this railroad and the Yangtze river.

Fuling lies at an intersection where the Yangtze river meets the Wu river, and has long been called the “southeast gate” of Chongqing. With 23 ports in total, it has very good logistical advantages which are necessary for the transportation of our large output.

Asian Metal: How about the production equipment and technologies; will there be any breakthroughs?

Li: In order to make sure that our project can meet the standards within the industry and environmental requirements a long way into the future, our company has studied the current condition of ferroalloy producers all over the world and has optimized and reevaluated our technology and process plan several times. The hermetic submerged arc furnaces of 36,000kva and refinery of 9,000kva are capable of achieving large-volume, automatic and clean production, much superior to the threshold of semi-hermetic furnaces of 25,000kva, which differentiates us from the stereotypical image of high-pollution, high-energy-consumption ferroalloy enterprises.

At the same time, we will build new screening machines and drying machines supporting the sintering facility, as well as an accurate single furnace batching system, which will allow us to maintain strict control over the water content, the granularity, and the content of other ingredients through pre-processing so as to guarantee the standardization and stability of the raw materials. In this way, we can not only ensure safe production (explosions resulting from substandard raw materials — too wet or too small — have happened repeatedly), but also achieve steady, efficient, and low energy-consumption.

Asian Metal: Your company claims that the project is part of a circular economy. Could you explain how that is achieved? What measures will you take to protect the environment?

Li: First of all, manganese-rich slag — the by-product of high carbon ferromanganese — will be used for making silicomanganese; the leftover material from the process of silicomanganese crushing will be used for medium carbon and low carbon ferromanganese production; and the post-process silicomanganese slag will be sold to cement plants and used as a direct ingredient after grinding and drying. Also, we will make medium and low-carbon ferromanganese through direct hot charging of silicomanganese and high temperature molten iron. Through these methods, not only can a complete manganese alloy industrial chain be formed, but pollution can also be avoided, and the metal recycling rate can also be improved by 1-2 percent.

At the same time, the eight hermetic submerged arc furnaces will generate more than 400 million m3 of coal gas (equivalent to 100-140 million m3 of natural gas) which can serve as fuel for aluminium oxide production, and the waste heat can be used for everyday things such as heating and bathing, as well as the drying of material.

Also, we will make cyclic utilization of waste water so as to reduce our water consumption and waste water sewage discharge.

In general, under the premise of meeting the national requirements, through a circular economy mode, we are building a leading resource-saving and environmentally-friendly enterprise that should generate profit in every possible place for the pursuit of further additional value and greater competitiveness, which is what the government has called for, and also the inevitable measures for us to control and reduce our production costs that can ensure our survival against the ever-fiercer competition within this severely over-supplied industry.

Asian Metal: Silicomanganese prices have been trending downward in recent years, and everyone knows that the industry has excess capacity, with many enterprises making thin or even negative profits. What are the advantages of building such a big program in this kind of situation? And what kind of operating strategy will you adopt?

Li: We have bought a domestic manganese ore mine which can produce 750,000t of the material with a reserve of more than 50 million tonnes. This ensures us an advantage with regard to the raw material being of stable quantity, quality and price.

Then, the local electricity enterprises have also invested in our project, which is a guarantee of better electricity prices and a stable supply volume.

Thirdly, we have very good transportation advantages compared with other producers in the south as our products will mainly be transferred via waterways. Higher transportation costs have long been a headache to manganese alloy producers such as Guangxi, Yunnan etc. in the south As Chongqing is located in the middle of China, its transportation costs to the North are lower than those of Guangxi, Guizhou, Hunan and Yunnan. What’s more, the Yangzte river leads all the way to the Southeast and through this we can carry our products to the coastal area. So we have very obvious advantages over logistics, which is one aspect of the core competitiveness of our program.

We also have advantages over equipment and production. What we are building now are the largest hermetic furnaces in China, for which the raw material will be pre-treated before being put into production. In addition, our company will become the largest manganese alloy producer in China with a lower production cost, and we can ensure a continuous and steady supply of silicomanganese and ferromanganese to steel mills in large quantities. Along with the incessant price declines of manganese alloys, many producers cannot sustain stable production, which will also keep steel mills at bay as they may not be able to find enough material of standard quality. Therefore, they will prefer large producers like us as a long-term supplier with stable quality and quantity.

Regarding the operating strategy, we will put most of the effort into direct sales with end users, but will also deal with traders in smaller volumes, and we look forward to good cooperation with more steel mills and foundries in both the domestic and overseas markets.

Asian Metal: As the popular saying goes, “no manganese, no steel”: silicomanganese and ferromanganese are the top two large-volume ferroalloys used in steel production. However, as their downstream market, the steel industry, has been facing severe overcapacity problems in recent years with an ever-deteriorating situation, it has entered the so-called “autumn and winter season”. What’s your opinion on the future of the steel market?

Li: Many of the larger steel mills blindly expanded their capacity in the past few years, leading to ever-increasing steel output which surpassed the growth in demand. China’s real estate market has remained dim in recent years, and combined with a bad economic environment inside and outside the country, its demand for steel has gradually slowed. Last year, the steel market suffered a lot. In spite of that, the current situation of a volume-oriented profit mode hasn’t changed yet with few high value-added products being produced. The industry should keep adjusting its production scale and the upstream/downstream industrial chains, optimizing the product distribution factors, upgrading its structure and raising the added value of its products so as to change the big but insufficiently strong market conditions. However, this involves a series of problems such as resources, energy and employment, which call for the control and guidance of government and cannot be done in a short time.

Asian Metal: In your opinion, has the silicomanganese price hit the bottom yet? Is there any possibility that it will decrease further in the future?

Li: In 2014, given the influence of a weak global economy, a sluggish domestic real estate market, tighter currency policies, a large steel product inventory, and firm manganese ore quotations from foreign miners, China’s manganese, chrome, nickel, ferrosilicon, tungsten, molybdenum and vanadium industries all suffered great difficulties, during which many enterprises have struggled to make ends meet, and even the traditionally “golden seasons” have failed to witness the levels of prosperity there used to be, and the whole ferroalloy industry has taken a turn for the worse. I now think the silicomanganese price has almost reached its floor as many producers in the south are still operating with negative profits and many in the north are only making limited gains. According to the research by our company, I think the demand from end users will not see any large fluctuations in 2015, and the oversupply conditions can also not be overturned in a short time, so the main factors that influence the price of the material now are manganese ore prices and electricity prices. At present, manganese ore prices are still on the decline, and several provinces in the south will very soon enter the wet-season - during which lower electricity fees are often charged - so it will not be a surprise if the silicomanganese price continues to fall. However, due to the negative profits of many producers, the gap between the trading price and the production cost will remain at a relatively stable scale.

Asian Metal: Right now manganese alloy enterprises, especially silicomanganese enterprises, are dominated by medium-and-small-sized producers which are scattered all over the country, and the quality of their products is very uneven. So how should the silicomanganese industry adjust itself with regard to this situation? And how long do you think the adjustment will last? How is your company going to cope with it?

Li: The major reasons for this chaotic situation include the different resource reserves, such as manganese ore, coke, and the unreasonable product distribution factors in the main production areas, which mainly amounts to the distribution of power. And the traffic conditions in different regions also have to shoulder part of the blame. What’s more, the unhealthy steel industry also contributes to the disproportionate development of the silicomanganese industry: the reason why many plants which produce non-standard silicomanganese can exist is because there are steel mills who buy their products. This is a problem for the whole industry chain, and the silicomanganese industry can only be turned around after the steel industry has finished its adjustments.

At present, a lot of small ferroalloy producers have adopted a workshop model of operation which has a lot of shortcomings in terms of capital, industrial chain, energy-saving, environmental protection and recycling economy. To cope with that, the government should tighten its controls, strictly implement the admission standards and take advantage of the electrovalence ladder. For our company, this means both a challenge and an opportunity, and I believe we will be a new benchmark and bring a breath of fresh air to the manganese alloy industry.

Asian Metal: On average, 4,000kWh of electricity will be consumed in the production of one tonne of silicomanganese, so power charges are always seriously taken into account when it comes to silicomanganese production costs. This is also the tough nut to crack that is troubling many southern producers. The government has been preparing for the electricity reforms in recent years, and started trials in Shenzhen not long ago. Do you think this kind of reform will have any real effect on the silicomanganese industry?

Li: Electricity reforms are one part of the measures the government is taking to achieve an economic transformation, and consumers have long called for that. However, just as in the steel industry and the energy field, the main issue of electricity reform is a monopoly, which cannot be resolved within a short period. The trial in Shenzhen was an attempt made by the government, but we still have to watch for the specific effects and not rush to any conclusions. If the reform can really be generalized with electricity prices balanced all over the country, it will help promote fair competition in the market and benefit the development of the manganese alloy industry in the end.

Asin Metal: Thanks again for granting this interview, we hope your program goes smoothly!

Li: Thank you!