Primary aluminum inventory slides amid strengthening demand

Asian Metal: Environmental issues have been the focus of rectification in China over the recent two years. Does the strict environmental protection policy have any influence on your company?

Mr. Yan: The strict environmental protection policy exerts no impact on us as we secured all necessary environmental impact assessment (EIA) certificates. Our leadership pays high attention to and strictly implements China's environmental protection policy. It can be said that we are a good example in regard to environmental protection.

Asian Metal: Primary aluminum consists of aluminum ingot and aluminum liquid. Which do you mainly produce? What are the differences between them?

Mr. Yan: We focus on producing aluminum ingot now as it has a wider sales market. We mainly target small-to-medium aluminum deep processing enterprises in Northeast China. We supply aluminum liquid to enterprises surrounding primary aluminum plants. For downstream enterprises, directly consuming aluminum liquid can eliminate the process of re-smelting and thus reduce production cost as well as the loss caused by re-smelting.

Asian Metal: The inventory of primary aluminum has remained high at about 2 million tonnes since late 2017. What's your opinion on this?

Mr. Yan: I believe that China's strict environmental protection policy mainly contributed to the increase of primary aluminum inventory. Some downstream enterprises failing to meet environmental standard were forced to shut down for rectification, which led to weakened consumption capacity. With a few downstream enterprises resuming production from the second quarter this year, the demand for primary aluminum became stronger. As a result, the inventory began to experience higher decline rate.

Asian Metal: What are the influences of China's crackdown on illegal primary aluminum capacity on this industry? Is there any excess capacity in primary aluminum industry?

Mr. Yan: The primary aluminum industry has been well regulated owing to China's crackdown on illegal capacity in 2017. Activities such as unapproved construction and blind capacity expansion were inhibited, which helped to advance a sound development of the industry. As far as it goes, the overcapacity has been alleviated to some extent. I believe that China's primary aluminum industry would step towards a better outlook along with the further implementation of the state industrial policy.

Asian Metal: It is known that electricity price greatly affects the production cost of primary aluminum. Do you have any advantages on electricity price? For example, do you have any captive power plants?

Mr. Yan: Electricity cost makes up for 30%-40% of our comprehensive production cost, so electricity price is of great importance to primary aluminum industry. The captive power plant can help to reduce electricity cost to a great extent. However, we have no captive power plant and thus experienced higher production cost. In regard to electricity price, we are actively applying for direct power supply for large users.

Asian Metal: What's the outlook for primary aluminum industry? Have you ever considered industrial transformation?

Mr. Yan: The primary aluminum industry tends to turn towards an integration of coal-electricity-aluminum industry, which can effectively reduce production cost and enhance market competitiveness. Under the situation where low-end aluminum products generate lower profits, the primary aluminum industry is also facing choice of whether to make industrial transformation or not. Constant technology innovation, more investment in R&D for high-end products, development of high-grade, precision and advanced products, as well as higher product added value are all key factors that lead to a stronger core competitiveness for an enterprise.

Asian Metal: In face of the fierce market competition, could you tell us a little bit of your plans for the future?

Mr. Yan: As a long-standing and state-owned enterprise, it is extremely more urgent for us to try industrial transformation. We plan to relocate our plant to Baiyinhua town and set up a coal-electricity-aluminum-integrated primary aluminum enterprise so as to increase market competitiveness. At the same time, we will put more effort in the research and development of our products and increase added-value, making our products more competitive.