Gao Yong: Small and medium-sized cemented carbide enterprises must embrace new technologies to remain competitive and grow

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AM: Thank you very much for accepting our interview. Could you please introduce your company?

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Mr. Gao: Zhuzhou Jinding Cemented Carbide Co., Ltd. focused on cemented carbide holding up hammer for synthesizing diamond in 2004. However, we began to develop new products including geological minerals, moulds and non-standard products in 2005 when many plants closed down as demand shrank sharply because superhard alloy industry encountered huge adjustment. At present, the company is involved in series of cemented carbide products and has made great efforts to build its own key products. The new cold-upsetting cemented carbide of huge-coarse grain has been listed in the Torch Plan of China, and the company has obtained eight patents. As a representative of small to medium sized enterprises, the company can produce 15tpm of cemented carbide with output at around 10tpm at present.

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AM: You have entered cemented carbide industry since 1990s, and know much about the sector. Could you please comment on the industrial changes in this field during recent years?

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Mr. Gao: Cemented carbide market was short-supplied in late 1990s but lots of cemented carbide enterprises have been founded in Zhuzhou and Zigong through around 20-year development. In addition, some cemented carbide enterprises are also built in Zhejiang, Hebei, Jiangsu, Hubei, Liaoning and Shandong. So far, supply has exceeded demand for most specifications except a few products like NC cutting tools.

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AM: Many cemented carbide enterprises continue to start new projects despite fierce competitiveness in the industry. What’s your opinion?

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Mr. Gao: Many industries move slowly due to unpromising economic environment and stagflation. After 30-year rapid development of economy, situation of excessive supply has occurred in lots of industries and generally speaking, profit margin keeps at a low level. However, profit margin is high for some specifications of cemented carbide and more capital flows into sectors of high profit. (Note: Profit ratio of cemented carbide industry fluctuates within 5-50% and even reaches 100% for high-end products.)

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AM: Could you please talk about how to maintain and sharpen competitiveness for private enterprises under situation of excessive capacity?

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Mr. Gao: We devote ourself to staying competitive. On the one hand, private enterprises need to upgrade equipments and technologies, in order to draw close to high quality level as large state-owned enterprises. Relatively speaking, private enterprises are of higher flexibility. On the other hand, private enterprises concentrate on fewer products and have special features in quality control. Therefore, it is easier for private enterprises to take advantages of specialty and flexibility.

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AM: Cobalt powder price has kept dropping since 2009. Could you please talk about cobalt powder demand and procurement strategy?

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Mr. Gao: Cobalt powder market is full of negative sentiment at present as most producers and consumers expect prices to drop further. Cobalt powder prices are likely to drop below RMB250,000/t in the future. I have stockpiled several tons of the material and plan to place orders after current inventory runs out. On the other hand, long-term loss for the whole cobalt powder industry is impossible even though it is reported that many producers are under losses as prices are lower than production costs. Shuffling is also inevitable in this field.

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AM: Could you please talk about cobalt powder supply and demand in Zhuzhou?

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Mr. Gao: Cobalt powder supply is sufficient with so many participants from Shanghai Bailuoda Metal Co., Ltd., Nanjing Hanrui Cobalt Co., Ltd., Shenzhen Gelinmei High-Tech Co., Ltd, Suzhou Meico Co&Ni Material Co., Ltd, as well as Guangzhou Xingming Powder-metallurgy Co., Ltd., Hengfeng Tungsten Co., Ltd, Zhuzhou Dingli Industrial Co.Ltd. and Hunan Hongtaiyang Battery New Materials Co., Ltd.. In addition, some traders also turn to produce cobalt powder with an output of 1-2tpm respectively.

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Macro-economy keeps at a low level and real estate industry softens further at present. Meanwhile, some infrastructure construction projects slow down. Cemented carbide plants cannot obtain sufficient orders and buyers delay paying. Oversupply also occurs in cobalt powder market.

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AM: It seems that resources integration is on the inevitable trend for cemented carbide industry. For instance, China Minmetals Corporation holds stocks of Zhuzhou Cemented Carbide Group and Zigong Cemented Carbide Co., Ltd.. What’s your opinion on resources integration?

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Mr. Gao: Minmetals does make great efforts on resource integration, but it remains to be seen that how to promote advantages of integrated enterprises. However, as one of cemented carbide enterprises, I think it is not resources integration but tungsten mines in Ganzhou, Jiangxi that influences Zhuzhou cemented carbide enterprises. Tungsten enterprises have realized to use resource and capital advantages to extend tungsten industrial chain from tungsten ore, to APT, tungsten carbide powder and cemented carbide. For example, Chongyi Zhangyuan Tungsten Co., Ltd., Ganzhou Yuanchi New Material Co., Ltd., Yaosheng Industry and Trade Development Co., Ltd. focus on industrial chain extension, which is helpful to solve employment problems and create revenue for local governments. Some mine owners, with sufficient capital, are in shortage of soft power now. Cemented carbide enterprises both in Zhuzhou and all around China will be highly influenced once they form actual competitiveness. Under this circumstance, enterprises of high quality, timely delivery and good service can stay competitive and develop rapidly.

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AM: Thanks again to accept this interview and may a bright future for Jinding!

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Mr. Gao: Thank you!

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