Nie Zongjing: Brown fused alumina market in depressed period, looking forward to positive policy from government

Asian Metal: Hello, Mr. Nie. Thank you very much for accepting our interview. Could you please introduce your company first?

Nie: Our company is located in Maoping town of Zunyi county with an area of 30,000 square meters. With the output of 35,000tpy of brown fused alumina, we own three 5000KVA tilting furnaces with production technique in line with the national environment protection requirement. We also have a bauxite mining with an area of 4 square kilometers and bauxite reserve of 6.5 million tons.

Asian Metal: Brown fused alumina market has run really slowly at home and abroad this year, and it seems that there will be no recovery within a short period. So, can you tell us what situation that brown fused alumina market is going through?

Nie: Brown fused alumina is described as the teeth and aginomoto of industry, so the whole industry environment affects the brown fused alumina market a lot. On the one hand, the growth of economy slows down recent years, and the growth rate is expected to be 7.5% in 2013.On the other hand, the total capacity of brown fused alumina is quite large, and it is estimated that the output only accounts for one third of the whole capacity. The oversupply of brown fused alumina is quite severe. So the brown fused alumina will be in the sluggish period for a long period with depressed demand.

Asian Metal: Brown fused alumina market is quite bad these two years. Many producers in Henan are out of production due to the tight supply of bauxite and high power price. It seems that the operating rate is a little better in Guizhou because of the lower power price. What problems do Guizhou-based fused alumina producers face presently?

Nie: In general, the bauxite reserve is abundant in Guizhou, and the advantage of the location of Guizhou, which is on the upper reaches of the Yangtze, brings adequate hydropower for us. We used to have the preferential power price from June to September when the hydro-power was available. However, the preferential power price is cancelled this year, and the good quality bauxite price remains at a high level. The labor salary keeps increasing, and the advantage gradually disappears in Guizhou. In addition, the major setback in Guizhou is the transportation, and the transportation charge is higher than that in Henan.

Asian Metal: With coal price keeping decreasing this year, some insiders even predict that the power price will drop accordingly later. Do you share the same opinion with them?

Nie: I do not see any signs that the power price will decline, and I do not receive any notices about the power price adjustment yet. It is unknown that whether the power price will drop. Regarding the power price adjustment, Chinese authority will take many aspects into consideration. The performance of steel industry is bad with low steel price and large capacity, so the related infrastructure industry also runs slowly. Chinese government may lower the power price to encourage production in order to stimulus the slow economy, but the producers with heavy pollution and high energy-consumption will also start, which can deteriorate the environment further. So it is quite early to predict the power price adjustment. Let us wait and see.

Asian Metal: If the power price would drop, do you think the brown fused alumina price will decrease accordingly?

Nie: Power price accounts for a half on the brown fused alumina production cost, so the power price decrease should bring down the production cost of brown fused alumina in theory. However, I think it is the demand in the market that determines the price of brown fused alumina. If the market sees oversupply, the price will decrease; otherwise the price will increase although the power price decreases when the market sees tight supply.

Asian Metal: What do you think of the future market of brown fused alumina? When can it pick up? Do you think the market will begin to recover before the end of 2013?

Nie: It is hard to predict whether the market will pick up before the end of this year. In a view of current domestic situation and the depressed demand from steel industry, I hold a pessimistic attitude towards the brown fused alumina market. The third Plenum of the 18th Communist Party of China Central Committee will take place in October, and I hope the government can unveil some positive policies regarding the Development of the West Regions, High-speed Rail construction and Urbanization. All these infrastructure constructions can stimulus the depressed demand of steel industry and boost the demand of brown fused alumina.

Asian Metal: Thank you for accepting our interview. Wish your company a flourishing future.

Nie: Thanks.