Wang Lixian: Molybdenum industry in small profit era

----Interview with Mr. Wang Lixian, GM of Huludao Xinli Metal Co., Ltd

Asian Metal: Good day, Mr. Wang! Thank you for taking the interview of Asian Metal. Firstly, please make a brief introduction to Huludao Xinli Metal Co., Ltd
Mr. Wang: Huludao Xinli Metal Co., Ltd. is a metallurgical mining company and mainly deals molybdenum and vanadium, such as molybdenum concentrate, molyoxide, ferromolybdenum, vanadium pentoxide and ferrovanadium.
Asian Metal: At present, the central bank continuously raises the interest rates in China. What do you have in mind for this tightening policy?
Mr. Wang: The risk of inflation is clear and the monetary policy is generally loose at present. I think it will not take on too much risk in inflation, but go on by hidden inflation at home, so it is necessary to maintain existing tightening policy. What’s more, we felt that non-ferrous metal industry performed not good and economy grew slowly under the management of tightened monetary policy, although we trust the government will control the inflation.
Asian Metal: Molybdenum market performed depressed in the second quarter of this year, and prices continuously went down. How do you feel about the demand for ferromolybdenum from steel mills in the past months?
Mr. Wang: Some attribute the depressed situation in ferromolybdenum market to sufficient supply in China, but in my personal feeling, demand for ferromolybdenum from steel mills was not bad in the first half of this year, and steel mills were mainly arranging orders signed months ago. In China, steel mills are also facing difficulties, such as high investment but low profits and pessimistic export situation, so generally speaking, steel industry does not need too many ferromolybdenum in the near term.
Asian Metal: What problems do you think Chinese molybdenum concentrate and ferromolybdenum markets have?
Mr. Wang: First, I still feel the production capacity is overall after China stopped exporting ferromolybdenum from 2008. In addition, with big molybdenum producers keeping reducing their production cost, small ones become less competitive and are facing difficulty in management, which pressed them to stop production or arrange production from time to time. In my view, traders are also under great pressure as some of them still cover large positions, especially high cost materials, so sufficient supply, high cost materials and industry reshuffle etc are blocking Chinese molybdenum market to boom, and I think prices will not increase or drop sharply but fluctuate in narrow range in the near term.
Asian Metal: What do you think of the development trend of molybdenum burden in the second half year? And will it be depression as it was in the first half of this year?
Mr. Wang: Without policy adjustment from the government, I believe demand for ferromolybdenum and molybdenum concentrate will generally keep stable, and prices are unlikely to boom in the second half of this year. What’s more, molybdenum prices may rebound when they dropped near the production cost line, as we known the interest rate increased continuously in the past months and enterprises have to assure reasonable profit margin to repay loans. However, I still think the rebound will not be strong.
Asian Metal: Do you feel Chinese molybdenum industry have the potential to boom?
Mr. Wang: China has sufficient resource of molybdenum and is one of the world’s major producing and consumption area, so in the long run, the prospect of Chinese molybdenum industry is still good. I think the opportunity for Chinese molybdenum booming will come in next two or three years, and nowadays it still have to endure low buying activities and relatively low prices.
Asian Metal: Please talk about your plan from 2011.
Mr. Wang: 2011 is the transition year and brings in difficulties to Chinese traditional enterprises, such as molybdenum industry, which traditionally depends on energy to develop. Molybdenum companies earned small profits in recent two years and some of them are on edge of getting losses, so I think it’s time to change traditional management and to secure business continuity.
Asian Metal: Thanks for your precious time for this interview, Mr. Ding. We hope your business is booming.