Wang Shaowen: Reducing magnesium production likely to break ceaseless sectoral market price decline

----Interview with Wang Shaowen, Vice General Manager of Fugu Yufeng Magnesium Co., Ltd.

Asian Metal: Good morning, Mr. Wang and thank you for accepting this interview. Would you like to talk about current magnesium industry?

Wang: Currently, magnesium is mainly used in magnesium alloys production, die-casting and desulfuration in steelmaking. Major producing areas are Shenmu and Fugu where coal gas is used as main fuel of producing magnesium. However, sluggish coal market and coal products market significantly increase costs of producing magnesium and many enterprises hold high stocks of magnesium ingot. The market outlook seems not positive at the moment.

Asian Metal: Q2 was a period seen with slight increase in magnesium ingot prices and steady deals in previous years, but this year is another story. What is your take on contrast?

Wang: Oversupply. Producers in Shenmu and Fugu employ similar techniques in producing magnesium and their fuels is all coal gas from medium temperature coke furnaces. Considering overall cost accounting, producers have to expand production, which results in high stocks and consequent disequilibrium between supply and demand.

Asian Metal: Tariffs imposed on magnesium products were cancelled on January 1, 2013, which ever strengthened participants’ confidence in the market. But export data in recent months did not indicate noticeable increase in export volume of magnesium products. How do you comment on the phenomenon and the outlook of the export market?

Wang: Cancelling these tariffs will help to expand global applications of magnesium and its use in downstream sectors in a long run. In the short-term, export volume of magnesium products will be subject to economic situation. Magnesium ingot market is seeing weak demand and the export is also on downward trend. The sluggish trend could continue for a while given no signs of recovery in demand.

Asian Metal: It is obvious that demand keeps fragile in both domestic and oversea magnesium market while many domestic producers are expanding capacity. How do you see the contradiction and will your company adjust production?

Wang: Producers of ferrosilicon have eager desire to reduce stocks due to continuous price decline while downstream mills try to force tender prices down. Ferrosilicon market is under greater pressure but stockholders show more willingness to make sales even though the price is gaining on cost. What a vicious circle! Apparently, deprecation of ferrosilicon means lower costs in producing magnesium, but the decrease of purchasing costs of ferrosilicon is far less than the increase of fuel costs considering production techniques of magnesium producers in Shenmu and Fugu.

Asian Metal: Magnesium ingot prices are in decline and big-tonnage deals seem rare. What’s your opinion on the market condition and price trend in Q3?

Wang: I am pessimistic about the market in Q3 as all industries at home and abroad run sluggishly in the depressed global economy. Magnesium metal market is no exception.

Asian Metal: What leverage, if any, do your products have compared with similar ones in the domestic market and how competitive in terms of technique, quality and price etc.?

Wang: Pidgeon process is the only technique used by magnesium producers in China and many have mastered the process with little difference between each other. What we can do currently to improve competitiveness is to enhance management, control costs and vitalize funds.

Asian Metal: Thank you again for accepting the interview and we wish you success.

Wang: Thanks! We appreciate supports from Asian Metal.