Wang Zhigang: Expecting the new pattern of balanced supply and demand along with steady prices in germanium market

Asian Metal: Good morning, Mr. Wang, thanks for accepting the interview of Asian Metal. In the past few months, germanium metal demand from downstream industries showed no sign of increasing but prices kept upward tendency. What’s your opinion about the current germanium metal market?

Wang: Germanium metal is mainly used in infrared, photovoltaic and optical fiber industries. There has been no obvious progress in new application field exploitation for the metal until now. That’s to say, demand from downstream application industries has not increased. Moreover, gloomy global economy impacts the germanium downstream industries. However, values for germanium metal went up greatly from RMB7,000/kg (USD11,42/kg) in the second half of 2012 to the current level of around RMB12,000/kg (USD1,957/kg), as far as I am concerned, two factors, supply and demand, can’t be ignored. First of all, some producers in China, influenced by factors including environment protection issues, tight supply of germanium raw materials and self consumption and so on, provide fewer germanium products to the spot market. Secondly, Chinese government purchased 20t of germanium metal late last year. Lastly, more than ten tons of germanium metal has been transported to THE FANYA Metal Exchange to be dealt. Overall, despite the fact that demand from downstream industry has not recovered, the output of germanium metal in China is shrinking while demand from stockpiling and investment does rise up. Thus, prices of germanium rebound quickly in a short term.

Asian Metal: Judging by what you have said, the current germanium metal price change has little to do with demand from downstream industries. So, which factors can affect the price trend efficiently?

Wang: One is Chinese strategic stockpile, however, this demand persistence is determined by the government. If the stockpiling volume is large, the market will be impacted in the coming few years. In fact, the demand from this part will be unlikely to go on permanently. As for investment demand, such as from FANYA, the trend will depend on the market development as well as investors’ acceptance on the product. If we think from the side of supply and demand, as is known, sufficient supply will lead to prices declines while increasing demand will guide prices to go up. On the assumption of weak demand from downstream industries, if we begin mass production, it will bring impacts to the current tight supply and continuous upward prices tendency in the germanium market. But as our company and Tongli Germanium are using the “Three Waste” dealing system together, on the one hand, our output will be limited by that in the near future; on the other hand, Tongli Germanium’s output will be reduced accordingly once we are in production. So, the total supply in Chinese germanium spot market will not increase in the short term. Our own new “Three Waste” system will be put into use in the second half of 2014 and our output will lift up by then, exerting influence truly to the germanium market. As for the demand side, as I learnt, Chinese government is working hard to promote the process of FTTH, which will result in increasing demand from optical fiber industry and influence the germanium market. Ultimately, it is still the supply and demand that determines the price.

Asian Metal: According to main producers, the supply of germanium tightens. There are also rumors saying that Chinese government will purchase the germanium metal in the coming months. Considering this, some participants think prices of germanium metal will go up gradually in the remainder months of the year. How do you think of the future market?

Wang: In fact, germanium metal offers kept upward tendency in the past few months, mirroring the tightening supply in the market. If Chinese government will stockpile the material again, prices will go up to higher levels surely. As a producer, we are eager that our products can fetch a good price. But, you know, a product’s continuous price climbing will refrain from its demand in turn, which will hinder the industry to develop healthily. In the long run, enterprises in the germanium industry will benefit only if supply and demand keep in balance along with relatively stable prices.

Asian Metal: Photovoltaic industry, as one of germanium important downstream industries, has attracted more attentions recently due to the EU’s anti-dumping and anti-subsidy policies to China. As related news released, if China fails to negotiate with EU successfully before Aug 6th, the Chinese export tax of photovoltaic products to EU will be likely to increase from 11.8% to 46.8%. Do you think what impacts will the germanium market suffer from by then?

Wang: Germane is the raw material of thin-film battery. As I learnt, the volume of germanium consumed in the thin-film battery production is not large. If the tax increases to 46.8%, Chinese polysilicon industry will be the first to be affected and suffer from huge losses. Although I am unsure whether the tax includes thin-film battery, it seems that thin-film battery accounts for a small part of the proportion among the photovoltaic products exported to EU. If the two sides can’t negotiate in success, the germanium industry will be impacted, but it will suffer less than polysilicon industry does.

Asian Metal: Mr. Wang, what advantages does your company have if you step into the germanium industry? Is your company’s pilot run going well?

Wang: Our striking advantage is that we have rich resources. Mengdong Energy Group Ltd., a subsidiary of Inner Mongolia Pingzhuang Coal Group Ltd., whose shareholder is China Guodian Corporation, is the only one who owns the lignite spreading in Xilingol and containing thousands of tons of germanium metal. As the subsidiaries of Mengdong Energy Group Ltd., Mengdong Germanium and Tongli Germanium will provide germanium products to the market by taking good advantage of the merits. In addition, we hope to develop a long-term, steady and win-win cooperation relationship with domestic and foreign enterprises and contribute our strength to the germanium industry’s healthy growing. Our company’s pyrogenic process plant and wet process plant are in the stage of debugging and pilot run as planned. We will finish all of the debugging work in early August and then begin to produce germanium dioxide, germanium metal and monocrystalline products. But since there are uncertainties during the debugging, we will try our best to speed up and finish the work within plans. Thanks a lot for those friends’ concerns on us in the germanium industry.

Asian Metal: Thanks so much for sharing the above information with us. Hope that we can keep in good communication about the market in the coming days.

Wang: Thank you. I also wish that we can have more opportunities to cooperate and communicate with each other in the future.