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    Imported secondary aluminum alloy ingot to keep hitting Chinese market in Q2 and Q3
    ----Interview with Zhang Haiquan
    Vice President of Guangdong Huajin Aluminum Group
    General Manager of Nantong Hongjin Metal Aluminum Co., Ltd.
    Founded in 1996, Guangdong Huajin Aluminum Group mainly focuses on the production of aluminum alloy ingot and liquid. It has six production companies with an annual production capacity of about 800,000t, being one of the largest aluminum alloy manufacturers in China.

    Asian Metal: First of all, thank you for accepting our interview. Could you please introduce your company briefly?

    Mr. Zhang: Nantong Hongjin Metal Aluminum Co., Ltd. is a member of Guangdong Huajin Aluminum Group. The Group focuses on production, sales and development of aluminum alloy with an annual production capacity of 800,000t and has six entities and one project under construction. Its attractive business is the direct supply of aluminum alloy liquid. The plant in Nantong was completed and launched in 2011, which includes a production factory, a raw material processing factory and a technology research and development center, with an annual production capacity of 220,000t. Nantong Hongjin Metal Aluminum Co., Ltd. is mainly engaged in providing services for high-end markets such as auto and 5G communication, directly or indirectly serving GM, Honda, Toyota, Benz, BMW, etc.

    Asian Metal: Impacted by the COVID-19 pandemic, most companies' operating rates are lower than the same period of last year. How about your production resumption?

    Mr. Zhang: The COVID-19 pandemic has a large impact on the secondary aluminum alloy market, but as we mainly serve the middle and high-end markets such as new materials and 5G products, we minimize the impact of the pandemic and maintain an operating rate of over 90% now.

    Asian Metal: The consumption for automobiles began to decline from the second half of 2018 and even gets worse under the COVID-19 pandemic currently. Do you face the pressure of decreasing orders from auto parts enterprises?

    Mr. Zhang: Yes, we indeed received fewer orders but we could handle the situation. At present, the proportion of our users of automobile and communication products is 65% and 35% respectively. Facing the situation of less consumption for traditional automobiles, our company actively developed new materials suitable for lightweight vehicles, new energy vehicles (NEVs) and 5G communication products, and gradually realized mass production, which offset the negative impact of shrinking demand for traditional automobiles. At the same time, we adjusted the market layout to enhance resilience. Therefore, the decline in traditional automobile consumption has little influence on our company.

    Asian Metal: Domestic producers are stepping up to resume production in Q2. How do you think about the demand for secondary aluminum alloy in Q2 and Q3?

    Mr. Zhang: The domestic and global economy has been severely impacted by the COVID-19 pandemic, especially the uncertainty of the pandemic abroad, and the secondary aluminum alloy market witnessed a big challenge in Q2. Relatively, with the implementation of domestic support policies and improvement of overseas epidemic situation, the market demand in Q3 is expected to be better than that in Q2. However, the overall demand for secondary aluminum alloy in Q2 and Q3 will keep relatively weak, which will lead to more fierce market competition.

    Asian Metal: The Chinese market has been hurt by imported secondary aluminum alloy ingot since the latter half of last year. Do you think the situation will last long?

    Mr. Zhang: The situation started in the latter half of last year and there was almost no influence from imported secondary aluminum alloy ingot in China before. As China's restrictions on imports of aluminum scrap strengthened continuously and the environmental protection inspections didn't slacken, the import volume of aluminum scrap is declining year by year. The import quota announced in Q1 and Q2 2019 made up over 70% of the annual quota and thus the quota in the last two quarters decreased sharply, which prevented a large amount of aluminum scrap from entering the Chinese market. As a result, foreign aluminum scrap suppliers reduced prices significantly, resulting in a price gap of about RMB2,000/t (USD282/t) between imported aluminum scrap and domestic aluminum scrap. The huge gap stimulated overseas aluminum alloy producers and domestic producers and traders to directly import finished aluminum alloy ingot instead of aluminum scrap. According to available statistics, China imported 120,000t of aluminum ingot in the first two months of 2020, and the import volume is expected to reach 200,000t in Q2. Enjoying a great price advantage, the imported aluminum ingot has impacted the domestic market dramatically. However, with demand for aluminum scrap increasing in foreign countries, the raw material cost would rise in overseas market, and then the imported secondary aluminum alloy ingot would gradually lose its price advantage. Therefore, the Chinese secondary aluminum alloy ingot market would feel the impact in the first three quarters of this year and then gradually get over the plight through self-adjustment.

    Asian Metal: Did the large imports of secondary aluminum alloy ingot affect your business? How did you cope with the problem?

    Mr. Zhang: The imports of secondary aluminum alloy ingot only affected the low-end market greatly and our company mainly serves high-end customers, so our market layout isn't disturbed. However, the impact on the domestic secondary aluminum alloy industry is inevitable resulted from lower prices and more volumes of imported materials. Our company will continue exploring the high-end market, strengthen the research and development of new materials, improve the proportion of new material products and constantly enhance the competitiveness of our products.

    Asian Metal: Supply of aluminum scrap has been tight since the second half of last year and suppliers of the material are still holding back from selling. What's your opinion about aluminum scrap supply in Q2 and Q3?

    Mr. Zhang: In Q2, supply of aluminum scrap is still tight. There are two reasons for this: Firstly, 200,000t of import quota in Q1 and Q2 hasn't been used affected by the pandemic; secondly, domestic dismantling companies resumed operation slowly as there was little material to be separated or dismantled for aluminum scrap production. However, with the pandemic under control and domestic dismantling companies resuming work, supply of aluminum scrap is expected to improve in Q3.

    Asian Metal: How did your company keep high growth in business under the overcapacity of secondary aluminum alloy and fierce market competition? Do you have any new aluminum alloy projects in the future?

    Mr. Zhang: The threshold of the secondary aluminum alloy industry is low. Although the industry sees overcapacity, new production capacity is still on the increase, which will lead to fiercer competition. In this case, our company made three strategic decisions. Firstly, we will continue to maintain the share in the high-end market, consolidating the development foundation; Secondly, we will strengthen the development mode featured by direct supply of aluminum alloy liquid and gradually increase the proportion of the material; Thirdly, we will cater to the development trend of lightweight vehicles, NEVs and 5G industry to do a better job in research & development of new materials, and constantly raise the proportion of new materials in our sales. We have established strategic cooperative relations with two national key universities, and achieved good results in the research & development of new materials, patent application and product application. In terms of research & development and market layout of new materials with high strength and toughness, high thermal conductivity and high electrical conductivity, we have taken the lead in the industry and occupied a certain market share. In accordance with changes in the industrial structure and needs of market development, our leading group will make comprehensive development plans for our company to guarantee the leading position.

    Asian Metal: Thank you for accepting this interview again. Wish thriving business and a benchmark position of your company in the industry!

    Mr. Zhang: I also would like to express my gratitude to Asian Metal for providing us with this communication platform and hope that Asia Metal will be prosperous and continue to provide more extensive and accurate information for enterprises.
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