Baowu Magnesium Industry:

Q: What is the current distribution of primary magnesium production capacity at home and abroad? How is the export situation of domestic magnesium products?

A: In 2024, the global primary magnesium production reached 1.12 million mt, up 12% YoY. In 2024, China's primary magnesium production capacity was 1.4875 million mt, up 9.29% YoY; primary magnesium production was 1.0258 million mt, up 24.73% YoY; and magnesium alloy production was 396,800 mt, up 14.95% YoY. According to statistics from China Customs, from January to December 2024, China exported a cumulative total of 459,800 mt of various magnesium products, a 13.62% increase from 404,700 mt in 2023.

Q: Could you please introduce the company's operating performance in 2024?

A: In 2024, the company achieved operating revenue of 28.12 billion yuan, up 17.39% compared to the same period last year. Net profit attributable to shareholders of publicly listed firms was 159.628962 million yuan, down 47.91% compared to the same period last year. This was mainly due to the decline in magnesium prices, which led to a decrease in the gross profit margin of magnesium materials and die-casting products, resulting in a year-on-year decline in the company's performance.

Q: What progress has been made in downstream magnesium deep-processing products in the automotive sector?

A: In 2024, the company achieved over 20% growth in the number of steering wheel products, CCB products, and seat products compared to 2023. It strengthened strategic cooperation with top-tier enterprises in the industry and achieved business reserves for multiple new products.

Q: How does the company view the relationship between magnesium and aluminum prices?

A: As magnesium prices fall below aluminum prices, it presents a good opportunity for the magnesium industry. It is more conducive to expanding the application of magnesium in downstream sectors such as large automotive components, integrated die-casting of automotive magnesium alloy large components, robots, and construction templates, which will further enhance the enthusiasm of downstream customers to use magnesium. Previously, we promoted the application of magnesium from a performance perspective, but now we can also promote it from a cost perspective.

Q: What is the company's ore reserve situation?

A: The company's subsidiaries, Chaohu Baomei and Wutai Baomei, hold dolomite ore reserves of 88.6425 million mt and 578.95 million mt, respectively. The company's equity-accounted company, Anhui Baomei, holds dolomite ore reserves of 1.3197813 billion mt. Gansu Mining holds 1.6889 million mt of proven reserves in the Zhongliangzi quartzite mine in Yongdeng County and 1.26 million mt of proven reserves in the Zhongliangzi Nangou quartzite mine in Yongdeng County.

The resource guarantee has further consolidated the stability of raw material supply for the company in the production of primary magnesium and magnesium alloys, laying a foundation for the development of the entire industry chain.

During the reception process, sufficient exchanges and communications were conducted with investors, and the company strictly adhered to regulations such as the "Information Disclosure Management System" to ensure the truthfulness, accuracy, completeness, timeliness, and fairness of information disclosure. There were no cases of undisclosed material information leakage, and the company had signed the "Letter of Commitment" for surveys as required by the Shenzhen Stock Exchange.

According to the record of the survey conducted with specific targets on March 13, as announced by Baowu Magnesium Industry:

Q: Could you please introduce Baowu Magnesium Industry?

Baowu Magnesium Industry responded: Baowu Magnesium Industry Technology Co., Ltd., formerly known as Nanjing Yunhai Special Metals Co., Ltd., was established in 1993 and listed on the Shenzhen Stock Exchange in 2007. After more than three decades of development, the company has become a high-tech enterprise integrating mining, non-ferrous metal smelting, and recycling processing. Its main business is the production, deep processing, and sales of magnesium and aluminum alloy materials. Its main products include magnesium alloy, magnesium alloy die-castings, aluminum alloy, aluminum extruded micro-air conditioner flat tubes, aluminum extruded automotive structural parts, master alloys, and metal strontium, among others. These products are mainly applied in fields such as automobiles, lightweight e-bikes, consumer electronics, and construction. The company possesses a complete "dolomite mining - crude magnesium smelting - magnesium alloy melting - precision casting and deformation processing of magnesium alloy - magnesium alloy recycling" industry chain. The optimization of the entire industry chain enhances the company's product cost structure and risk resistance capabilities, enabling it to steadily provide customers with various products.

Q: What are the company's plans for the overall expansion of downstream deep processing?

Baowu Magnesium Industry responded: The company has six die-casting bases nationwide, providing customers with a full set of lightweight solutions. It owns over 200 die-casting units and nearly a thousand machining centers, with surface treatment capabilities for components. It also has the ability to independently develop, design, and manufacture molds, and possesses a strong R&D and design team to meet customers' varying design needs. The company's magnesium alloy deep-processed products primarily focus on automotive components, e-bike components, robot components, and magnesium building templates. Automotive components include small parts such as steering wheels and steering components, as well as medium-to-large parts like instrument panel brackets, seat brackets, center console brackets, display back panels, and side door inner panels. Magnesium alloy is applied in components such as e-bike wheel hubs and front forks. Robot components include covers, bases, control arms, and other parts. Magnesium building templates include ceiling panels and wall panels. Magnesium alloy deep-processed products also include magnesium hydrogen storage materials and integrated die-castings. Aluminum alloy deep-processed parts mainly expand into automotive extruded structural parts and micro-channel flat tubes.

Q: How does the company view the application of magnesium alloy in robots?

Baowu Magnesium Industry responded: The company has always attached great importance to the promotion and application of magnesium materials in the robotics field. Magnesium alloy empowers the robotics industry with four major advantages: "lightness, speed, stability, and cost-effectiveness," aiming to demonstrate stronger competitiveness and bring lightweight, efficient, and responsive new solutions to the industrial automation field. The use of magnesium alloy materials can meet the requirements of efficient transmission, reliability, and stability in robots. Additionally, magnesium alloy has good recyclability, reducing environmental pressure and meeting environmental protection requirements.

Q: Could you introduce the company's strontium metal products?

Baowu Magnesium responded: Strontium is a silvery-white metal with a yellowish tinge, belonging to the alkaline earth metals. It is the least abundant alkaline earth metal (excluding beryllium) and exists in nature in a combined state. Strontium can be added to metals such as aluminum and magnesium to form alloys, enhancing their strength, hardness, and corrosion resistance. Additionally, adding a small amount of strontium during the processing of some metal materials can refine the grain structure. Currently, the company has a production capacity of 3,000 mt/year of strontium metal, with an annual production of approximately 2,500 mt.

Q: What is the company's future development strategy?

Baowu Magnesium responded: The company places great emphasis on R&D innovation and technological accumulation. It always regards technological innovation and new product development as the core development strategy, with technological innovation as the primary driving force for development. The company continuously increases its R&D efforts in new technologies and new products. After years of technological accumulation, the company has independently developed a complete set of magnesium reduction and magnesium alloy production and processing equipment and processes, as well as a direct magnesium liquid supply system. Its energy-saving and consumption-reduction levels in primary magnesium production are among the best in the industry. The company has also independently developed large-tank vertical-tank magnesium smelting technology, magnesium alloy melting and purification technology, and magnesium alloy forming technology, all of which are at the leading level in the industry. Leveraging its existing R&D and production platforms, the company has undertaken and completed multiple scientific research projects at the national and provincial levels through industry-university-research cooperation. The company continues to promote the technological transformation and upgrading of its industries, driving the transformation of its industries towards high-end, intelligent, and green development. With the steady advancement of automotive lightweighting, the company's automotive product business continues to grow, and the demand for medium-to-large magnesium alloy components increases year by year. The company is expanding its deep-processing business to ensure the supply of medium-to-large automotive parts, achieving product structure adjustment and business transformation and upgrading, improving resource utilization efficiency, and optimizing the industrial structure. On the basis of stabilizing the supply of basic magnesium alloy materials, the company focuses on expanding downstream deep-processing businesses such as magnesium alloy automotive die-casting parts.

On March 12, Baowu Magnesium stated on the investor interaction platform that the company currently cooperates with companies producing industrial robots. Magnesium alloy empowers the robotics industry, aiming to demonstrate stronger competitiveness with its four major advantages of "lightness, speed, stability, and cost-effectiveness," bringing lightweight, high-efficiency, and fast-responding new solutions to the field of industrial automation.

Recently, Autoliv (China) Automotive Safety Systems Co., Ltd., a leading enterprise in the automotive safety systems industry, reached a strategic cooperation agreement with Baowu Magnesium Technology Co., Ltd. The two parties will engage in in-depth cooperation in areas such as automotive lightweighting and safety performance enhancement, jointly driving technological innovation and sustainable development in the automotive industry. In this strategic collaboration, both parties will leverage their respective strengths in technology, resources, and markets to jointly explore the application of magnesium alloy materials in automotive safety systems.

Baowu Magnesium announced on the evening of March 5 that the company had recently received the "Mining License" issued by Xinzhou Municipal Planning and Natural Resources Bureau. The mine is named as the Dolomite Mine in Dapu Village, Dongzhi Town, Wutai County, with the mining species being metallurgical dolomite, refractory dolomite, and construction dolomite. The production scale is 10 million mt/year, with a validity period from March 4, 2025, to March 4, 2055. The announcement revealed that Wutai Yunhai Magnesium Industry Co., Ltd., a subsidiary of the company, participated in the auction for the "Mining Right of Dolomite Mine in Dapu Village, Dongzhi Town, Wutai County, Xinzhou City, Shanxi Province" conducted by Xinzhou Municipal Planning and Natural Resources Bureau to ensure a stable supply of raw materials for primary magnesium and magnesium alloy production, and successfully won the mining right at a price of 1.168 billion yuan on November 3, 2023.

Given that Baowu Magnesium has not yet released information on its 2024 corporate performance, a review of its Q3 report shows that in the first three quarters, the company achieved operating revenue of 6.347 billion yuan, up 14.09% YoY; net profit attributable to shareholders of the listed company was 154 million yuan, down 25.88% YoY. During the reporting period, Baowu Magnesium's basic earnings per share was 0.155 yuan, with a weighted average return on net assets of 2.88%. Baowu Magnesium's Q3 report indicates that the increase in operating revenue was mainly due to higher sales of deep-processed products compared to the same period last year. Regarding the decrease in net profit, Baowu Magnesium stated that it was due to a decline in magnesium prices and a decrease in the gross profit margin of magnesium alloy products.

Magnesium prices experienced multiple rounds of increases last week. In addition to the effective alleviation of magnesium ingot supply issues due to factory rectifications, which restored market confidence, there was also an increase in foreign trade container freight rates, further stimulating downstream demand. Domestic downstream restocking followed suit, and market trading volume continued to improve, driving magnesium prices higher.

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According to SMM quotes, on March 17, SMM magnesium ingot 9990 (Fugu, Shenmu) was quoted at 15,550-15,650 yuan/mt, with an average price of 15,600 yuan/mt. This average price fell by 50 yuan/mt from the previous trading day and rose by 550 yuan/mt from the early low of 15,050 yuan/mt on March 7, representing a 3.65% increase.

SMM analysis suggests that, based on current market performance, as inventory in the main production areas continues to destock, bearish sentiment in the magnesium market has been alleviated. However, considering the general acceptance of high prices by downstream buyers, there is limited support for magnesium prices to fluctuate at highs in the future. SMM will continue to monitor changes in spot transactions.

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