Well known carbon identity Michael Wrotniak was in China recently, so I took the opportunity to catch up with him and get his views on the current market. Michael is Managing Director of Aminco Resources, one of the leading China anode exporters, although he is also very active in coke and pitch exports.

How did you/Aminco get involved in the China market in the first place?

Aminco started exporting carbon raw material from China in 1994 and we began to export anodes in 1998. Our attraction in coming to China for carbon was related to the production flexibility the plants exhibited, the production cost advantages and the Chinese market’s interest in the technical know-how that Aminco provided through our partnership with R&D Carbon.

How has the anode and carbon industry changed in the 14 or 15 years since you first came here?

The global carbon industry has changed dramatically in the last 15 years. The Chinese market is no exception; however the consolidation in the West of the various segments of the carbon industry does not have a parallel in China. Actually, it is just the opposite. Over the last several years, we have seen more refining companies established, new calciners and pitch producers and of course new anode plants.

In addition, coke quality has changed in China in a fashion similar to the West and this will continue as the country continues to rely more on imported crude.

Our anode volumes have certainly grown since 1998 as have the number of customers who rely on our deliveries to support their smelting operations. Actually, in 2008 China exported just over 1.0 million tons of anodes.

How do your customers and clients view the risks of accepting Chinese material, given China gets so much bad publicity about quality?

Aminco has maintained its partnership with R&D Carbon and because of this R&D has technical oversight of our carbon production in China. This begins with raw material selection and continues through anode production. At the same time, we are also able to offer clients technical support at the smelter level with regard to integrating our carbon into their pots. This mitigates quality risk.

There seems to be a big difference between the prices that we in AZ China report compared to the actual prices that smelters pay to their suppliers. Not just you, but across the board. Why is that?

During the AZ Black China conference you mentioned that the carbon market in China lacks a certain degree of transparency and I completely agree with this comment. Not just in pricing, but in most aspects of the carbon industry here. As far as pricing is concerned, I assume that the prices which you report are derived from export Customs data; this information does not tell the entire story. For example, we have seen that several suppliers use off-shore entities for export orders and therefore the Chinese Customs data does not pick up that pricing.

Alternatively, it is rare in China that a supplier would provide cash settlement on a quality claim, but it is possible to receive a discount on the price of a future sale. This would show an artificially low price in the export declarations. The raw statistics reported to Customs therefore are only the beginning point, not the end game when it comes to price reporting. I think however the Customs data is useful tool in showing pricing trends.

Why should smelters use Aminco? Why not come to China and deal directly with the Chinese anode plant or calciner?

Aminco has a quality advantage over our competition. For the aluminum industry, this is attractive. Additionally, as Aminco is a New York based entity, we mitigate counter party risk relative to buying directly In 2008 when prices were rising, that was significant. Additionally, we provide freight and when needed consignment stocks for customers. We look to add value for our customers and in 2009 this will become very important.

How do you read the current market in terms of the rest of 2009? Prices seem to have bottomed - how should we interpret that?

The Chinese aluminum industry idled approximately 3 million tons of aluminum capacity during the second half of 2008 and there is another 1 – 2 million tons of aluminum production capacity built in 2008 which has yet to be commissioned. Not surprisingly, the carbon industry here is suffering, with the result that across the board from green coke to finished products, prices have dropped dramatically. I agree that there is stability now, whether it will last or not will depend in my view on the a few issues: Steam coal pricing, the USD/RMB exchange rate, and economic conditions in China relative to the western economies - both will be slow but which one recovers first?

My feeling however is that we will see more pain in carbon pricing but the price decreases will not be as dramatic as in the recent past.

What’s your long-term prognosis for China as a supplier to the world’s anode and carbon market?

China is one of two countries in the world that will increase its green coke production (not to mention steel production) and therefore the carbon industry here will continue to grow. Aluminum production will increase, but there will always be room for the export business particularly in situations when the customer provides assets which the Chinese plants can’t easily obtain in China. I think that is one of the keys to long-term success here.

I know you are a family man. How do you balance the demands of running a business across several continents with the needs of your family?

That is really an interesting question. Certainly cellphones, blackberries and laptops help, but more than that, I have a wonderful wife, who accepts my “home life” responsibilities while I travel, and equally important Tricia is able to help me to find the proper balance between family and business.