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    Chinese NGO electrical steel prices are unlikely to rise in Q3 amid the traditionally low season
    ----Interview with Jinchun Chen
    General Manager
    Foshan Shunde District Wurong Materials Co., Ltd.
    Located in Lecong Town, Shunde District of Foshan, Foshan Shunde District Wurong Materials Co., Ltd. was established in 2013. It is one of the main distributors of non-grain oriented electrical steel in South China. The company mainly deals with materials from Ansteel and Baosteel with an annual sales volume of about 30,000 tonnes.

    Asian Metal: Mr. Chen, thank you for taking our interview. Please briefly introduce your company.

    Mr. Chen: My pleasure. Our company is mainly engaged in NGO electrical steel from Ansteel and Baosteel. Our target monthly sales volume is around 2,500t and the regular inventory is about 2,000t.

    Asian Metal: After the Spring Festival, prices of NGO electrical steel in domestic market kept going down, but they began to rebound since May. What do you think is the reason for the price increase?

    Mr. Chen: From the beginning of this year to May, Chinese NGO electrical steel prices witnessed a downward trend and the price decrease for the grade of 800 in South China was about RMB900/t (USD132/t) or 15%. However, as the market inventory decreased and steel mills increased their list prices, prices began to rebound in May. The price has increased by RMB300-400/t (USD44-59/t) up to now.
    Besides, the price increase of other steel products especially cold rolled coil also pushed up NGO electrical steel prices. In April and May, CRC prices in South China saw a total increase of more than RMB300/t (USD44/t).

    Asian Metal: Currently prices of NGO electrical steel from different steel mills are generally on the same level, while prices of materials from Baosteel used to be about RMB200/t (USD29/t) higher than other steel mills. What do you think is the reason?

    Mr. Chen: That's the case. Currently prices of NGO electrical steel from different steel mills such as Baosteel, WISCO, Ansteel and Shougang Steel are basically at the same level. I think this is because there are not so many spot materials in the market and steel mills’ list price gap is quite small now.
    Let’s take South China as an example, prices of materials from Baosteel, WISCO and Ansteel are almost the same, while those of Shougang Steel are about RMB50/t (USD7/t) higher due to the low market inventory.

    Asian Metal: The tight supply in the spot market has been going on for a long time. How about your stock now?

    Mr. Chen: In recent months, traders were reluctant to build large stockpiles due to the high purchase cost and weak customer demand. Steel mills’ list prices were much higher than market prices. Besides, the supply from steel mills was also insufficient caused by the regular facility maintenance.
    We have also reduced order quantities with steel mills for July and August in order to keep our inventory at a relatively safe level.

    Asian Metal: Many steel mills overhauled facility maintenance recently and the supply for NGO electrical steel was decreased. Will this bring a certain support to the market price?

    Mr. Chen: Yes, many steel mills conducted production line maintenance lately. Ansteel cut NGO electrical steel production by about 40% for June and July and Shougang Steel started the annual facility maintenance from late June to the middle of July. In addition, Shagang, Masteel and Bengang Steel also reduced their production in June and July accordingly.
    The production reduction of steel mills is bound to reduce the supply of market resources, which will certainly support the market price. This is also an important reason for the price rebound of non oriented silicon steel in the previous period.

    Asian Metal: It is the traditionally low season now. How about the demand from customers?

    Mr. Chen: Silicon steel is mainly used in household appliances and electromechanical industries. It is the traditionally low season from May to August. Besides, the downward price trend in the first half of this year makes customers more cautious about the market outlook. At present, the demand from downstream customers is relatively limited, and most of them are purchasing the material in small quantities for urgent need and refusing to build large stockpiles.

    Asian Metal: Does environmental inspection have a big impact on downstream industries?

    Mr. Chen: Affected by the environmental inspection, many customers have updated their equipments in the recent two years. At present, they can basically meet the requirements of environmental protection. Therefore, the impact of environmental inspection on the needs of downstream customers is not very great.

    Asian Metal: What do you think of the market trend of NGO electrical steel in the third quarter?

    Mr. Chen: I am not so optimistic about the price trend of NGO electrical steel in domestic market in Q3. Firstly, July and August are traditionally low season for steel industry and demand from customers in downstream industries is weak. Secondly, once major steel mills finish their facility maintenance and resume regular production, the supply of materials will increase, which will bring some pressure on spot prices.
    Shougang Steel has completed the equipment overhaul in mid-July, and Ansteel’s NGO electrical steel output in August will be greatly increased, too.
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