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    Construction steel prices to wave at high levels in Q2
    ----Interview with Yongping Zhu
    Sales General Manager
    Chengyu Vanadium Titanium Technology Co., Ltd
    Located in Weiyuan, Sichuan, Chengyu Vanadium Titanium Technology Co., Ltd (previously called Weiyuan Steel) is the biggest subsidiary of Tranvic Group and the biggest construction steel producer in Southwest China. Its annual output for steel and vanadium reaches around 7.0 million tons and 15,000t respectively. The company's construction steel output could reach nearly 6.0 million tons per year.

    Asian Metal: Hi Mr Zhu, thanks a lot for taking part in the interview. Please make an introduction of your company firstly.

    Mr Zhu: With a long history, the company was previously known as Weiyuan Iron and Steel Plant, which was founded in 1929 as the arsenal of Liu Wenhui, a warlord in Sichuan. Our company is the founder of Sichuan metallurgical industry. In March 1998, Weiyuan Iron and Steel Plant was restructured into Sichuan Tranvic Iron and Steel Group Co., Ltd. In December 2011, Weiyuan Iron & Steel Co., Ltd. changed its name to Chengyu Vanadium Titanium Technology Co., Ltd. Our company is the biggest construction steel producer in Southwest China, the most powerful enterprise in logistics and storage. Currently we mainly produce construction steel including rebar, wire rod, coiled rebar and have seven production lines for steel including four rebar production lines, two high-speed wire rod production lines and one production line for medium-wide strip. Our annual production capacity for steel reaches 7.0 million tons.

    Asian Metal: As we know, your company used vanadium titano-magnetite as raw materials for steelmaking. What are features and advantages for this material?

    Mr Zhu: We use vanadium titano-magnetite from Panzhihua and Xichang, Sichuan, refining the vanadium inside and produce vanadium pentoxide. The production capacity and output of vanadium pentoxide produced by our company rank the second in China. In addition, we are one of the three major vanadium and titanium industrial bases in China. The price of imported iron ore kept rising since May last year and already doubled in early March in 2021. The price advantage of vanadium titano-magnetite is prominent. What's more, our company has our own mine, so we could produce steel with lower cost. Since the government announced the new standard about producing rebar in November 2018, which required using micro-alloy and vanadium in production. It already accelerated the development of vanadium industry. In addition, the government will also announce new standard on rebar classification, which would be based on the content of vanadium. This policy will continue to speed up the development of vanadium industry.

    Asian Metal: Construction steel prices rebounded sharply by around RMB300/t (USD46/t) as soon as the Spring Festival holiday came to the end. At that time, the demand from building sites did not recover at all. What do you think support such a sharp rise then?

    Mr Zhu: I think there are some major factors. Firstly, the firm support from high prices of raw materials. Before the Spring Festival holiday, prices of raw materials like iron ore, coke and coal kept moving up and some steel mills remained on the verge of a loss. Secondly, excessive issuance of international and domestic currencies and inflation drive commodity prices collectively to go up in 2021. Thirdly, in February this year, the government adopted an accommodating monetary policy and the new loans hit a record high at the same period. In addition, the social financing scale increased by about 200% MoM. Fourthly, at the end of last year, the State Council forecasted a first high and then low level for economic development in 2021. GDP is expected to grow sharply in the Q1 and Q2 and it will see a slowdown in Q3 and Q4. The market expectation after the Spring Festival holiday for demand and price is good.

    Asian Metal: The price of raw materials like coke went down gradually during Mar-Apr. Do you think it would weaken the support for construction steel prices?

    Mr Zhu: Before the Spring Festival holiday, the coke price continued to rise sharply, so that most coke producers' profit reached nearly RMB1,000/t (USD154/t). I think this "era of huge profit" is not in line with the law of economic development, nor can it last long. It was reasonable for the price to go down after the Spring Festival. Even though they already declined by around RMB500/t (USD77/t) till the middle of March, steel mills' production cost remained at high levels due to firm prices of iron ore fines, whose prices hovered at around USD166/dt CFR China. China replied a lot on imported iron ore, though China suppressed to imported iron ore fines, its prices could not fall obviously in strong demand. As a consequence, prices of construction steel would not drop sharply.

    Asian Metal: Construction steel prices rebounded sharply in the first week after the Spring Festival and waved frequently in March. How do you think prices would perform in Q2?

    Mr Zhu: In the first week after the Spring Festival holiday, construction steel prices rebounded by RMB300-400/t (USD46-62/t). The prediction of a rise after the Spring Festival is already fully shown. Building sites are all in operation in March. If the demand does not explode in the month, I don't think there will be much room for prices to rise further. But be based on firm support from high prices of raw materials, prices of construction steel would fluctuate at high levels in Q2. Taking the market in Southwest China as an example, I think the price would wave within the range of RMB4,600-4,750/t (USD707-730/t).

    Asian Metal: Prices of construction steel in Sichuan and Chongqing reached the lowland for many times in recent two years. Were they depressed by more deliveries from other regions? How would local mills strengthen their control on the market there?

    Mr Zhu: As net steel-inflow regions, Sichuan and Chongqing repeatedly presented "prices lowland", this was very abnormal. Of course, the impact of external resources is one of the factors. For example, Shaanxi Steel delivers steel with a volume of about 3.0 million tons per year into these two regions indeed brought a lot of sales pressure. At the same time, steel mills in Sichuan and Chongqing did not show enough control management on local traders, especially on the price and channels. Our company already tried to set an example by taking the lead in price increase and diverting to release sales pressure. We hope to unite with other steel mills in Sichuan and Chongqing to strengthen market control management.

    Asian Metal: The production capacity in Southwest China expanded soon in recent two years. Yunnan began to lose price advantages. In the increasingly fierce competition, what is the development orientation of your company?

    Mr Zhu: Construction steel market always shows cyclical law. In recent two years, the real estate industry is often under strict control by the state. However, in the past two years, the production capacity of our surrounding steel mills continues to expand. These factors make us rethink our development direction in the future. We seized the time to upgrading production lines when the construction steel market ran well in recent two years. Next year we will produce around 3.0 million tons of different types of steel, including medium and wide strip, welding products, premium special steel, etc., which means we will shift half of our production capacity to high value-added products. In addition, we will provide supporting services, integration services including construction steel, cement, steel structure, and steel mesh and so on. This is our priority over other steel mills.

    Asian Metal: Thanks for your wonderful share. Wish your company a great success in the future.

    Mr Zhu: Thank you.
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