Executive Interviews

Asian Metal: Mr. Cao, welcome to Asian Metal's Executive Interview column. Could you briefly introduce your company's main business?

Mr. Cao: It is my great pleasure to be here. Tianjin Wanfulong Technology Co., Ltd. was established in 2015 and is mainly engaged in the trading of cold-rolled coils, aluminum-zinc coated steel and Chenggang hot-dip galvanized steel, with an annual trading volume of nearly 100,000 tonnes. Traders account for approximately four-fifths of our customer base, while end-users account for about one-fifth. Our business is primarily focused on the domestic market. Cold-rolled coils are mainly sold within a radius of 200-300km around Tianjin, while galvanized and aluminum-zinc coated products are shipped to Tianjin, Shandong, Shanxi, Inner Mongolia, Hebei, Henan and the three northeastern provinces.

Asian Metal: Which steel mills does your company mainly cooperate with? How have deliveries been recently?

Mr. Cao: We mainly cooperate with Jingtang Steel, Xintian Steel, Donggang, Guofeng and Chenggang. Overall deliveries are normal at present, and our inventory remains at a medium level. However, shipments of galvanized steel from Chenggang have accelerated slightly.

Asian Metal: How is downstream demand at present? Has there been any significant change compared with the same period last year?

Mr. Cao: Our downstream customers mainly include manufacturers of electrical boxes and cabinets for export. Demand in the first quarter was not significantly different from previous years. However, it has weakened noticeably since May, declining by approximately 10-15% year on year. The weakening demand is attributable to two factors. On the one hand, domestic manufacturing activity has contracted. On the other hand, the Israel-Iran conflict has disrupted transportation, prompting overseas buyers to remain on the sidelines and delay purchases.

Asian Metal: Looking back at the first three quarters, cold-rolled coil prices fluctuated within a narrow range. Prices remained weak but stable in January and February, rose by around RMB100/t in mid-March, rebounded by another RMB100/t in late April and early May, fluctuated downward in June and July, and started to rise again in late August. What do you think caused these price fluctuations?

Mr. Cao: Around the Spring Festival, domestic cold-rolled coil prices fluctuated within a narrow range. In early to mid-March, the Israel-Iran war pushed up oil prices, which in turn drove up iron ore and other raw material prices and supported higher finished steel prices. However, due to weak downstream demand, the price increase lasted only about a week. By late April, sustained strength in crude oil prices and improving exports led to tightness in the domestic supply chain, triggering a sharp rise in domestic steel prices. However, downstream demand weakened significantly from May onward, while supply remained at a high level, leaving insufficient momentum for prices to continue rising and resulting in a slight pullback. Since late August, prices have risen again, supported by surging prices of raw materials such as coal and coke and stronger market expectations for peak-season demand. Overall, macroeconomic factors have pushed prices higher, while demand has exerted downward pressure. This year, demand has had a greater influence on prices.

Asian Metal: The third quarter is drawing to a close. How do you view the market in the fourth quarter?

Mr. Cao: I hold a cautiously optimistic outlook for the fourth quarter. I expect cold-rolled coil prices to fluctuate upward by RMB200-300/t to around RMB4,000/t. There are two main reasons for this bullish outlook. First, costs are likely to continue rising. International oil prices remain elevated, domestic safety inspections have tightened, and coal and coke prices remain strong. Second, downstream demand has gradually recovered since August.

Asian Metal: The steel industry remains a buyer's market, with intense competition among distributors as well as between steel mills and distributors. More than one-third of steel traders have gone out of business or switched industries over the past two or three years. What is your view on this? When do you think the "shakeout" in the steel industry will come to an end? What is your outlook for the steel industry's development?

Mr. Cao: Survival of the fittest is a normal feature of the industry. I have been working in the sector for more than 20 years, and every year some companies are eliminated. Against the backdrop of this industry shakeout, steel traders and distributors alike need to adapt their business models and management philosophies to changing market conditions. Companies that fail to change will eventually be eliminated. Take steel trading today, for example. If a company continues to rely solely on the traditional spot trading model, its ability to withstand risks will be significantly reduced. Therefore, companies need to combine spot transactions with forward transactions to hedge against price volatility.

Asian Metal: What has been the biggest challenge facing your company this year? Where do your strengths lie?

Mr. Cao: Our main challenge at present is the competitive pricing and sales strategies adopted by large state-owned enterprises and online platforms, which have squeezed our room for sales growth. Meanwhile, steel mills are increasingly inclined to ship directly to end-users, putting them in direct competition with distributors. Our main advantage is that we were among the earliest companies to introduce relatively new products with less competition, such as aluminum-zinc coated steel and hot-dip galvanized steel, enabling us to secure high-quality customers at an early stage. As China steps up investment in power grid construction, aluminum-zinc coated steel for distribution cabinets and Chenggang hot-dip galvanized steel used in steel grain silos have promising application prospects.