Executive Interviews

Asian Metal: Good afternoon, Mr. Li. Welcome to the interview. Please briefly tell us about your company.

Mr. Li: Founded in 2008, our company aims at acting as the bridge for northern steel mills and eastern enterprises since the beginning of its foundation. We stated to build stocks in Tianjin to further develop the business following the government proposing the coordinated development strategy of Beijing-Tianjin-Hebei (BTH). Holding around 5,000t of stocks, we deal with section steel and flat steel business, and also involve in steel pipe and basic processing, striving to provide one-stop delivery service for our clients.

Asian Metal: What are your target markets and clients ？

Mr. Li: We supply steel products to end users and traders, with the former accounting for 90% and the latter around 10%. Presently, most of our customers come from infrastructure plants and building companies in Beijing, Tianjin and Hebei. With the urbanization and industrial upgrading, the government phased out some low-end industries, and the demand for steel reduces gradually in North China. Benefited from the prevalence of the internet, we started nationwide delivery gradually. About the proportion for sales, traditional sales occupies about 70% and the online sales accounts for approximately 30% now. I believe the online sales would exceed the traditional sales finally.

Asian Metal: How about the downstream demand and the upstream operation rate?

Mr. Li: Generally speaking, the demand this year shrinks by 30%-40% compared with last year. We learnt from regular clients that most downstream customers face insufficient orders for final products this year. The capital shortage and the decreasing profits act as the main reasons. Presently, clients reporting profitable fail to produce normally dragged by the capital shortage, while those with sufficient capital have to reduce production dragged by the thin profits or even losses.

Asian Metal: Prices of section steel went up spirally from the end of 2022 to Mid-March of 2023, but fell suddenly from late March. Then the prices rebounded in early June and fluctuated narrowly in the second half of 2023. What do you think act as reasons for the frequent price fluctuations?

Mr. Li: Personally, I believe national policy performs as the main reason for the price change. Downstream plants suspended production from time to time during the pandemic control. Participants showed strong confidences in 2023 following the government' removal of epidemic control in late 2022. The bullish atmosphere lasted to early 2023. Till March, downstream customers faced insufficient orders and shrinking demand. In early June, the central government released series of policies to boost the economy. In the second half of 2023, prices of raw materials rose continuously, while the demand from downstream industries kept soft, which restrained prices from rising obviously or decreasing significantly.

Asian Metal: Do you see obvious stock change at the moment compared with the corresponding period of last year?

Mr. Li: Adopting wait-and-see attitudes towards the market prospect, we endeavor to maintain low stocks, low profits and high turnover rate. We pursue stability to survive under the current market situation and control the stocks to around 4,000t now from the regular level of 5,000t. We tend to prepare enough categories of materials for each grade rather than big volume of single category and we prefer to reduce the capital occupation.

Asian Metal: How do you think of the price trend for section steel in the first quarter of 2024?

Mr. Li: I become increasingly hesitant to predict the market outlook even after more than ten years' involvement in the industry. The market runs far from solely determined by the supply and the demand. Too many factors influence the prices, such as the national policy, the sudden price change of overseas market, the futures market, and the pollution curbs. Generally speaking, I believe the mainstream prices of section steel would stay low and fluctuate narrowly in the first quarter of 2024, ranging from RMB4,000/t (USD556/t) to RMB4,200/t (USD584/t).

Asian Metal: Although 2024 is the second year after the pandemic control, the market would not see immediate economy rebound, so steel traders face both opportunities and challenges. How does your company understand the current challenges and how to adapt to the future trends and seize opportunities?

Mr. Li: The risk for traditional steel trading increased gradually in the recent years due to various factors. Therefore, we tend to maintain stability, adhering to low stocks, low profits and high turnover rate so as to avoid potential risks. Benefited from the internet and modern transportation, we endeavor to expand the investment on online sales. Meanwhile, we meet with clients' needs accurately and undertake some basic processing services to provide one-stop service chain for our clients.