Ye Zepeng: Section steel industry will remain sluggish for quite some time

Asian Metal: Please give us a brief introduction to your company.

Ye: Our company mainly deals with section steel from Shengfeng Steel, Rongtai Steel, Jinqiao Steel, Zhaobo Steel, Jifeng Steel and Baode Steel. Our distribution network covers the Pearl River Delta regions, supplying products to customers like China State Construction Engineering Corporation (CSCEC), China Railway Engineering Corporation (CREC), and China Communications Construction Company (CCCC). Our annual sales volume can reach RMB 200 million.

Asian Metal: Could you give us an account of the market condition of section steel in Foshan?

Ye: The situation is quite grim. The bank has tightened its lending policy for steel traders, and local traders are finding it very hard to get bank loans to support their business. As far as I know, nearly 20% of traders have gone bankrupt or changed to other fields due to the sluggish section steel industry and the tight capital flow.

Asian Metal: I have heard that the profit margin for section steel is quite slim, so how are your profits on section steel from Tangshan, Hebei Province?

Ye: Yes, the profit margin is slim and it keeps shrinking. If you deduct the expense for human resources, warehousing and logistics, there is almost no profit at all. In 2011, I could still earn a profit of RMB180-200 for each tonne. But now, the profit is less than RMB100/t.

Asian Metal: So what is the reason for this phenomenon?

Ye: The root cause is the oversupply. There aren’t many construction projects in Foshan, while steel mills’ production continues at a high level. Traders compete with each other by reducing offers, and buyers always ask for lower quotations. We should be thankful for the fact that we haven’t suffered any losses yet.

Asian Metal: What measures did you take to cope with the harsh situation?

Ye: The first thing we did is to reduce costs. We are holding fewer stocks this year than we did in previous years. We controlled the costs, and then we managed the risk. Secondly, we don’t borrow money from banks, so we don’t need to pay back loans to them every month. Our capital chain is always running smoothly. Thirdly, we try our best to satisfy our regular customers, who are mainly steel structure users.

Asian Metal: What do you think of the development trends in the section steel industry?

Ye: I personally believe that there is a fat chance of the section steel industry improving much this year or even next year. Oversupply will continue to exist for quite some time. The elimination of outdated capacity and the internal adjustment of the industrial structure both take time. But the hope is still there. Section steel is usually used to build steel structures, which are lighter, more environmentally friendly and anti-seismic compared with traditional reinforced concrete. With more people attaching importance to their dwelling and working conditions, buildings made using steel structure will become more popular.

Asian Metal: As a man who has been in this industry for years, what is your advice on people in this field?

Ye: I think people in this field should improve their operational methods and concentrate on their customers. One should think what the customer is thinking and do what they really want us to do. It is true that the situation is harsh and the prospects are grim, but a capable person can always find his opportunity from somewhere. I think a person who can do well in the bad conditions will only get better in future.