Committed to creating the supermarket of HR strip and coil

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

Mr. Li: Based on Handan market, our company is mainly engaged in HR strip and HRC business and we also supply customers in surrounding markets such as Henan and Shandong. At present, Hebei Gangsheng Economic and Trade Co., Ltd. mainly deals with HR strip from Wenfeng Steel with a monthly contract volume of 10,000t. In 2018, we registered and established Hebei Danhe Trading Co., Ltd., mainly engaged in HRC from Yuhua Steel and Tiantie Steel with the monthly contract volume of 10,000t and 20,000t respectively. Our stockpile is always maintained at about 10,000t.

Asian Metal: What is the current market situation of HR strip in Handan?

Mr. Li: Currently, the HR strip market in Handan is running smoothly and the price is rising steadily. At present, the mainstream price of HR strip Q235 520mm*3.5mm*C from Wenfeng Steel is about RMB3,850/t (USD573/t) D/P. In addition, market transactions were still acceptable before the Qingming Festival holiday, and the market demand after the holiday is expected to be further released.

Asian Metal: HR strip prices in China lacked momentum to go up after the Spring Festival holiday. What do you think is the reason for this?

Mr. Li: Chinese HR strip prices failed to increase for some time after the Spring Festival holiday. The main reason was that environmental protection restrained the demand of end users, and many pipe manufacturers could not keep the regular production.

In addition, before NPC & CPPCC, many policies were not clear. Coupled with inadequate funds, customers' demand for HR strip was not strong. However, since mid-March, demand from downstream industries has steadily increased, and the market sales performance is gradually improving.

Asian Metal: Weighed by the environmental protection inspection, the production of most steel mills in Handan has been under pressure recently. What is the current situation of steel mills' supply?

Mr. Li: Influenced by the environmental protection inspection, most steel mills have stopped production since mid-March, and the supply of materials is insufficient. Puyang Steel stopped the production line of 1,250mm rolling mill on March 18th. Yuhua Steel and Xingtai Delong Steel also suspended the production from March 19th and March 20th respectively until the end of March.

However, steel mills have resumed the regular production now. On the one hand, the pressure of environmental protection is not great; on the other hand, the low-cost materials in the market have been consumed and steel mills also have the strong willingness to expand production due to the high profit margin.

Asian Metal: How about the current demand from downstream industries?

Mr. Li: Since the end of March, with the alleviation of environmental protection pressure and the rapid digestion of market resources, pipe manufactures have received sufficient orders and they are purchasing raw materials actively now to maintain the regular production.

In addition, with the weather becoming warm, many construction sites have started. The recent price increase in futures market of construction steel like rebar has also brought some support to HR strip and HRC market, which has increased downstream customers' enthusiasm in purchasing.

Asian Metal: Will the recent reduction in VAT rates have a positive impact on HR strip market?

Mr. Li: In the long run, the reduction in VAT rate will benefit the downstream industries more, such as the automobile and household appliance industries. The sales increase in these industries will drive the demand for cold-rolled and automotive steel, which are also the downstream of HR strip and HRC. But I don't think this policy will have much influence on steel traders in the short term, and the impact on steel prices is relatively limited.

Asian Metal: What's your opinion about the market trend of HR strip in Q2? Is it possible that prices will rise sharply?

Mr. Li: It mainly depends on the downstream demand and whether the speed of market demand recovery will be faster than the speed of output increase of steel mills. I am still optimistic about the market outlook in April. After all, it is now “golden March and silver April". Since the market performance was not so good last month, the increase in customers' demand will support HR strip prices to go up this month.

Baosteel previously issued the steel price policy for April and expected steel prices to increase by about RMB300/t (USD45/t). Recently, the price of HR strip in Handan has risen by about RMB150/t (USD22/t).

In addition, iron ore and other raw materials also have some support for the price increase of steel products. Earlier hurricanes in Australia and the mining accident in Brazil led to a reduction in iron ore production. Recently, steel mills have been operating at a higher rate, and the demand for iron ore will also increase. Rising iron ore prices will reduce the profits of steel mills, and the increase in steel mills' production costs will eventually pass on to the price of finished steel products.

Asian Metal: Do you have any new plans in the near future?

Mr. Li: At present, our company is mainly based in Handan and Xingtai area. Handan itself is also an old industrial city and we will maintain the local and surrounding markets. The steel mills we are currently cooperating with are all large iron and steel enterprises, which are also relatively strong after integration. In the future, we may consider cooperating with Jinan Steel to increase the steel plate business.

The target sales volume for this year is 500,000t. We will enrich our product line, from HR strip with the width of 500mm to HRC with the width of 1,500mm, in order to better meet customers' needs. We will strive to build our company into a supermarket of HR strip and coil in the future.

Asian Metal: Thank you for your support, and wish you and your company a great success in the future.