Yang Mengfei: Good relationship with customers and suppliers makes stainless bar traders survive in the "meager profit" time

Asian Metal: Good afternoon, Mr. Yang, thank you for your support to Asian Metal and accepting the interview. Well, could you please give us a brief introduction of your company?

Yang: Ok. My business mainly involves in the trading of stainless bar, such as round bar and hexagonal bar. Besides the trading, we also provide some further processing to clients, such as drawing wire and cutting. The operation principle of the company is to serve clients with our sincerity and professional skills, so although the company is not large scale, it can provide customers the best service and materials with best quality and consequently, establish a long-term cooperation relationship.

Asian Metal: We all know that the stainless bar market has been sluggish since early this year and the price has decreased by nearly 20%, so could you please give us some analysis about this?

Yang: Ok. It is true that the market is much worse than before and the price has almost reached the lowest point in recent four years. Well, briefly speaking, reasons are fund shortage in China and the appreciation of US dollar coupled with the dull overseas demand in the international market.

In China, most factories and manufacturers are confronting with a fund shortage, because of the slowing down economic development. Many factories could not take enough orders from end users, so the demand for steel products is softer, accordingly. Besides, they dare not build as large stockpiles as they did in past years due to the insufficient money. Steel producers and traders also would like to cut offers for a healthier capital flow. In addition, the appreciation of US dollar recently led to a continuously price decline of bulk commodity such as Nickel. In addition, many European and American countries are posting anti-dumping tax on Chinese stainless steel, so the export market is unpromising. All of these multiple factors suppressed the domestic stainless steel price.

Asian Metal: So, may I know the current living status of those stainless bar traders and producers? Are they losing money or at the edge of meager profit? I heard that some mills halted the production.

Yang: Yes, it is true that both producers and traders are facing a difficult situation of losing money or losing clients. Those producers are in the red while traders are not yet, but their profits have been squeezed greatly. Meanwhile, few steel mills shut down at present because they will lose more if they halt the production. It will cost several million yuan for one smelting furnace to restart the production, so producers prefer to arrange the production according to orders they take rather than suspend. On the other hand, steel traders are confronted with decreasing profits. My gross profit is only RMB500-1,000/t now, far less than the best one of over RMB2,000/t in past years, and it is only gross profit, so imaginably, the net profit is how low, as the cost of capital and the labor is quite high nowadays. Therefore, my target now is quite simple-to survive.

Asian Metal: Totally understand. However, it seems that the dilemma will last for a quite while, and there are no signals of recovering yet, so do you think the price of stainless steel will go down further?

Yang: I’ve talked about this with other traders in the market, and we think the situation will get some improvement in October. It is too hot from June to August for processing plants to keep a normal production, so they place fewer orders in summer, and after September, the temperature will be proper to run the business and the demand from downstream buyers will be stronger. In addition, the support from production cost is still strong, because prices of metals such as nickel have been decreased too much and almost hit the bottom, they are unlikely to go down further. Besides, the environment protection for mines is highly requested, which also indicates a high production cost of nickel’s smelting. Thus, I think the stainless steel market will make some progress in autumn and the price will go up slightly, but generally speaking, the market will remain tough.

Asian Metal: Hope so. Then, could you share us your opinion about how traders would get over the hard time? I heard that some traders switched the business to special steels or changed the business to other fields, so how do you think about that?

Yang: Well, I really do not think it is necessary to switch careers, because the metal industry is still promising at present, and it is only the slowing down economy and fluctuating currency exchange rate make the market worse this year.

Asian Metal: So, what should traders do to cope with the problem?

Yang: The only thing traders could do is to keep good business with regular customers and suppliers. The most important is keeping the stable demand and the normal sales volume, even by reducing profits; otherwise, it will be much more difficult to get those clients back. We all know that many buyers are also facing fund shortage, so if I can give them a hand without cash requirement, they would appreciate it and are likely to be my regular customers. Besides, it is also significant that keeps good relationship with those reliable suppliers who can provide you products with good quality and some balance due or arrearages. Thus, you can survive in the hard time.

Asian Metal: Got it and thanks. Last, it will be appreciated if you can say something about your development plan in the near future.

Yang: Ok. Honestly speaking, as a trading company, I think it is more important to do a better trading business, by keeping a regular sales volume and occupying the certain market share. Besides, I am also thinking about the deep processing, but there will not be equipment investment, because it requests a lot for funds and technology. Being professional is always better than being generic but master of none.

Asian Metal: Absolutely agree. Well, thank you again for taking the interview and we wish you a successful work and flourishing business in the future!