Chinese HR strip prices are not likely to go up obviously in the short term on weak customer demand

Located in Foshan, Guangdong province, Guangzhou Zhengning Steel Trading Co., Ltd. mainly deals with HR strip trading business. After years of efforts, the company has earned a good reputation in the market and will cooperate with customers with high quality products, sincere service and reasonable prices.
Asian Metal: Hello, Mr.Chen! Thanks for accepting the interview. Please introduce your company firstly.
Chen: Being the sales agent of Guofeng Steel and Ruifeng Steel in Tangshan, Hebei province, we mainly supply HR strip to customers in South China with a regular sales volume of 6,000-10,000tpm. We normally have a stockpile of about 6,000t in hand.
Asian Metal: Recently, domestic HR strip prices continued downward, what do you think is the reason for the price decrease?
Chen: That's true. Since the last two or three months, HR strip prices in major market of China have dropped sharply, with the markdown of RMB300-400/t. I think the lack of customer demand and the reduction in steel mills’ list prices are the main reasons for the price decrease. Because of lower raw materials prices of steel billet, HR strip producers have all reduced their prices accordingly.
Asian Metal: How is the market situation in South China? Have prices reached the bottom?
Chen: HR strip prices in South China have decreased to about RMB3,180/t from those of around RMB3,700/t in March. Besides, the current mainstream market price of HRC is just RMB3,160/t. Normally prices of HR strip should be about RMB100-200/t lower than those of HRC. Therefore, I think HR strip prices still have room to go down further in the coming days.
Asian Metal: Many HR strip producers in North China have been out of production due to environmental protection inspection recently. Will this support the market price?
Chen: There are many factors affecting HR strip prices at present. In addition to the limited production of steel mills, steel billet price and steel futures price fluctuations also have a greater impact on the strip market. Of course, steel mills’ decreasing production will certainly be a certain support for the market price, but currently the role is not obvious. In South China, the market inventory remains high, which brings a lot of downward pressure on prices.
Asian Metal: How about the demand of downstream industry?
Chen: As a result of environmental inspection, the production of downstream customers like cold rolling mills in South China was affected in March, and their demand for HR strip decreased. In addition, the current property market has been suppressed, so fans, rice cookers, air-conditioning, furniture and other industries will also suffer a greater impact. It is predicted that the market demand will continue to be weak in the short term.
Asian Metal: What’s your opinion about the market trend in Q2 of this year?
Chen: Market prices will continue to fluctuate in May. As June is the traditional off-season, the price is unlikely to go up on weak customer demand. Although I personally think that RMB3,500-3,600/t is a reasonable price for HR strip, it is estimated that the market price in South China will hover in the range of RMB3,000-3,500/t in the whole year of 2017.
Asian Metal: What’s your reaction to the current market situation?
Chen: We will actively expand downstream customer and increase sales channels.
Asian Metal: Thank you for your support. I wish your company success.
Chen: It’s my pleasure.