HRC prices likely to go up slightly and slowly in 2017
----Interview with Li Zhizhu, Manager of Shanghai Anshou Co., Ltd.
Founded in 2015, Shanghai Anshou Co., Ltd. majors in flat steel trading, with an annual trading volume of around 50,000 tonnes. The company has earnt a favourable reputation in the steel industry by adhering to the “Consumer first, reputation first” business philosophy. It has built long-term cooperation with several state-owned and famous enterprises.
Asian Metal: Good afternoon, Mr. Li. Thanks a lot for agreeing to the interview. Please could you briefly tell us about your company.
Li: It’s my pleasure. Anshou Co., Ltd. mainly deals with flat steel, with the monthly trading volume of around 5,000 tonnes. Major products in our company are carbon HRC, low-alloy HRC, quality carbon steel, cutlery steel and weathering resistant steel.
Asian Metal: What about delivery from mills? I heard that deliveries from mills nearby Hebei and Henan provinces have been cut by 20-30% since H2 of 2016 influenced by the environmental protection policy.
Li: It’s true. Mills failed to delivery materials 100% according to orders because of reduced output. Besides, they prefer to produce fine steel rather than carbon coils for more profits, requiring certain proportion for the fine steel when traders place orders with them.
Asian Metal: Where are your materials sold? Only in Shanghai? How about customers?
Li: Materials from our company are sold to many regions besides Shanghai, such as Jiangsu, Zhejiang, Anhui, Fujian, Hunan, Shandong and so on. Around 70% of our clients are traders, and the rest are end users.
Asian Metal: What’s your biggest challenge at present? What about your advantages?
Li: We face some pressure on selling lots of non-standard Hot-rolled products at the moment. Advantages are we guarantee products quality and provide excellent after sales service. In addition, we never lift prices blindly and those we provide are always mainstream ones in the market.
Asian Metal: Boosted by significant prices rises in the futures market as well as continuous environmental protection policies, prices for HRC in the spot market almost doubled in 2016. That is, the price rose to 3,800/t (USD553/t) by the end of the year from that of 2,000/t (USD291/t) at the year-beginning, so do you think they will keep rising sharply this year? Is there any change for the supply and demand? It’s said that the government plans to investment massively on infrastructure and the demand for construction steel will increase by at least 32 million tonnes in 2017.
Li: Personally I think the price for HRC is likely to continue on the upward trend this year. However, considering the current base is as high as nearby RMB4,000/t (USD582/t), it is hard to reach the mark-up of last year, and a price of RMB4,500/t (USD655/t) is possible by the end of the year.
Meanwhile, facing capital pressures caused by the significant price increase, currently most downstream customers prefer to purchase according to urgent needs rather than build large stocks as they did in past years, being uncertain about the market outlook. In the meantime, some well-funded traders collect products at lower prices to earn profits by selling them when prices rise.
I also heard the news about the massive investment on infrastructures, and it mainly helps the demand for construction steel to increase, but the direct effect to HRC is not so obvious. Nevertheless, the whole steel industry is closely connected, and positive news help to strengthen HRC market participants’ confidence in the market outlook, and thus boost the price to go up.
Asian Metal: As far as I know, most traders are still cautious about the market prospect and inactive in supplementing inventories, despite an upward price trend. Do you plan to enlarge stockpile this year?
Li: Just like other traders, we have no intention to enlarge stocks obviously this year. As you know, the current price is too high when the weak downstream demand is taken consideration, and it’s possible to fall back at any time.
Asian Metal: More than 1/3 steel companies have gone bankrupt in recent several years, and the whole industry face serious challenges. What do you think steel enterprises should do to adapt to the new normal?
Li: Anshou Co., Ltd. survives on high quality and developing our credibility. As modern enterprises, we need to be conscious, intelligent and keep pace with the times. Alongside this, we should extend our trading models. For example, the rise of e-commerce is a new kind of selling model, by which traders could sell products both on the line and in the spot market.
