Chinese HRC prices lack strong support in Q3
----Interview with Li Zhizhu
General Manager
Shanghai Anshou Co., Ltd.
- Established in 2015, Shanghai Anshou Co., Ltd. insists on providing qualified products and reliable after-sales service during the five-year development. The company majors in dealing with HRC related products and cooperates with end users from industries of automobile machinery, special engineering, household appliance, hardware equipment, etc.
- Asian Metal: Good afternoon, Mr. Li. Thanks for agreeing to the interview. Please could you briefly introduce the company background and main products?
- Mr. Li: Cooperating with Ansteel, Shanghai Anshou Co., Ltd. deals with HRC, low-carbon steel, high-carbon steel, low-alloy coil, cutting tool steel and shipping coil, with a yearly trading volume of about 50,000t.
- Asian Metal: Where are your materials sold? How about customers?
- Mr. Li: We sell 70%-80% of the products to distributors, with the rest 20%-30% to end users directly. Besides Jiangsu, Shanghai and Zhejiang, we also deliver materials to Jinan and Qingdao in Shandong province.
- Asian Metal: The downstream industry recovered day by day from mid-April. Statistics show that sales of excavators in China soared by nearly 70% year-on-year in May, and those for automobile increased by more than 10% year-on-year during the corresponding period. How about the downstream demand for HRC at the moment?
- Mr. Li: Absolutely, both distributors and end users purchased actively with the higher operation rates of downstream industries from the middle of April. However, the demand remained not strong enough when compared with that in the peak season. Actually, the upward price trend encouraged end users to place orders actively to some extent, and they tended to watch the market again when the prices showed signs of powerless to go up further.
- Asian Metal: After the total drop of about 16% during February and March, prices for HRC rebounded by around 10% from early May. What do you think are the reasons for the price hike? How about the market performance after the price increase?
- Mr. Li: Dragged by the outbreak of the COVID-19, the market performed stagnantly in February and March. Both traders and customers showed little confidence in the market prospect, and traders were eager to conclude deals to avoid potential risks, leading to a sharp price decline. With the positive control of the COVID-19 as well as the loosening loan policy from banks since mid-April, steel distributors faced loosen capital flow and became active in purchasing, with the positive anticipation for the stimulant policy from the government. Besides, downstream customers placed orders actively supported by increased orders for final products, together with the sharp price rebound of raw materials, pushing prices for HRC to go up.
- Following the price increase, the market performance showed signs of warming up.
- Asian Metal: How do you think the market in the third quarter?
- Mr. Li: Personally, I do not believe prices for HRC would increase further with the uncertainties in the third quarter. Firstly, the supply increases. Boosted by the considerable profit, most producers tend to transfer more iron melt from the production of CRC to that of HRC for the time being. Secondly, the demand remains not sufficient enough. On the one hand, though the domestic downstream industries keep recovering, the demand remains weak; on the other hand, lots of overseas countries still face serious outbreak of the COVID-19, and the downstream industries run slowly, restraining the demand from getting stronger. Thirdly, the tough export might heighten domestic stock pressures. I heard that to transfer domestic sales pressures under the COVID-19, steel producers from Japan, South Korea, India and Turkey lowered HRC export prices sharply, which made Chinese materials export impossible and even attracted domestic traders to import materials. As a consequence, I believe prices for HRC would lack power to go up further and might keep changing narrowly in Q3.
- Asian Metal: Prices for HRC in East China were similar or even lower than those in North China these two months, while they should be about RMB100/t higher than the latter. Therefore, northern mills become inactive in sending materials to East China. Does Shanghai witness reduced delivery in recent days?
- Mr. Li: Indeed, steel mills are reluctant to deliver materials to East China now. At present, the overall market stock of HRC in Shanghai remains low, and some low-alloy grades are in shortage.
- Asian Metal: As far as I learnt, although the COVID-19 witnesses positive control in China, the "sequel of the epidemic" still exists, and most enterprises tend to maintain stability, either cancel or postpone expansion plans. What do you think enterprises should do to improve the business vitality?
- Mr. Li: Admittedly, we also tend to reduce stockpiles under the COVID-19. The combination of online and offline becomes an effective model to revitalize business vitality. For example, besides trading in the spot market, we also put products on e-commerce platforms such as Ouye. In addition, when developing front-end sales, we also strive for timely, responsible and efficient after-sales service. To ensure product quality, once problems are found, the processing time will not exceed two weeks.
- Asian Metal: Thanks so much for your time. Wish Anshou Co., Ltd. a great success in the future.
- Mr. Li: Thanks.
