Chinese coated steel prices to stabilize
----Interview with Yinshan Zhang
General Manager
New Tianjin Steel Decai Technology Group Co.
- As a sub-group of New Tianjin Steel Group, New Tianjin Steel Decai Technology Group Co is an important production base of fine steel sheet and the largest metal product industry base in North China. It has six wholly owned subsidiaries, including Tianjin New Steel CRC Co., Tianjin Rolling-one Steel Co., Tianjin Metallurgical Group Tiancai Science and Technology Development Co., Tianjin New Steel Zhongxingshengda Co., Tianjin New Steel Wire Cable Co., Tianjin Decai Supply Chain Co.
- Asian Metal: Hello Mr Zhang. Welcome to our interview. Could you please introduce your company?
- Mr Zhang: Our business focuses on two fields including CRC as well as coated products and metal ware. For CRC and coated products, we owns two CRC production lines with one of 1,750mm and the other of 1,450mm, one HGI coil production line, batch annealing and continuous annealing production lines, precision strip production line and galvanizing, color coating, leveling, crimping units. We are the important production base of fine steel sheet in North China. Our main products include pickling coil, CR coil and sheet, HGI coil and sheet, GL and AZM, with a total annual production capacity of 2.5 million tons. Our HGI is mainly used in construction, home appliances and automobiles industries. GL is mainly used in construction, light steel keel and household appliances industries. ZAM is mainly used in photovoltaic supports, industrial refrigeration, and agriculture industries. PPGI is mainly used in large engineering, commercial buildings, household appliances and automobile industries. For metal ware products, we own production lines for wire stranding, aluminum clading, wire welding, aluminum zinc coating and steel wire rope. We are the largest metal product industry base in China. Our main products include high efficiency prestressed steel, stranded steel wire, aluminum clad steel composite, spring steel wire for automobile, galvanized steel wire, galvanized steel wire and wire rope used for bridge cable, with a total annual production capacity of 500,000t. Besides, we also produce wire, tube, rod, strip and section manufactured by precision alloy, high temperature alloy, titanium alloy, special steel, stainless. We can produce some special products like hand-torn stainless steel, small specifications of stainless seamless pipe and capillary, high strength welding wire and so on. The annual production capacity for these products reaches 18,000 tons.
- Asian Metal: In recent two years, ZAM has became more and more attractive in coated product market. Compared with HGI and GL, what is the advantage of ZAM?
- Mr Zhang: As a ternary alloy coating, ZAM is mainly composed of zinc, and the content of aluminum and magnesium is 1.5-8% (the magnesium content is not less than 0.2%). ZAM has excellent corrosion resistance and self-healing of shear section, and their corrosion resistance is more than 10 times that of pure zinc coating products with the same coating thickness. As the time goes by, ZAM may replace HGI and GL in the future. ZAM is broadly used in photovoltaic, automotive panel, shipbuilding, home appliance panel, animal husbandry, construction and other industries. At present, our monthly output for ZAM is about 20,000 tons and the annual production capacity of is 500,000 tons. We mainly focus on mid-Al and mid-Mg products, targeting at photovoltaic industry.
- Asian Metal: During January-April, prices of coated products in domestic market moved up gradually. What are main factors for this?
- Mr Zhang: Taking HGI prices as an example, during this time, prices of HGI with zero spangles from major steel mills rose from RMB5,500/t (USD765/t) to RMB6,100/t (USD849/t). I think reasons are as follows: Firstly, in the H2 of last year, the task of reducing crude steel output was implemented, so the crude steel output of all steel mills in 2021 declined year-on-year. Therefore, at the beginning of 2022, steel mills' inventory and market inventory were lower than the same period in previous years; Secondly, from January to February, the utilization rate of coated products' production capacity remained low. Private steel mills conducted facility maintenance before and after the Spring Festival and state-owned steel mills reduced production for pollution curbs before the winter Olympics. The utilization rate of main coated products' production capacity in February recorded about 10% lower than the same period last year; Thirdly, prices of raw materials moved up, causing higher production cost. At the same time, prices of CRC and HRC edged up by around RMB400/t (USD56/t); Finally, under the government's guidance of steady growth for national economy, the market held strong expectation for the demand recovery from downstream industries.
- Asian Metal: In June, after the epidemics stayed under control and the lockdown was removed, why did the market witness an accelerated price decline of RMB400/t (USD60/t) totally? How did the prices perform in Q3?
- Mr Zhang: After the epidemics became under control, the expectation for demand recovery fell though. As the traditional low season came, no improvement showed in manufacturing industry and construction industry, causing reduced orders from downstream customers. At the same time, steel mills burdened increasing pressure from receiving orders, especially export orders. As I know, most steel mills including us failed to receive enough orders for July production, while we could receive enough order for next month's production until the middle of the month for the latest. However, the supply remained sufficient when demand reduced obviously, causing the sharp price decline. Taking HGI coil prices from big mills in Tianjin as an example, prices dropped sharply in July and recorded a decline of nearly RMB600/t (USD83/t). After that the decrease slowed down obviously and in August the prices fell by around RMB300/t (USD42/t). In September, the prices leveled off and hovered around RMB4,600/t (USD640/t).
- Asian Metal: In H1 of this year, prices of coated products in North China remained similar to those in South China, which was rare in the recent years. What are the major reasons and will the situation continue in Q3?
- Mr Zhang: In the past, South China has a big demand for coated products because of the intensive home appliance industry. Prices in South China were usually about RMB200/t (USD28/t) higher than those in North China. As a consequence, the market in South China was favored by producers in North China. However, in the past two years, the capacity utilization rate in South China improved significantly, while the overall market demand remained lower than expectation, causing that the price advantage failed to exist. In addition, this year, the epidemic in North China caused long-term blocked delivery and even caused resource shortage in some periods. In Q3, some steel mills in South China reduced production to firm prices and the price gap between North and South China recovered a little bit. However, as a big consuming market, South China was favored by many steel mills in North China, who kept supplying materials there. As a consequence, if the demand from South China does not grow obviously, such situation will remain in Q4.
- Asian Metal: How do you predict the price trend of coated products in Q4 of this year?
- Mr Zhang: The supply and demand both reduced continuously this year. The market did not perform actively in traditional high season but it remained not too bad in the traditional slack season. I think the demand from home appliance industry would recover a little bit but not too much in Q4. In my opinion, the prices of HGI coil would level off and hovered at RMB4,500-4,800/t (USD626-668/t) in Q4 of this year.
- Asian Metal: Based on increasing competition among various steel plate products, what is your company's development goal?
- Mr Zhang: We are determined to develop in the way of "specialized, refined, special and new direction". We will focus on green and smart manufacturing, and build "5G+ smart factory". We plan to build a capacity of 5 million tons of cold rolled products and 1 million tons of metal ware products in three years. Through unremitting efforts, we will make Decai Group into a leading company in cold rolling and metal product industry both home and abroad, becoming a new growth point of New Tianjinsteel Group and comprehensively helping New Tianjinsteel Group to become bigger, better and stronger.
