----Interview with Zhiguang Li
General Manager
SinomaterialInternational Co., Ltd.
Registered in Hong Kong in 2013, Sinomaterial International Co., Ltd. is a China-based company majoring in steel imports & exports and international trading. The company mainly deals with HRC, steel plate, full hard CRC, CRC, GI, GL, PPGI, wire rod, rebar, section steel, round steel bar, square steel and steel billet, with the yearly trading volume of around 500,000t.
Asian Metal: Hello, Mr. Li. Thanks for joining the interview. Please briefly tell us about your company and customers.
Mr.Li: My pleasure. Registered in Hong Kong, Sinomaterial International Co., Ltd. is a China-based company majoring in steel imports & exports and international trading. The main shareholders and management of the company are professionals with more than 20 years of experience in the steel industry, with rich and profound professional skills. With years of industry experience and bank support, we conform to the trend of the times and combine the traditional trading, logistics and finance together so as to create the unique core competitiveness of the company. Sinomaterial International Co., Ltd. has built harmonious relationships with leading domestic steel producers such as Ansteel Bengang Group, Baowu Group, HBIS, SD Steel, Liugang Group, Valin Steel, Xinsteel, Rizhao Steel and Shagang Group. We mainly export to Southeast Asia, South Korea, Middle East, South Asia and South America. We concluded deals with buyers from Europe and Africa gradually in recent years. Customers include stockists, traders, steel mills, manufacturers, end users from oil and gas plants and construction projects.
Asian Metal: How about the current demand from overseas? Is there any change compared with the first quarter?
Mr.Li: Generally speaking, the demand from foreign countries kept improving sincee early March. Buyers from Middle East and Europe tend to import from China due to the reduced supply from Russia and Ukraine, and the demand hiked by around 30% compared with January and February. Besides, they could accept higher prices.
Asian Metal: The HRC exports from Russia and Ukraine accounts for about 7% in the world, and the conflict makes the supply reduced. Meanwhile, steel mills in India, Japan, South Korea and Vietnam prefer to increase the exports to Europe and reduce the delivery to Asia. How do you think it will influence the HRC export of China?
Mr. Li: Absolutely, HRC prices in Europe hit the historical high of USD1,500/t in late March due to the reduced supply from Russia, and leads to the worldwide price hike. As steel mills in India, Japan, South Korea and those in Southeast Asian countries rush to export to Europe, materials from China make up the market share in Asia quickly. Both steel mills and exporters in China receive sufficient export orders in Mach. However, in the long-term, the supply and the demand will get the new balance with the ease of the conflict, even though Europe and America do not loosen the sanctionson on Russia, which means it's hard to boost the Chinese HRC export fundamentally. In contrast, we believe that the domestic steel industry planning and the national policy would impose huge structural influence on the HRC export.
Asian Metal: Please briefly analyze the present HRC export status in China.
Mr. Li: In terms of volume, the HRC exports in China decreased from 15.54 million tons per year in 2016 to 6.67 million tons in 2020, and the country exported about 10.33 million tons of HRC in 2021, up by 55% YoY, ending the five-year consecutive declines. We believe the HRC export volume would edge down gradually under the carbon neutrality and emission peak policy. In terms of species, the regular grade of coil accounts for above 95% among the total HRC exports. The steel export from China would transfer to the quality advantage finally from the current price advantage under the carbon neutrality and emission peak policy. With regard to destinations, export destinations of HRC remain relatively concentrated. Major destinations of Vietnam, SouthKorea, Saudi Arabia, Pakistan, Taiwan, India, Indonesia, Thailand and Nigeria accounts for 80% of the total HRC exports of China.
AsianMetal: What factors do you think act as the reason for the decline? When will it reach the new balance? How about the product upgrade? Do you think the export destination will witness the obvious change?
Mr. Li: Personally, I believe there are two reasons for the decline in exports. Firstly, China's low-price advantage fades. Secondly, overseas relies less on Chinese materials with the production capacity expansion. To specify, more and more countries built trade barriers against Chinese materials and the government of China cancelled the export subsidies, leading to the increased import costs of overseas buyers and weakened their import activities for Chinese materials. Besides, China's major HRC export destination, Vietnam, founded two HRC steel mills in the recent years, with the annual production capacity of around 8 million tons, which not only reduces the rely on Chinese materials but also competes with Chinese materials in the international market. To be honest, it's hard to forecast the new balance, but we do not predict the further decrease in exports and it might maintain above 5 million tons annually. Customers for fine steel are relatively scattered and the volume remains far less than that for carbon HRC. The products include pickling coil, automotive steel, container coil, abrasion-resistant steel and pipeline steel and so on. We do not expect for significant change in the export destinations in the forthcoming several years.
Asian Metal: Prices of HRC fluctuated frequently in the domestic market since the Spring Festival holiday. Steel mills remain eager to raise prices stimulated by the rising prices of raw materials, while the demand from downstream industries failed to improve dragged by the new wave of COVID-19. How do you think of the HRC export market prospect in Q2?
Mr. Li: We adopt optimistic outlook for Q2. The improving demand in overseas and the stimulant policies from the central government, together with the booming infrastructure and the warm of the property market all support prices of steel products to go up. We deem export prices of HRC would hit the yearly highest point of around USD920/t in Q2. Nevertheless, we should pay attention to the uncertainty caused by the new wave of COVID-19 and revise the forecast timely.
Asian Metal: Could you please share the experience in market development?
Mr. Li: Secure suitable products and customers so as to play full advantage of the current platform. Besides, in terms of the market development, we endeavor to make plans in advance and implement them thoroughly, despite the short-term losses.
