Grain oriented electrical steel prices to keep falling
----Interview with Bin Lei
General Manager
Shanghai Gangyue Metal Materials Co.
Established in 2017, Shanghai Gangyue Metal Materials Co. mainly engages in sales of imported grain oriented electrical steel from Russia and materials produced by domestic steel mills such as Baowu Group and Baotou Weifeng, with an annual sales volume of nearly 30,000 tons.
Asian Metal: Welcome to the interview by Asian Metal, Mr. Lei. Please introduce your company briefly.
Mr. Lei: I am delighted to receive the invitation for interview by Asia Metal. Located in Fengxian District, Shanghai, Shanghai Gangyue Metal Materials Co. was founded in 2017. At present, we mainly engages in sales of imported grain oriented electrical steel from Russia, as well as materials produced by domestic steel mills such as Baowu Group and Baotou Weifeng. Our monthly sales volume reaches nearly 3,000 tons, and our company's regular inventory is over 2,000 tons. At present, our products are mainly sold to mainstream domestic markets such as East China and South China, and are mainly used to produce transformers, electric furnaces, reactors, voltage regulators, and other related products.
Asian Metal: How about the current domestic production capacity and distribution of grain oriented electrical steel?
Mr. Lei: With the continuous growth of demand in China's grain oriented electrical steel market in recent years and the continuous improvement of related technical levels, major producers have invested in the construction of grain oriented electrical steel production lines and China's grain oriented electrical steel production capacity and capacity utilization rate continue to grow. The production of grain oriented electrical steel in China increased from about 1.219 million tons in 2018 to around 2.174 million tons in 2022, an increase of nearly 80%. It is expected that the production of grain oriented electrical steel will reach about 2.458 million tons in 2023. At present, China’s top six enterprises in terms of production are Baowu Group, Shougang Steel, Wangbian Electric, Baotou Weifeng, Ningbo Yinyi, and Zhejiang Huaying, with Baowu Group’s grain oriented electrical steel production accounting for more than 50%.
Asian Metal: Domestic prices of grain oriented electrical steel went down obviously since Q2 of this year. What are the main reasons for the price decrease?
Mr. Lei: Since the second quarter of this year, the domestic prices of grain oriented electrical steel have continued to decline. Taking the grade of grain oriented electrical steel 120 produced by private steel mills as an example, the prices dropped from above RMB16,000/t (USD2,200/t) at the end of March to around RMB11,000/t (USD1,512/t) currently, a cumulative decrease of more than RMB5,000/t (USD687/t) or 30%. I think the main reasons for the price decrease are weak demand from downstream industries and the continuous price reductions by steel mills. Since the beginning of this year, although the domestic epidemic already ended, the demand from downstream industries has not recovered as previously expected, and prices of grain oriented electrical steel have also been decreasing continuously along with other steel products.
Asian Metal: How about the current supply of steel mills?
Mr. Lei: Generally speaking, domestic steel mills have been relatively active in production since the beginning of this year, with steel production maintaining at a high level and sufficient market supply. However, due to the low demand from end users, the overall market is still in a situation of oversupply. From January to July of this year, the national crude steel production reached 626.51 million tons, a year-on-year increase of 2.5%; The steel production reached 789 million tons in the given period, a year-on-year increase of 5.4%.
Asian Metal: How about the current demand for grain oriented electrical steel in downstream industries?
Mr. Lei: At present, the overall demand for grain oriented electrical steel in downstream industries is relatively low, especially for small and medium-sized private enterprises and export-oriented companies, whose orders have decreased by at least one-third compared to the same period in previous years. The demand from some large state-owned enterprises is relatively stable. But in the long run, as the economic situation improves, the demand from downstream industries will gradually recover. Taking transformers as an example, in the next few years, China's distribution transformer market will show a phased new growth trend, and it is expected that the market size will gradually increase with an annual growth rate of 5%. Based on this, it is predicted that the market size of China's distribution transformer industry is expected to reach over 13 billion yuan by 2026.
Asian Metal: How do you think of the price trend of grain oriented electrical steel in Q4?
Mr. Lei: Given the current sluggish economic situation both home and abroad, the demand from downstream industries is unlikely to show significant improvement in the short term. In addition, due to the recent decline in raw material prices such as iron ore, the production costs of steel mills will also decrease accordingly. Taking grain oriented electrical steel with the grade of 120 as an example, the current production cost of steel mills is around RMB11,000/t (USD1,512/t). However, with the further decline in raw material prices, it is expected that the prices of the grade 120 may drop to around RMB10,000/t (USD1,375/t) in the fourth quarter.
Asian Metal: Do you have any new development plans in the future?
Mr. Lei: In order to better meet customers need, we will continue to deepen the processing services of grain oriented electrical steel. In addition, we also have some lithium ore and vanadium titanium magnetite resources, and we plan to expand these new businesses in the future.
