----Interview with Jinchun Chen
General Manager
Foshan Shunde District Wurong Materials Co., Ltd.
Founded in 2013, Foshan Shunde District Wurong Materials Co., Ltd. is one of the major non-grain oriented electrical steel distributors in South China. The company is mainly engaged in the trading business of NGO electrical steel produced by Baosteel, Ansteel, Hongwang Steel and Zhexiang New Materials, and also provides deep processing and distribution logistics services such as slitting and cutting, with an annual sales amount of about 25,000t of NGO electrical steel products.
Asian Metal: Thank you for taking our interview. Please introduce your company briefly.
Mr. Chen: Located in Lecong Town, Shunde District, Foshan City, Foshan Shunde District Wurong Materials Co., Ltd. was established in 2013. We are one of the main distributors of NGO electrical steel in South China. At present, our company mainly deals with materials from Baosteel, Ansteel, Hongwang and Zhexiang New Materials, with an annual sales volume of about 25,000t and a standing inventory of over 1,000t.
Asian Metal: Recently, Chinese domestic NGO electrical steel market performed slowly. How about the current demand from downstream industries?
Mr. Chen: Our company mainly supplies small and medium-sized producers of home appliances and some motor manufacturers in South China. Currently, downstream customers purchase materials sparingly due to insufficient orders, and the market sales performance is relatively poor. It is understood that the current downstream industry orders have decreased by about 20-30% compared to the same period of last year. According to statistics, the retail sales of white goods in the first half of this year reached 231.9 billion yuan, a year-on-year decrease of 7.0%, with a total retail volume of 77.74 million units, a year-on-year decrease of 3.6%.
Asian Metal: How about the supply of steel mills at present?
Mr. Chen: Due to soft downstream demand and weak market prices, some steel mills reduced their production previously, resulting in a decreased supply in the spot market. Taking Baosteel as an example, because of the maintenance of a blast furnace in Dongshan production base, its monthly output of NGO electrical steel there decreased by more than 10,000t respectively in May and June, from around 55,000t to about 40,000t. At present, most steel mills are maintaining normal production and the supply of NGO electrical steel is quite sufficient.
Asian Metal: Since 2023, prices of high-grade NGO electrical steel and materials used for new energy vehicles have continued to decline. What do you think is the main reason for the price decrease?
Mr. Chen: It's true. Since last year, the prices of high-grade NGO electrical steel and materials for new energy vehicles have been continuously decreasing. Taking Baosteel's B35A300 as an example, the price already dropped from RMB8,500/t (USD1,191/t) at the beginning of last year to around RMB6,500/t (USD911/t) at present, with a cumulative decline of about RMB2,000/t (USD280/t), a decrease of over 20%. I think the main reason for the price decline is that the market supply exceeds demand. Due to the rapid increase of more than 30% in domestic prices of NGO electrical steel in 2021, especially for high grades and those used for new energy vehicles, many steel mills expanded their production capacity and added new production lines in the past two years. This has led to intensified competition in the current market for high-grade NGO electrical steel and materials used in new energy vehicles, resulting in a continuous decline in market prices. In addition, the current slowdown in demand in downstream industries such as electric vehicles is another reason for the continuous price decrease.
According to data from the China Association of Automobile Manufacturers, in July, the production and sales of automobiles reached 2.286 million and 2.262 million respectively, a decrease of 8.8% and 11.4% month on month and 4.8% and 5.2% year on year, respectively. From January to July, the production and sales of automobiles reached 16.179 million and 16.31 million respectively, an increase of 3.4% and 4.4% year on year, respectively. The growth rate of production and sales narrowed by 1.5 and 1.7 percentage points respectively compared to January to June.
Asian Metal: Prices of middle and low grades of NGO electrical steel rebounded a little early June. What do you think are the reasons for the price increase?
Mr. Chen: Domestic prices of NGO electrical steel with middle and low grades continued to decline by RMB200-300/t (USD28-42/t) in March and April this year, despite it was the traditional peak season at that time. Therefore, steel mills have been more willing to raise prices recently. As mentioned above, some steel mills have started to reduce production to support market prices. In addition, the recent price increase in futures market has also brought some confidence to steel traders, who raised prices of middle and low grades of NGO electrical steel by RMB50-100/t (USD7-14/t). However, in spite of the increase in market prices, the current situation of sluggish demand in downstream industries has not changed, and there are still few deals concluded in the spot market at the moment.
Asian Metal: How do you think of the price trend of NGO electrical steel in the third quarter?
Mr. Chen: The third quarter is the traditional off-season for NGO electrical steel, and from the demand side, the market does not have the conditions for rebound. In addition, there has been a significant drop in cold rolled steel prices in the domestic market recently. Currently, the price difference between NGO electrical steel and cold rolled steel in South China has widened to over RMB500/t (USD69/t). In view of this, I believe that prices of NGO electrical steel may slightly decline further in the third quarter, with an expected decrease of RMB50-100/t (USD7-14/t).
Asian Metal: What is your company's new development plan in 2024?
Mr. Chen: Considering the current market situation, I believe that the focus for the future is not on development, but on survival. We will proceed cautiously while maintaining our existing high-quality customers, without blindly increasing inventory and order volume, hoping to overcome the current market difficulties as soon as possible.
Asian Metal: Thanks for your wonderful sharing. Wish your company all the best in the future!
