Richard Y.C.Lin: Excess production capacity is behind the gloomy steel market worldwide and eradicating it will take 10-20 years

Asian Metal: Good morning, Mr. Lin, thanks very much for accepting our interview. First of all, please give us a brief introduction to your company’s main business.

Lin: Our business consists of two parts, export and import. We export HR and CR automotive structural steel plate from CSC, with a volume of about 3,000mt per month. Our customers are auto part manufacturers in Thailand and Indonesia, who are suppliers of the local automobile plants belonging to Toyota and Honda. In addition, as a distributor for Nachi, we import special alloy steel and high-speed steel and the monthly sales volume in Taiwan is 10-20t.

Asian Metal: Besides the automobile industry, does the company supply steel products to other industries in Thailand and Indonesia, such as bridge building, road construction and so on?

Lin：Not really. Infrastructure projects like bridge building and road construction are protected by local government in these two countries. The steel products which these projects require are mainly supplied by local steel mills. As far as I know, only the automobile industry and household appliances are open to overseas suppliers. However, our company has not developed a household appliances business yet.

Asian Metal: What is demand like for steel in Thailand and Indonesia? How is the annual growth rate?

Lin: Judging by our export volume, steel demand has grown by 5-6% annually in the past two years in these two countries, which is almost the same as the growth rate of GDP.

Asian Metal: Is your business in Thailand influenced greatly by the unstable political situation?

Lin: In my opinion, it is just a political thing. Actually, our business is rarely influenced by the political unrest.

Asian Metal: What is the exact export price of automotive structural steel plate from CSC?

Lin: The offering price for SAPH440 6-12mm is USD550/t FOB Taiwan.

Asian Metal: What do your customers think of the price? How often does CSC adjust the export price?

Lin: Customers aren’t interested in placing orders at this moment and the business is tough to run. CSC usually adjusts the price every two or three months. Frequent adjustments aren’t helpful to customers faced with making decisions.

Asian Metal: Steel prices have dropped significantly since earlier this year on the Chinese mainland, mainly due to soft downstream demand. How has the steel market performed in Taiwan this year?

Lin: Steel prices have also continued to decrease in Taiwan this year, and steel demand has been insufficient. Fifty percent of steel products produced in Taiwan since 2012 have been for export. The domestic sales ratio has decreased from 70% to 50% in the past two years.

Asian Metal: In your opinion, what is behind the gloomy steel market worldwide?

Lin: I think it is excess production capacity. According to US standards, the normal rate of capacity utilization ranges between 78% and 83%. However, I understand that on the Chinese mainland, the iron production equipment utilization ratio is 73%, while it is only 68% for steel.

Asian Metal: The steel industry is facing a serious problem of overcapacity on the Chinese mainland. It is reported that the capacity utilization ratio for long steel is at a relatively high level, reaching about 86% for rebar, while the average ratio for flat steel is only 70%. Do you have any suggestions on resolving this excess capacity?

Lin: That really is a tough task. Firstly, we need to eliminate backward production capacity. The biggest problem is that a large number of steel workers will lose their jobs in the process of eliminating this capacity. If re-employment of laid-off workers isn’t managed well, a range of social problems will emerge. I think that it will take at least 10-20 years to eradicate the excess capacity. There is an extremely long way to go.

Asian Metal: Coordinating the interests of all parties really is a major concern in the process of eliminating backward production capacity. Finally, would you like to share your company's development plans with us?

Lin: Shida Metal Corporation is committed to building good relationships with our regular customers. Our goal is to meet different customers’ various needs. We actively seek out opportunities for cooperation with other clients, while ensuring we complete the export quota from CSC, which is 3,000t per month. We have entered into preliminary cooperation with a number of steel mills in Anshan, Liaoning Province in China, which produce a range of automotive steel products, such as rim sections. In addition, we are also engaged in developing our export business for carbon steel products, such as rebar, wire rod and so on.

Asian Metal: I hope that you find even more rewarding cooperative partnerships all over the world. Thanks again for accepting the interview.