Li Ruoyu: It's risky to build large stainless scrap stocks since the price is likely to fall back
----Interview with Li Ruoyu, GM of Hengrun Metal Scrap Recycling
As one of the leading scrap recycling enterprises in Baoding, Hebei Province, Hengrun Metal Scrap Recycling majors in the recycling of stainless steel scraps, copper, aluminum, lead and zinc and so on, with a monthly trading volume of 500t. Meanwhile, the company mainly sells materials to foundries and large stainless steel producers like Taigang Stainless. It has not been involved in exports yet.
Asian Metal: Mr Li, thanks for agreeing to the interview. What about the stainless scrap market in Baoding right now?
Li: Boosted by the continuing significant price rises in LME nickel, the stainless scrap price has witnessed a total markup of around RMB1,500/t since the beginning of April. As the price kept falling between the end of last year and this March, traders suffered a lot and they are eager to lift their quotations to gain profits. Besides, the Indonesian government’s nickel ore export ban and the temporarily production halts at the Vale nickel production unit have also stimulated nickel prices to go up, leading to a corresponding price rise for stainless scrap.
Currently most local suppliers are reluctant to sell materials, waiting for another price increase, so the overall supply is tight, in return leading to a price rise. Nevertheless, I do not think the price will go up further in the near future in view of the absence of solid demand.
Asian Metal: The stainless scrap price soared by RMB700/t last week, boosted by the price rise of LME nickel, so will you build up large stocks?
Li: Currently both traders and buyers are expecting for a price rise. But personally I think the markup is unbelievable and is likely to fall back, so it is unwise to build a large inventory at such high prices. In addition, most foundries, the downstream customers for stainless scrap, prefer to watch the market cautiously rather than engage in placing orders, and the price lacks the power to continue on an upward trend without the support of demand.
In the meantime, the sentiments of market participants have been boosted by the price rise and the sales performance is better than it was two weeks ago, so I will supplement the inventory in small quantities.
Asian Metal: Just now you said the market was recovering, does it mean that the market performance is the same as that in the peak season?
Li: Absolutely not. Although the market performance was better than that of two weeks ago, it was still unsatisfactory compared with that seen during the peak period. Inquiries increased significantly, but most customers are still cautious about placing orders. After all, the current price is too high for them to afford. As a consequence, the sales volume has not risen significantly.
Meanwhile, if the price should continue to run on an upward trend for another month, downstream customers will become more active in placing orders, and the market is likely to recover.
Asian Metal: Taigang Stainless, the stainless steel giant in China, cut its stainless steel output by 10,000t in May, faced with higher raw material prices, so what are the operating rates of other mills? Are they starting facility maintenance?
Li: Yes, the significant price increases for raw materials have pushed up stainless steel producers’ production costs, and Taigang Stainless chose to cut production to reduce costs. The mill has lifted stainless scrap prices twice this month, with a total markup of RMB1,500/t. Currently the price of 304 solid scrap is RMB13,000/t.
However, most other mills are under normal production and output has increased. In April, the total stainless steel sheet output of major steel mills like Taigang Stainless, Baosteel Stainless, Zhangjiagang Pohang Steel, Jiuquan Steel, Qingpu Steel, Baoxin Steel, Lianzhong Stainless Steel, Taishan Steel, Shanghai Krupp Stainless and Dageng Stainless was 0.85 million tons, increasing by 8% on a year-on-year basis.
Asian Metal: Given the newly established government emphasis on environmental protection, especially in Hebei Province, the largest steel production region in China. Is it having a negative influence on the local market?
Li: Yes, there is a special environmental protection investigation team setting up offices here and the mayor of Baoding also has written a pledge to fulfill a military order. As a consequence, many local copper and lead processing enterprises have been forced to shut down, but as stainless scrap is mainly sold to other markets like Jiangsu and Guangdong Province, the influence is slight.
Asian Metal: Thank you so much for your excellent co-operation and we wish your company a better future!
Li: The same to Asian Metal!
