Expanding upstream and downstream to prepare for construction steels' high season

Asian Metal: Hi Mr Deng, thanks for your participation in the interview. Could you please briefly introduce your company's business?

Mr Deng: OK. Our company is a direct agent of Shaoguan Steel and mainly deals with construction steels such as rebar, wire rod and coiled rebar. Our regular inventory for construction steels is 3,000t more or less and trading volume is about 200,000 tons.

Asian Metal: What projects are your materials supplied to?

Mr Deng: We provide materials to CCCC Supplies, Foshan Subway, Guangdong Construction Group, Yuxiang Group and house-building projects in Qingyuan city. We are supplying materials to following projects: Poly Garden Phase 3 in Qingyuan city, Qingyuan-Guangzhou Railway, Yicui Garden in Donghua Town of Qingyuan city, Foshan Subway Line 3 and so on.

Asian Metal: What is the cooperation model between your company and building sites?

Mr Deng: We need to receive payment before delivery. Benefiting from supply chain model, we integrated finance, warehouse and logistics and provide professional service.

Asian Metal: How did your company improve service quality on logistics?

Mr Deng: Firstly, we will do effective communication in time with building sites and ask them to arrange their plan for purchasing in advance. Secondly, we classify our goods to be delivered as Type A and Type B. Type A will be for priority supplied to building sites which need materials urgently.

Asian Metal: This year the bulk commodity was negatively influenced by the tense relationship between China and America. What's worse, the capital constraints exist. What are signals of capital constraints?

Mr Deng: Take steel industry for an example, before this year, the payment for steel products will be made as a matter of priority, while the payment for concrete will be made firstly influenced by the environmental protection policies. In addition, banks restricted its loans this year.

We tried our best to improve service quality. On the one hand, we well cooperated with Ouyeel Platform; on the other hand, we tried to explore upstream and downstream industry and provided best service.

Asian Metal: How do you think of the price trend for construction steels in Q4 of this year?

Mr Deng: They are likely to show fall-rise pattern then. Prices began to stop going up further at the end of August and fell back in September. Market performance turned to be bad during this time, causing increased inventory in major markets. However, as the demand will continue to strengthen in long term and most projects will speed up before the Chinese New Year, I think the market will improve gradually.

Asian Metal: As far as you know, whether construction steels from Northern part of China begin to be delivered to Southern part of China? Is there any difference from last year?

Mr Deng: Influenced by the production restriction in North China in winter, materials from Northern market will not bring much negative influence to Southern market. Most traders who bought materials from North gained losses last year, so they were not willing to buy this year. In addition, capital constraints will be more serious in Q4, when steel mills will firstly put cargo together in port and then try to deliver materials to markets where they can get highest profits.

Asian Metal: Benefiting from the environmental protection inspection, steel industry rose from the bottom and made great improvement during 2015-2017. However, someone thinks that steel mills gained a lot of profits but traders did not. How do you think of this?

Mr Deng: I think it is a short-term phenomenon. During this time, the strong survived but the weak went bankrupt, which is the law of the nature. Some traders have materials but were short of downstream customers, while some others, who have downstream customers, do not have enough materials to be sold. In my opinion, if we have good relationship with both upstream and downstream industries, it is easier to gain profit.