HR strip prices are hard to go up in the near future on weak customer demand

Asian Metal: Mr. Li, thank you for taking the interview. Please introduce your company briefly.

Mr. Li: It’s my pleasure. Our company is mainly engaged in the trading business of HR strip grading 295-355mm from Tangshan Guofeng Steel, Ruifeng Steel and Delong Steel.

We mainly supply materials to downstream customers in the Pearl River Delta region. Our target monthly sales volume is around 6,000t and the inventory is above 4,000t.

Asian Metal: HR strip prices in domestic market witnessed a downward trend this year. What is the current market situation in South China?

Mr. Li: HR strip prices in South China went down obviously in the first quarter of this year. The lowest level was ever about RMB3,800/t (USD574/t) Inc-VAT at the end of March, with the decrease of more than RMB400/t (USD60/t).

After that, the price rebounded gradually and it is generally stable at RMB4,040/t (USD610/t) Inc-VAT at the moment.

Asian Metal: Unlike before, the price gap between North China and South China is quite small now. What do you think is the reason?

Mr.Li: At present, the domestic strip market as a whole is "strong in the north and weak in the South". Compared with the previous years, the price difference between North China and South China is relatively small.

On the one hand, due to environmental protection inspection, the production of steel mills in North China is affected, and the supply is reduced.

On the other hand, the price of cold rolled steel in South China is not high, and the price of HR strip has also been suppressed.

Asian Metal: Currently, it is the traditionally low season. How is the demand from customers?

Mr.Li: It is the traditional off-season from June to August in domestic market. At present, downstream customers are just purchasing materials in small quantities for urgent need and they are reluctant to build large stockpiles. Therefore, the market inventory has been increasing.

Asian Metal: Affected by the new round of environmental protection inspection, some steel mills in North China have stopped production for maintenance recently. Will this support the market price to some extent?

Mr.Li: Because of the environmental protection inspection, the production of many steel mills in North China has been affected, and HR strip production has been reduced in varying degrees, which is bound to bring support to spot market prices.

Asian Metal: Does environmental protection inspection greatly affect the downstream industries?

Mr.Li: Last month, the Central Environmental Protection Inspectorate entered Guangdong province to carry out the environmental protection inspector's "look back". Some downstream enterprises whose facilities failed to meet the standards were shut down. But there was little impact on most environment-friendly enterprises.

It is estimated that the market demand will increase after this round of environmental protection inspection.

Asian Metal: What do you think of HR strip market trend in Q3?

Mr.Li: Considering it is the traditionally low season and demand from customers is weak, I think it will be hard for HR strip prices to go up in the third quarter.

Asian Metal: What is the new development goal of your company this year?

Mr.Li: It is relatively difficult to do HR strip business nowadays, affected by the price fluctuations of steel billet, the raw material. There is just a profit margin of RMB20-30/t (USD3-5/t).

In addition, materials of HR strip in South China are normally delivered to customers before payments are made, and the return of funds is lagging behind.

Our company will consider adding some HRC business in the future.

Asian Metal: Many thanks for your kind support and wish your company a great success in the future!