Domestic NGO electrical steel prices likely to remain low in H2, 2020 under COVID-19

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

Ms.Chen: Thank you for giving us such a good opportunity to share some insights of our business. Our company mainly supplies materials for home appliances, such as NGO electrical steel, raw materials for motors used in home appliances, and cold-rolled galvanized steel for home appliances shell and bracket, etc.

We are based in South China and deeply engaged in household appliances and supporting enterprises in the Pearl River Delta. We also provide services such as slitting, distribution and logistics, as well as financial support for some high-quality customers. The company's monthly sales volume of steel products is about 30,000t, and the standing stock is more than 15,000t.

Asian Metal: As a major distributor in South China, which steel mills do you cooperate with? Where are the products mainly sold to?

Ms.Chen: As for NGO electrical steel, we mainly cooperate with Shougang Steel, Ansteel and Baosteel. The products mainly cover the market in South China, mainly the enterprises in Guangdong-Hong Kong-Macao Greater Bay Area.

Our company is the sales agent of Shougang Steel’s NGO electrical steel in South China. We have spot materials of NGO electrical steel with all grades from Shougang Steel, Ansteel, Baosteel, TISCO and WISDRI Engineering.

At the same time, our company is also the sales agent of Gaoming Jiye’s cold rolled sheets and galvanized steel. We have sufficient supply from Shougang Steel, Jiujiang Sheet, Liuzhou Steel, and Xinyu Steel and can meet the high-quality needs of home appliance customers.

Asian Metal: What industries are your steel products mainly used in?

Ms.Chen: In South China, there are many private small and medium-sized home appliance enterprises, so our products are also mainly used in home appliance industry. Silicon steel is also supplied to customers who are doing the export of mechanical and electrical products.

Asian Metal: What is the current market situation of NGO electrical steel in South China?

Ms.Chen: After the Spring Festival holiday, the COVID-19 had a great impact on export-oriented enterprises, especially producers of household appliances and mechanical and electrical products. The suspension, postponement and cancellation of export orders occurred in a wide range, so the demand for raw materials like NGO electrical steel decreased greatly, and the price fell rapidly.

Taking Baosteel's 800 as an example, the price dropped from about RMB5,050/t before the Spring Festival to around RMB4,500/t at present. Recently, prices of NGO electrical steel in South China showed some signs of going up mainly supported by the decreased production of steel mills and the price increase of other steel products such as cold rolled steel.

Asian Metal: Recently, many steel mills have announced to reduce the production. Can this bring some support to spot market prices?

Ms.Chen: We think that the decreased demand would lead to oversupply and heavy inventory pressure. Customers mostly expected a severe impact on economy caused by the COVID-19 and pessimism dominated, so prices of NGO electrical steel decreased sharply from March to April. If steel mills are willing to reduce the production and supply, the market inventory will decrease and this will certainly bring support to the market.

Recently, domestic mainstream steel mills all announced to cut their production of NGO electrical steel. For example, Baosteel would reduce the output by 48,000t and 38,000t respectively in May and June. Ansteel planned to decrease the production by 25,000t respectively in May and June. Shougang Steel cut the production by 50,000t in May, and Masteel witnessed a decrease of 15,000t in May, and Shagang Steel and WISDRI Engineering cut the production by 10,000t and 15,000t respectively in May.

Asian Metal: What impact does the COVID-19 epidemic bring to the downstream industry of NGO electrical steel? How is the demand from end users?

Ms.Chen: It has a great impact on the demand for large household appliances (air conditioners/refrigerators/washing machines). Affected by the COVID-19, most people's income will be reduced, so big spending will decrease, and the house decoration will also slow down. However, the demand for small household appliances, especially kitchen appliances (such as ovens, microwave ovens, etc.), medical equipments, ventilation, etc., has increased significantly. At present, the demand from most customers especially export-oriented ones is very low.

Asian Metal: What do you think of the market trend in the third quarter?

Ms.Chen: The situation in the third quarter is very uncertain. It depends on the situation of the COVID-19 epidemic outside China. The pull of domestic demand is likely to start in the third quarter, but if the export is not good, the total demand will decrease. Even if steel mills reduce the production to support market prices, it will not improve much. Therefore, the market price of NGO electrical steel may run at a low level for a long time.

Asian Metal: In the face of the impact of COVID-19 this year, what are your countermeasures?

Ms.Chen: Recently, many customers who built stockpiles before the Spring Festival holiday have told us that they had a big loss. We said that the epidemic was sudden and inhuman. Our country's epidemic prevention and control is excellent enough, and our people are really very lucky. It is understandable that some customers have delayed or even cancelled orders. There are also some factories that have gone bankrupt. We will provide more detailed supporting services for our customers, and help them reduce the cost of raw materials to get more orders, and speed up the turnover of materials and ensure the healthy flow of funds, so as to survive this year.

Asian Metal: Thanks for your time. Wish you a prosperous business!