NGO electrical steel prices to remain high in Q3

Asian Metal: Thanks for taking our interview. Please introduceyour company briefly.

Mr. Zhao: Founded in 1905, Benxi Steel Group Co., Ltd. (hereinafter referred to as "Benxi Steel") is the first large-scale steel enterprise to resume production in China, and is known as "Cradle of China’s Iron and Steel Industry" and "Meritorious Enterprise of the Republic". In June, 2010, Benxi Steel and Beigang formally reorganized and established Benxi Steel Group Co., Ltd. With superior geographical location, Benxi Steel is located in the core area of the central economic belt of Liaoning province. With 80,000 employees, an asset scale of 145 billion yuan, the annual sales revenue of more than 100 billion yuan and the crude steel production capacity of 20 milliontons, it is one of the top ten iron and steel enterprises in China, ranking No.20 in the world, the largest state-owned enterprise group in Liaoning province and the top 500 enterprises in China, and the world famous "Ginseng Iron" production area. In August, 2010, Benxi Steel began to produce low and medium grades of non-grain oriented electrical steel. At present, it can produce 10 kinds of NGO electrical steel of 35bw440, 50bw470 ～ 50bw1300, with anannual output of 200,000 tons. The electromagnetic properties of the products have reached the advanced index of the same industry in China.

Asian Metal: Which industries are your products mainly used in? Which markets are your products mainly sold to?

Mr. Zhao: Our NGO electrical steel products are widely used in the household appliance industry and we have good cooperation with domestic well-known enterprises of household appliances. We also export products to many countries such as the United States, Italy, South Korea, Mexico, Pakistan and so on. Since July of last year, more than 2,400 tons have been exported. We manage the parts according to users’ needs, fully meet their personalized needs, develop the characteristic technical standards for specific users, and provide professional technical service team for on-site service.

Asian Metal: Since this year, Benxi Steel’s monthly output of NGO electrical steel has increased significantly compared with last year. What is the reason for the increase in production?

Mr. Zhao: We resumed the production of NGO electrical steel in July last year, but the average monthly output in 2020 was less than 10,000 tons. Since this year, the production has increased to about 20,000tpm. The main reasons for the increase in production are higher production profits and the strong demand of customers. Since the beginning of November last year, domestic prices of NGO electrical steel have increased by over RMB3,000/t, or more than 60%. In addition, China's home appliance industry recovered steadily in 2020, with the main business income of the whole industry reaching 1.48 trillion yuan, a year-on-year decrease of only 1.06%. The annual accumulated export volume was 83.7 billion US dollars, an increase of 18% year on year. The scale of export volume maintained the best level in the same period in history, and the growth rate was the highest in the past ten years.

Asian Metal: Since the end of last year, domestic NGO electrical steel prices have increased significantly. What do you think are the main reasons for the price increase?

Mr. Zhao: First of all, the cost support of steel mills. Before the Spring Festival, the prices of iron ore, coal, coke and other raw materials continued to rise, and most steel mills had been on the verge of loss. Secondly, the international and domestic currency over issuance and inflation. Thirdly, the recovery of downstream industry demand also played a certain support for the price rise of NGO electrical steel. For example, since the beginning of this year, the price of iron ore in the international market has risen from USD158/t to USD213/t, up by 35%; In addition, the price of coke in the domestic market also climbed from RMB1,700/t (USD263/t) to RMB2,650/t (USD410/t) in the past year, up nearly 56% year on year.

Asian Metal: What about the current demand for NGO electrical steel in downstream industries?

Mr. Zhao: Driven by export, the overall productionsituation of China's household appliance industry is good, and the demand is relatively strong, which drives up the demand for NGO electrical steel. From January to April 2021, China's home appliance exports reached USD37.62 billion,an increase of 55.5% over the same period in 2020 and 45.9% over the same period in 2019. It is expected that China's home appliance export will exceed USD100billion in the whole year of 2021.

Asian Metal: What do you think of the market trend of NGO electrical steel in Q3?

Mr. Zhao: After the sharp rise in April and May this year and the recent sharp adjustment, the fear of heights in the market has been released, and the trend of steel prices has returned to the fundamentals, and there is not much room for price ups and downs in the short term; In the medium and long term, with the support of domestic and foreign demand and high cost of iron ore, the price of NGO electrical steel will remain at a high level. Taking the grade of 800 as an example, it is expected that the price in domestic market will continue to maintain above RMB8,000/t (USD1,238/t) in the third quarter.

Asian Metal: Do you have any new plans for product and market development?

Mr. Zhao: With the promotion of national energy conservation and emission reduction policy, and the support for high-efficiency motors and electric vehicles, high-speed wear-resistant electrical steel and high-efficiency motor steel for electric vehicles with high magnetic induction,high grade, thin specification, high strength will be widely used in the future. Therefore, Benxi Steel plans to build a new high grade NGO electricalsteel production line (including electrical steel for driving motors of newenergy vehicles) with a production capacity of 150,000t in the near future.