Construction steel prices to fall slightly before the Chinese New Year

Asian Metal: Hi Mr Lin, could you please firstly give a basic introduction of your company?

Mr Lin: OK. Quanzhou Minguang Steel Co. owns two 2 sets of 90㎡ and 1 set of 180㎡ sintering machine, one 2 ,550m3 blast furnace and one 1,250m3 blast furnace, three 50t converters, three sets of continuous casting machines for billet, two sets of 20,000 m3 oxygen generators, as well as one rebar production line with an annual production capacity of 1.5 million tons, one high-speed wire production line with an annual production capacity of 700,000 tons and one high-speed bar production line with an annual production capacity of 800,000 tons. Our main products are high-quality construction steel products named "Minguang" brand including rebar, coiled rebar, wire rod and 160㎡ continuous casting billet series products.

Asian Metal: What is the relationship between Sangang Minguang, San'an Steel and Quanzhou Minguang?

Mr Lin: Quanzhou Minguang is a wholly-owned subsidiary of Sangang Minguang. In addition, Quanzhou Minguang was formerly known as San'an Steel. In January 2007, Sansteel group and San'an Steel completed the reorganization of assets. On March 30, 2018, the purchase of 100% equity of San'an Steel by Sangang Minguang through the issuance of shares was unconditionally approved by the Merger and Reorganization Commission of the China Securities Regulatory Commission. On June 12, the asset transfer procedures and relevant industrial and commercial registration changes were completed. On July 13, 2018, Fujian San'an Steel officially changed its name to Fujian Quanzhou Minguang Iron & Steel Co., Ltd.

Asian Metal: What are your major customers? What projects were your products used for?

Mr Lin: At present, our company's customer groups are mainly big distributors and companies who directly supply end users in Southern Fujian (Xiamen, Zhangzhou, Quanzhou) and Guangdong (Jieyang, Chaoshan, Meizhou). Our products construction steel with high quality are widely used at the airport, bridges, railways, highways and landmarks. In recent years, we supplied to some important projects such as Xiasha Highway, Puyan Highway, Quanzhou Bay Cross-Sea Bridge, Quanzhou Railway Station, Xiamen Subway, Xiamen Airport Terminal 4, Xiang'an Airport, Fuxia Railway, Guangdong Huilai Sinopec and Zhangzhou Gulei Petrochemical Industry Park.

Asian Metal: In 2020, especially in H2 of this year, flat steel and long steel market situation showed polarization. How do you think about it?

Mr Lin: This year was extraordinary. Affected by the outbreak of the COVID-19, the global industrial chain and supply chain structure showed some adjustment. After the significant achievement in a difficult disease prevention and control, China became the world's engine for economic recovery, playing the role of the world's manufacturing center. During Jan-Nov this year, China's foreign trade imports and exports saw an increase of 1.8 percentage points over the same period last year. The trade surplus reached 3.22 trillion yuan, up by 24.6% YOY. Some products' export showed obvious growth such as epidemic prevention materials, "homestead economy" goods, especially medical instruments, household appliances, fitness equipment, integrated circuits, auto parts and other industrial products. The Manufacturing boom directly or indirectly increases the demand for flat steel at the same time. However, construction steel relied little on export. In addition, China's construction steel inventory remained at high level for a long time after the COVID-19, which made it difficult for prices to move up.

Asian Metal: How did the inventory of long steel perform in Fujian in H2 of 2020?

Mr Lin: In June, long steel inventory in Fujian went down to 1.13 million tons or so from 2.2 million tons in early March. After that, steel mills in Fujian kept producing with full capacity and the stocks hovered from 1.1 million tons to 1.35 million tons. The stock went down very slightly, causing some sales pressure for distributors and steels mills. Until November 8, the inventory reduced lower than 1.0 million tons and entered a period of falling down quickly. It reached around 500,000t by the end of early December.

Asian Metal: What are main reasons that construction steel inventory kept running high for a long time?

Mr Lin: This year the steel production capacity in Fujian showed obvious increase, so construction steel market ran slowly with high supply, high inventory and high production cost. Both Steel mills and distributors faced more serious challenges compared to the past days. All of us need to provide more hard work, brain and perseverance so that we would not gain losses.

Asian Metal: How do you think the construction steel prices would perform before Chinese New Year? What are main reasons?

Mr Lin: Recently the production cost and demand were two major factors which influenced construction steel prices. The demand for construction steel shrank further in the late December. According to recent sharp price increase of steel raw materials, steel mills' production cost already moved up drastically, so they would not reduce EXW prices initiatively. However, with the Chinese New Year holiday approaching, most market participants would reduce stocks to withdraw cash. Construction steel prices would struggle under the situation that steel mills did not plan to reduce production and the demand from downstream industries kept weakening. Taking all factors into consideration, construction steel prices would go down slightly before the Chinese New Year. We call on that steel mills and distributors should face difficulties through close communication and coordination in order to maintain mutual benefit.

Asian Metal: How could your company expand the business when the production capacity kept increasing in Fujian and the competition became more and more fierce?

Mr Lin: It is undeniable that after some production capacity replacement and transition in recent years, the steel production capacity in Fujian increased significantly, which used to be a province that needed to buy steel from others while it became a province that had to sell to others. With the sales pressure increasing, our company, Quanzhou Minguang would stand under the guidance of Sangang Group and find our own path of development. We would constantly learn from business partners in such aspects as modernization, intelligent, greening and upsizing. We would constantly improve our development capability to make greater contribution to the society.

Asian Metal: Thanks for accepting the interview and best wished for Quanzhou Minguang!

Mr Lin: Thanks.