Wang Xianliang: coking coal market decline not to cease amid decreasing demand

----Interview with Wang Xianliang, supply and marketing director of Shandong Taishan Iron and Steel Group

Asian Metal: Good morning, Mr. Wang and thank you for accepting this interview. Would you like to introduce your company briefly?

Wang: Taishan Steel, located in Laiyu, is a large-sized enterprise specializing in iron and steel metallurgy with businesses covering power, machinery manufacturing, international trade, scientific research, capital operation, logistics, real estate and hotel. It ranked 307 in top 500 Chinese enterprises, 156 in top 500 Chinese manufacturing enterprises, 61 in top 500 private enterprises, 41 in top 500 private manufacturing enterprises and 40 in Chinese iron and steel enterprises in 2012 when it achieved sales revenues of 33 billion yuan.

Asian Metal: Taishan Steel plays a decisive role in Chinese enterprises. What is your operating strategy?

Wang: First of all, we commit our survival and development to honesty. Secondly, we do intensive study on market as it is a treasure basin for explorers. We always get out there and look for what we need. Thirdly, we establish steady supply channels on the base of mutual trust. Suppliers and us will surrender part of the profits to each other in the nick of time. Fourthly, we master skillful accounts as we frequently check what fruit profit and what lead into loss, just as what Chairman Wang always said. We practice it in every step of operation, taking it as a key to survival in the market.

Asian Metal: Coking coal enterprises are facing great challenge as the market has been soft since Q4 of 2011. What is your company doing to control production costs and maximize profits.

Wang: We make efforts to maximize profits amid fierce competition in following aspects. First, we actively look for cheap resources and dig market potential, properly increasing percentage of procurements that are concluded at prices set for each unique deal. Second, we save costs and increase benefits through reducing internal costs at every turn. Third, we change marketing concept and do more practical purchase with focus on economic benefit and cost performance.

Asian Metal: What have you done to adjust adapt raw materials purchase to adapt to the current market facing frequent price fluctuation in coke and coking coal market?

Wang: We have coking plants that produce coke for our production of downstream products. We have reduced purchase volume of coking coal and keep the inventory at low level to adapt to the raw material market that have been in frequent decline since March.

Asian Metal: Coke market has seen serious overcapacity in recent years and producers in many regions close down some production capacity, how about your production and sales for the moment?

Wang: All production of coke is consumed by ourselves and our coking plants are in full production. In addition to coke market, overcapacity is also seen in coal and steel market. China’s iron and steel capacity is nearly 1 billion tons and it was 717 million tons in 2012. Production capacity of coke is 630 million tons and it accounted to 443 million tons in 2012. Meanwhile, coal capacity is nearly 4 billion tons and the real output was 3.65 billion tons in the same year. Figures indicate that production restriction is inevitable in independent coking plants.

Asian Metal: Coke and steel market runs sluggishly and it is still difficult to get rid of oversupply from steel market. What is your opinion on coking coal market in Q3?

Wang: Japan and South Korea postpone delivery of Australian iron ore through long-term contracts and Plattx index continues to decline. Iron ore prices will not stop sliding in the near-term as Platts index will find support at USD100/t after penetrating the price of USD100/t, which will certainly impact steel prices and those of coke and coal. As price decline in coal market comes earlier in coal market than in steel market, coking coal prices are very close to the lowest level seen in last September. The market is anticipated to decline and then stay stable in Q3.

Asian Metal: Thank you again for accepting this interview. Wish everything goes well with your work and your company.