Wang Zhanjun: The oversupply restricts the price from going up, and whether the market will improve or not depends on the policy execution

Asian Metal: Good afternoon, Mr. Wang, I am so happy to invite you to join the interview of Asian Metal. First of all, please give us a brief introduction of your company.

Wang: OK. Xuzhan Trading company mainly do the trading business of HR wide strip from Zongheng Steel and Puyang Steel, with a regular stock of 1,000t, while the best level in the peak season is about 2,000t. We also can provide Pinked carbon steel coil, HR coil, CR coil, galvanized coil but we rarely have stock of such products. Handan is one of steel logistics centers in North China, and there are so many companies like us with flexible options.

Asian Metal: Prices of steel billet and HR thin strip increased continuously recently, but those in Handan were hard to go up. Could you tell us the reason?

Wang: Yes, prices of steel billet and HR narrow strip are increasing indeed, and they are likely to go up further. However, the market in Handan is still slow and the market transaction remains flat for the time being. Once the price of HR narrow strip increases, the concluded price published by the North China Strip Meeting will also go up. We have to move up the quotation of HR wide strip to avoid potential losses. But the demand from downstream industries was soft, so prices only went up slightly.

As you know, HR wide strip is the raw material of spiral pipe, so most downstream buyers of HR wide strip are spiral manufacturers. However, some large spiral pipe steel mills will purchase materials with strip steel mills, and other smaller ones are willing to buy raw materials from agents of mills. Under such a condition, the business of smaller traders is hard to run. Some of our customers are Auto parts Factories. Since the order quantities from them do not increase, the price of wide strip is hard to go up.

Asian Metal: As far as I know, the market stock of HR wide strip in Handan is not big and traders with large inventories get fewer, so could you tell me is there any policy from steel mills? Do you think the price will go up sharply in the near future?

Wang: The supply of strip is a little tight in September and October because of the maintenance of steel mills. At the moment, mills can provide traders enough materials but traders refuse that because of the soft demand from downstream industries. In addition, the price of HR coil is lower than that of wide strip, which also puts a negative influence on the strip market. We don’t want to take a risk to build large inventory under the unsatisfying market condition. To sum up, traders are cautious about the coming market.

As for the price increase, I think the price is hard to go up sharply. As the weather gets colder, the demand from downstream industries will be weaker. Auto part factories and pipes mills will place fewer orders and most of them nearly finished the target production volume this year. I don’t think the order quantity will increase at the end of the year.

Asian Metal: Though the market is slow, participants are more confident than before. Stimulated by the Third Plenary Session, market improves a little, so how to run business next?

Wang: Participants are more confident than before, and the main factor controls the price is supply and demand relation. The oversupply in China has existed for certain years, so even though there will be positive policies, the market is hard to improve immediately. In addition, if the environmental protection measures execution is insufficient and the output is still on the increase track, the price is unlikely to go up. As the market is unclear at the moment, I think the best way is to make deals as soon as possible and be cautious.

Asian Metal: What’s your opinion about the coming market in remaining time of this year? Do you have any business developing plans?

Wang: I don’t think the market will improve this year. But stimulated by the Third Plenary Session, the market will be active in the first half of the month. However, whether the upward price trend trend will remain or not depends on the government policy.

As of business developing plans, to be frank, I am thinking about it nearly every day. Though smaller trading companies are more flexible, they can not get enough materials when the price keeps going up. However, if we want to be agents of steel mills, we need more funds to build large inventory, which is risky under such a condition. If the market recovers, we will enlarge the scale of business.

Asian Metal: Thank you very much, Mr Wang. We really hope the market will make progress, and thanks again for taking the interview and we wish you a successful work and flourishing business in the future!