Zhu Chengmin: Adapting the trend and perfecting details amid volatile steel market

Asian Metal: Hello, Mr. Zhu, thank you for accepting the interview with Asian Metal. As an influential group in Zhejiang, did your company take measures to cope with prolonged and weak domestic steel market which has no sign of recovery?

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Zhu: Seeing the market of this year, we made adjustments in three aspects, choosing hedge trading seizing the bullish market in H1, reducing spot inventory and decreasing lending ratio to compress the repayment cost.

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Asian Metal: Rebar market in Hangzhou fluctuated significantly and steel mills have adjusted prices stagnantly in recent days. For instance, Shagang Group quotes HRB335 rebar at RMB3,650/t which lags behind the transaction price of RMB3,670/t in the market. How your company controls cost to optimize profit?

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Zhu: Price inversion is a common phenomenon between steel mills and distributors in this year due to the weak market. Being the agent of several dozens of mills, we mainly operate rebar and adjust contracts volume according to actual sales. Furthermore, we could accumulate credit by being the agent and require more rebate from mills. Besides, we reduces the inventory to 20,000t which is the two-third of that in previous years.

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Asian Metal: 2012 is a tough year for steel enterprises and the market has kept showing downward trend due to the grim global economy. What do you think of the economy of the next year?

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Zhu: The Central Economic Conference held in recent days indicated that the overall tendency depends on the keynote. For my own viewpoints: Firstly, the overseas economy will impact domestic tendency. Widespread snapback replaced crises in enterprises since 2009, and developed counties will shift domestic risks in 2013 by financial austerity, monetary loose and government intervention. In addition, Chinese macro-control also influences the economic tendency. The government will transfer macro-control policy from preemptive fine turning in 2012 to monetary austerity and financial loose in 2013 with the combination of fringe markets. On top of that, the system reform is also highlighted in the next year including the improvement of private enterprises development and socialist market economy, the limitation and regulation of government power as well as the breakthrough of monopoly.

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Asian Metal: As to procurement and movement, what's the superiority of you company compared with those of the previous year, and what’s the new plan?

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Zhu: Massive information could be the biggest strength for us compared with other trading companies, which is beneficial to market judgments. We plan future procurement flexibly according to the existent inventory, sales plan of the next stage as well as situations of the market and steel mills, especially invoicing statistics from your company which are significant. Furthermore, previous advantages are also applied when moving material to avoid clear errors, but we mainly adjust movements in accordance with the overall market feedback. We plan to perfect operation details basing on sales assurance.

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Asian Metal: What does your company plans about the winter storage in the end of the year and what aspects would be involved?

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Zhu: There is no plan for winter storage as we typically make decisions until after January when the overall market becomes clearer. However, two aspects should be involved: On one hand, the volume of bank loan and overall economy tendency are considered due to the slow market recovery. Seeing the dim market, banks will strength credit evaluations and most mills will stockpile for winter by bank loan. On the other hand, the sluggish demand is critical to the weak market of this year. Therefore, large output from mills and the glut in the market are necessarily considered.

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Asian Metal: Thank you for accepting the interview and we are looking forward to further development of your company.

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