The clear consensus among speakers at Mysteel’s 2021 Steel Semis Imports Training in Shanghai on May 28 was that Chinese companies these days are more active in importing semi-finished steel products. But opinions differed regarding the priorities that Chinese buyers should adopt when identifying, selecting, and contracting with overseas semis suppliers.
When they’re choosing overseas suppliers of semis, Chinese steelmakers, both integrated mills and electric-arc-furnace (EAF) operators, place priority on balancing their production plans, several speakers emphasized, as the stability of their production is what steelmakers always put first, while re-rollers and traders generally focus on cost-effectiveness.
“My company, Shagang, has a stable demand for imported semi-finished products – despite being China’s largest EAF steelmaker and hosting a steel production capacity of 45 million tonnes – and our total imports of semis reached 2 million tonnes in 2020,” said Duan Zhibai, the general manager of Shagang Group’s European subsidiary, noting that Shagang has to roll some imported semis in order for the mill to meet its carbon emission reduction targets.
Duan told delegates Shagang has two criteria when screening stable and reliable candidates from semis suppliers worldwide. The first is that the proportion of production which the overseas company sets aside for regular export business should be large enough to ensure continuity of supply, while the second essential requirement is the quality of the products, he stressed. China’s steelmakers have rather strict requirements for product quality as leaders in annual steel output globally, he pointed out.
Duan said that after potential suppliers are found which meet Shagang’s “comprehensive considerations”, then certain mills are chosen and technical protocols signed with them. “This is the second difference with other types of importers, as our premise of starting a business negotiation with suppliers is that their plants must be equipped to a certain level of technological advancement,” he remarked.
In this context, it’s clear that the process of steelmakers choosing an overseas supplier follows a series of steps over a considerable period of time, Duan explained. On the other hand, re-rollers and traders enjoy much more flexibility when selecting suppliers because if the quality of the products is acceptable, the most crucial factor is usually just cost, he argued.
“They (re-rollers and traders) need to react fast, and they will pick up suppliers from mills in both China and other countries,” he remarked.
Gao Wentong, general manager of Tangshan Shengcai Iron and Steel, a re-roller in North China’s Hebei province, confirmed Duan’s view, saying that his company places priority on cost-effectiveness of the semis it buys – from any supplier. “But we still prefer to purchase billets mostly from Chinese mills rather than overseas suppliers, as domestic availability is more stable so we can reduce any risks,” he added.
Meanwhile, Wang Jianhua, Mysteel’s chief analyst, noted that Chinese importers of semis – either mills, traders or re-rollers – are confronting the risks they face from variable exchange rates and uncertain shipment times. But he reminded delegates that Chinese companies should also avoid unhealthy internal competition when trying to secure supplies of semis as this is unhealthy for markets and will simply boost prices higher.
Written by Lea Li, liye@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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