How to turn the tables in a market downturn? - Li Zhongshuang, a veteran steel trader, shares his survival secrets
Since 2022, the domestic steel market has been operating continuously sluggishly, with shrinking demand, steel prices have shifted downward, and steel traders are under tremendous survival pressure. In a market situation of oversupply, how can steel trading companies survive? In the game between profit and cost, how can steel trading companies break the deadlock?
Recently, a reporter from China Metallurgical News interviewed Li Zhongshuang, general manager of Shanghai Ruikun Metal Materials Co., Ltd., to discuss the survival strategies of steel traders under the current background.
Li Zhongshuang is in his early 40s, but he has been in the steel trading business for 20 years. He has been involved in the steel trading field, experiencing ups and downs in market fluctuations, with successful experiences and lessons learned from difficulties. Regarding the current survival environment faced by steel traders, he frankly stated: "Business is difficult now. It's not about thinking about how much money to make, but about how to survive. Only by surviving is there hope."
According to him, 2021 was the peak period for the domestic steel market. Since then, steel prices have experienced a continuous 3.5-year period of fluctuating decline. For example, on July 30, 2021, the price of Ansteel's 1.0 mm cold-rolled sheet ST12 in the Shanghai market was 6560 yuan/ton, while on July 10 this year, the price of this variety had fallen to 3780 yuan/ton, a cumulative decrease of 2780 yuan/ton. In the same period, the price of Shougang and Ansteel's 5.5 mm～11.75 mm × 1500 mm × C hot-rolled coil Q235B fell from 6010 yuan/ton to 3280 yuan/ton, a cumulative decrease of 2730 yuan/ton.
"Steel prices have been continuously declining, making the steel trading business increasingly difficult, and sales have been declining year after year." Li Zhongshuang said, taking his company as an example, "In 2010, when our company's sales were at their peak, the annual sales volume of cold and hot-rolled coils could reach 500,000 tons, but now the annual sales volume is only more than 100,000 tons. The sales volume has dropped significantly in recent years."
Why have domestic steel prices been fluctuating and declining for several consecutive years? Li Zhongshuang believes that the fundamental reason lies in the imbalance between supply and demand, with supply significantly exceeding demand. "In recent years, although the profitability of steel companies has shrunk, they still have a certain amount of profit, and the reduction in production has not been large, and some companies even have high production enthusiasm. At the same time, the demand from downstream end users continues to decrease." He further explained, "The production and sales situation in the downstream industries is not optimistic, the prosperity of the real estate and other industries has declined, and some downstream companies are also finding it difficult. As a result, the steel trading business has become even more difficult, and some steel traders are at a loss, feeling pessimistic due to the great uncertainty of the future."
Li Zhongshuang introduced that since the beginning of this year, steel traders have faced a situation of low inventory, low sales, and low profits—the "three lows." "In March and April this year, the trading situation in the domestic steel market was still acceptable, but after the May Day holiday, market transactions became particularly sluggish. Since June, the overall transaction volume has been only about 1/3 of the same period last year. For some steel traders, losses have become the norm, with losses ranging from 10 yuan to over 100 yuan per ton of steel. The top priority for these steel traders now is to survive." He said.
How can steel trading companies ensure survival? In Li Zhongshuang's view, the key is "four goods": good mentality, good learning, good rest, and good health. "In the current environment, steel traders must not take risks to make quick money." He introduced his company's response measures to the current market situation.
First, establish the confidence to survive and live well. Li Zhongshuang believes that after years of development, the steel trading industry has become increasingly important in the national economy. China's steel trading industry has become the world's largest steel circulation industry, and the growth and development of the steel trading industry is an inevitable trend. "As a member of the steel trading industry, steel trading companies must have confidence in the future and the courage to survive." He said.
Second, hone internal skills and explore new areas of demand. Li Zhongshuang introduced that currently, the photovoltaic industry is one of the new areas for steel trading companies to expand demand. In recent years, with the continuous growth of global demand for renewable energy, the photovoltaic industry has ushered in unprecedented development opportunities. Currently, the global installed capacity of photovoltaic power generation exceeds 700 GW, and China has become the world's largest photovoltaic market. With the continuous improvement of the industrial chain, the photovoltaic industry, from solar cells and component manufacturing to system integration, has developed into a huge and complex industrial system. "We are now shifting our sales focus to photovoltaic users, providing steel materials needed for the production of photovoltaic brackets for photovoltaic manufacturing companies." He said.
Finally, innovate the business model and improve service levels. Li Zhongshuang introduced that his company has changed its previous business model of waiting for customers to come to the door and "buying and selling." Instead, it goes out, actively tracks projects, proactively explores user needs, and delivers goods to users' doorsteps. The company has provided cold and hot-rolled coils and other steel materials to customers in fields such as motor equipment manufacturing, automotive parts manufacturing, and photovoltaic companies.
Although the steel trading industry is currently facing some challenges and steel trading companies are under great survival pressure, through integration and reorganization, optimization of product structure, innovation of business models, improvement of service levels, and establishment of a complete market marketing network, steel trading companies will still have broad development prospects in the future." Li Zhongshuang is confident about this.
