The Development Situation of China's Steel Trade Market in 2012

The entry barrier for the steel trading industry is relatively high, but it belongs to the low-profit industry, which makes steel traders must win by volume. However, a survey conducted by the China Economic Times reporter found that due to the current market's lack of demand for steel, the steel trader's running strategy cannot be effective. While expecting the macro economy to be good, steel traders hope to receive policy support.

The high threshold of low profit

“Although the steel trade is a meager profit industry, the entry barrier to entry into this industry is usually quite high. It often takes tens of millions of yuan to enter its own funds, and it is almost impossible to rely on entering the steel trade industry from banks.” Changzhou Chuang Teng Trading Chen Wei, general manager of the company, told reporters.

He Sunhui of Suzhou Guangye Iron & Steel Co., Ltd. stated that the main fund for steel traders is now self-owned, about one-third of liquidity is dependent on banks, and financial pressures such as inventory and manpower wages are also very high.

“There are many types of products the company manages, such as railways, machinery and other industrial materials, which usually require a large amount of funds to flow from, and it is very difficult to get from banks. The situation is very difficult.” Chen Wei told reporters.

Under the micro-profit industry, the profit of steel traders is not high.

“Builders are well aware of steel prices. We also sell steel products for tens of dollars per ton of profit. Steels of the same quality will have no business if we sell at a higher price per ton.”

There may be slight differences in the profits of steel trade between cities and between cities and counties.

In this regard, Chen Wei explained that “Changzhou dealers’ profits are relatively small because there are many steel traders. However, the profits of some small county steel markets may be larger, because there are only a few or even one steel trader in the county. There is no more choice to provide steel. Even so, the profit per ton is about 10 yuan more than us."

At present, the competition for agency rights between steel traders and traders is particularly fierce.

Chen Wei said that the trade rights of steel traders can be described as “flooding” and there are almost no exclusive distributors. Steel mills often set up several general distributors in one area at the same time. Anyway, it is cash pick-up. Whoever gives money can become a steel mill. The general distributor or agent. For example, there are several distributors of the same steel plant in Changzhou.

The amount of steel run is seriously hindered

"Steel traders rely mainly on volume, so long as they can maintain, they cannot be de-stocked. Therefore, it is impossible for steel traders to rely mainly on retail channels. But the problem is that if steel prices are chosen, the purchase price will have to be paid by builders and developers. And occupy indefinitely," said Chen Wei.

He Sunhui also told reporters that “the impact of steel prices on steel traders is not significant, and the key is sales. The scale of sales is large enough for steel traders to be profitable. Therefore, we generally do not retail, otherwise Will definitely lose money."

In this regard, Chen Wei has deep understanding. “Because of the low profit, steel traders must rely on running volume to win. If the amount of running is not enough, then they will definitely lose money. But at this stage, the demand is insufficient. For example, the operating rates of railways, highways, and infrastructure are not enough, which directly leads us to have no business. do."

“If we do not want to supply steel for the construction site, other steel traders will supply it to the site. Therefore, to ensure the quantity we have taken and to prevent loss of customers, we have to continue to supply the site with the brilliance. As a result, funds are increasingly being used by construction sites. The more people come, the one who knows when to pay the bills will not know. He Sunhui added.

This reporter learned that steel mills will generally give steel traders certain encouragement policies. For example, selling 50 million tons or less for three months is a price. If the sales exceed 50 million tons in three months, it is a more favorable price.

In response, He Sunhui sighed, "Now the most basic tasks for the steel mills may not be completed. This kind of encouragement policy that depends on the quantity we can't get."

The convenience of transportation is also one of the main factors affecting the size of steel traders. The reporter observed that steel mills are often set up along the national road or waterway, whether in Suzhou or Changzhou. Convenient transportation can save logistics costs. In the same situation as steel prices, local and even foreign construction companies and other customers choose to purchase at these steel trade markets.

He Sunhui analyzed that “the rise of the steel trade market is also closely related to the local industrial structure. For example, Suzhou’s urban industrial structure determines that sales of thin plates and other categories are very good. Wuxi’s machinery uses a lot of steel. At the same time, the amount It is inseparable from the convenience of transportation. For example, the Suzhou Xinao steel spot trading market is located on the 312 National Highway on the east and the Ring Expressway on the north. Convenient transportation directly reduces transportation costs.”

Urgently hopes that the policy system will cure the drug

On June 21st, this reporter went to the steel market in the Yangtze River Delta next to State Road 312 in Suzhou, Wangting, and discovered that business was light. In the steel market in the Yangtze River Delta, a Fujianese steel trader (a pseudonym) confided to this reporter. "The profits are too small. Developers occupy so many funds for steel traders. There is no interest on a penny. In many cases, steel traders really have no way to go."

When a reporter asked why some steel traders were desperate to commit suicide, bluntly said, “All banks are in trouble. When a ** expires, the bank will promise the steel traders to pay off this **. After the principal and interest of the bank, the bank will immediately issue a second pen to the company. However, after the steel traders have transferred friends and relatives to borrow millions or even tens of millions to pay off the first principal and interest to the bank, The bank will immediately turn its face and will not continue to lend to steel traders because the money is all in hand and promises to return it to friends and relatives soon. If the bank does not continue to lend, it is not surprising that steel traders will be desperate.”

However, an industry insider who did not wish to be identified pointed out that “to the banking industry, the complete lack of credit for steel traders is a dead end. The massive turnover of steel traders will cause a large increase in bad debts in the banking industry, but it will continue to be a loan. One does not return.”

According to the above-mentioned sources, the cycle of tightening the steel traders in the banking industry has just entered the cycle of steel traders and businesses in the future.

However, the macro situation does not seem to be clear.

On June 19, the China Iron and Steel Association issued a report stating that China's steel price index fell to its lowest level in 17 months, and was lower than the same period of last year for three consecutive months. However, the same quarter-on-quarter decrease was narrowed slightly, considering that the central government had already Steady growth is established as a macro-control goal, and it is expected that the demand in the domestic market will continue to grow. However, due to the imbalance of supply and demand in the market, the steel price in the latter period will continue its low momentum.

In fact, steel traders did not see the upward trend in steel prices. Chen Wei said, “The steel price is now sluggish, with an average of about RMB 4,100 per ton, and it cannot be said that it has bottomed out. According to his estimates, there is still a downward trend. At this stage, there is no sign of upside and recovery.”

He Sunhui said, “The steel price is still declining. In early 2012, the steel price was at a high point, but then it went down all the way. There has been no upward trend so far.”

Undoubtedly, the recession in real estate and other industries is often accompanied by the collective decline of steel and steel trade and business groups. In the short term, the property market is unlikely to recover, and developers have many existing stocks.

He Sunhui, a steel trader, judged that “although the central bank cut interest rates at the beginning of June, the transaction volume of real estate in many cities across the country has risen. However, these buildings are mainly stocked houses and cannot directly trigger new projects. It takes a lot of steel and the effect of destocking is at least four months, so it's hard to get it. It will take at least four months to six months to know."

The macroeconomic outlook will bring a glimmer of hope to steel traders, but nobody knows when the dawn will come.

At the "Economic Monthly Talks" organized by the China International Economic Exchange Center on June 14, He Wei, deputy chairman of the National Financial and Economic Committee, said that the downward pressure on the domestic economy is difficult to ease in the short term, and the second quarter should be the most difficult period. Some economic data will gradually improve in the third and fourth quarters.

“The key is macroeconomic regulation and control. We must increase the intensity of mergers and reorganizations. In reality, many profits are squeezed by local governments’ small steels. In addition, financial pressure is the root cause of the difficulties of steel traders. Banks must earnestly give steel trade. The support of commercial policies can promote the healthy development of the steel trade industry. At the very least, banks should not be fooled by steel traders.”** Speaking.

In He Sunhui’s heart, he regrets that he should not be a steel trader, but since he has taken this no-return path, he still has to go and borrow He Sunhui’s words. “I don’t understand other professions, so I’m only hard at work. Steel trade industry."