SteelOrbis talked to Shirong Lin from Shinrin regarding latest developments in the Chinese steel market.
Can you tell us something about your company?
We are an international company that does trading from Japan and China, and we also have a company in Singapore. We mainly sell steel from Japan to China, particularly to Volkswagen for automotive applications. We're also involved in batteries since China's EV market is doing very well. We sell materials to battery manufacturers who supply EV car makers like Tesla and BMW.
Additionally, we work with motor cores, which are also used in EVs. We cooperate with a motor core company in Japan. So, we're not only selling regular grades of steel, but we're trying to develop new kinds of steel materials specific to meet our customers' needs.
What are the main steel products you are trading?
We trade hot rolled coils, cold rolled coils and electrical steel. We also handle materials for batteries and products that require electrical conductivity.
How do you view developments in the local market in China, particularly the slowdown of local steel demand and the weak real estate sector?
I've talked to Chinese steel mills about this, but they don't want to decrease their production quantities. Although the Chinese government says they want to reduce steel production in China, the mills are waiting for others to cut first so they can capture more market share. I haven't heard of any mills decreasing production until now.
They are trying to sell cheap steel all over the world. Even when it's so cheap that they can't cover costs, they will still sell it globally.
Regarding exports, last year China exported 110 million mt, which was very high. Do you think exports from China will remain high this year?
Although there are tariffs from the US, exports are still a big problem. But China also wants to create the Silk Road to Turkey and Europe - they don't want to use ships anymore and want to use railways instead. This is a new way for China to export steel, not by sea but by land.
I think this is a big opportunity for Turkey because Turkey is in the middle of the Silk Road, and every product as well as steel will come to Turkey and then continue to Europe. In the future, if this comes true, it will be a very good opportunity for Europe, Turkey, and China as a connection between Asia and Europe.
But I don't think exports will decrease because they can't cut down production. The central government says maybe they need to cut back, but local governments need tax revenues and jobs from the mills, so they don't want to do that. It's kind of contradictory.
How do you see the economic situation in China, particularly regarding stimulus measures and their impact on the real economy and real estate?
We know real estate is not doing well in China. The Chinese government is trying to provide a stimulus in that area, but it's really hard because people can't afford to buy homes anymore. The trend is already down.
How about other industries in China? It is clear that the real estate market is in a downward spiral but car making, EVs in particular, is booming both in China and abroad. Are there some other opportunities elsewhere?
EV brands are starting to build manufacturing facilities all over the world, including in Turkey. They're actually buying steel from China at very cheap prices and often pay mills six months later, so they use that money to build manufacturing facilities worldwide. It's a hard time for mills, but it's also an opportunity as they explore international markets.
Chinese companies, especially battery manufacturers, are building facilities in Vietnam and Southeast Asia. More Chinese manufacturers - not government companies but private companies - are trying to establish new operations worldwide, outside of China, but they'll still buy from their suppliers in China.
What are the major challenges and opportunities in trading cold rolled coils and hot rolled coils from China, especially with increasing restrictions and antidumping duties?
We sell hot rolled coils from China to Japan, and Japan now imposes taxes on Chinese hot rolled products. It's a key material worldwide, so it's challenging. China tries to sell cheap - there are many local mills in China selling very cheap hot rolled products worldwide even with taxes.
But big mills can't cut prices as much, so they provide better service instead. It's a hard time for them, but they offer more support, better quality, and can support the supply chain. Big mills have the capability to support their customers, so, even with taxes, their service is good and some factories might still choose them.
Are you working more with large or smaller mills for exports?
Actually, we work with large mills because we serve the automotive industry. We have to develop new, better, or harder products, which requires new technology. So, we work with big mills.
What are your targets for steel product exports this year or in the future?
We're trying to connect local battery makers who want to go overseas, and we also bring South Korean and Japanese products to them. They can choose not only Chinese steel. For example, when they go to Vietnam but can't buy steel from China due to restrictions, we support them by sourcing from China, Japan, or South Korea to get alternative products. Everything depends on what the customer chooses - which mill and which country they want to source from.
Turkey is becoming an interesting export destination for Asian companies.
The distance is quite long, so there's currently limited cooperation between China and Turkey. But if the land-based Silk Road opens, there will be many opportunities, and Central Asia will also create many opportunities. This represents a new connection between Turkey and China.