China Steel Industry Summit for 2022 Market, hosted by SteelHome, was successfully held in East China’s Nanjing City during 29-31 October, 2021. Over 900 delegates from governments, associations, steel mills, miners, traders, research institutes and media attended the summit.

Zhang Qiusheng, Director of Marketing Department of Nanjing Iron and Steel Group Co., Ltd (NISCO), delivered a speech titled Analysis on Steelmaking Raw Materials Procurement Strategy and Outlook on China Steel Market. Here are some key viewpoints from his speech.

Outlook on China Steel Market in Nov-Dec 2021

(1) Chinese steel price may hit the bottom line in the near future, and it is unlikely to rebound to the previous lofty heights. Currently, the cost of steelmaking in Chinese steelmakers is around 5,000 yuan/t, and the price of steel is unlikely below 4,200 since that would be much loses for producers. For those working in steel industry, they should carefully analyze the government policies.

(2) The recent property tax reports signaled financial weakness and a crackdown on industrial goods. 

(3) One should also be aware of the environmental element. Post-disaster reconstruction projects start successively in Yellow River regions after heavy rainfalls hit this area.

(4) The cold winter days may approach early in this country, which may curb steel demand.

Steelmaking Raw Material Procurement Strategy

(1) Market analysis is the foundation of procurement, and there are four aspects should be fully studied, which are macro aspect, fundamental aspect, technical aspect and sentiment aspect.

(2) To build up “Quick Procurement Decision-making System”, which not only can improve efficiency, but also achieve rapid response to extreme events.

(3) To make monthly procurement plan, which covers 3-month procurement volume, inventory, products and others. And, adjust the procurement plans based on market dynamics flexibly.

(4) Strategical procurement can safeguard the production and operation. And companies should make good use of domestic and import materials. Under the background of carbon peaking and carbon neutrality, Chinese government encourage imports, and limit exports. Meanwhile, companies should not only focus on spot trading, but also on futures market. They also need to have long-term procurement contracts with their partners.

(5) Inventory management is the core of procurement. One should dynamically adjust its inventory to improve profits.

(6) Digitalization is the trend of procurement. One should establish full a full life cycle management system for procurement. All business should be digitalized, and all digital stuff should be treated as business.

(7) The lifeline of procurement is the risk preventions and controls such shipping risk, payment risk, price risk, credit risk, unpredicted events and etc.

(8) High-quality suppliers are the guarantee of procurement. One should set up a scientific supplier relationship management system, sign compliance with suppliers, and establish mutual evaluation system.

(9) Evaluation and appraisal are the supervisions of procurement.

(10) To make a thinking shift on procurement, transfer business model, improve market analysis ability, let the digitalization boosting business, and create a supplier ecosystem.