Steel Traders Should Plan to "Go abroad" in Advance

For existing steel traders, they should switch their attention to oversea market in the next step, especially to distribution market, instead of following large enterprises "going abroad"; they should actively seek cooperation opportunity with related traders and importers to establish a steady relationship.

Steel traders should not only know how to use trade to export products in the future, but also know how to extend service to oversea market: They should research on international market, seek for new increase and needs, put efforts on refining service to be high quality.

Domestic steel traders should not blindly follow the trend, but do sufficient market research before entering oversea market, put their attention on varieties and specifications needed in infrastructure constructions in these regions, fully understand import policy, market demand and service mode of the target market.

At present , due to the steel industry environment , the influence of production capacity surplus, as well as the present situation of the domestic steel market demand decrease haven't been solved , the export appears to be the blue bore to digest the domestic excess capacity . Estimated by the China iron and steel association, steel exports are expected to exceed 90 million tons this year, and reach its peak in history.

Since earlier this year , the state leaders frequently visited abroad, to show China's mature infrastructure to the world, for domestic enterprises to "go abroad" to open the market. In addition , " B&R " also brought new infrastructure requirements . Is this a turning point for the hard life of the steel trade and business? To this question, the author had an interview with Ren Qingping, the vice President of Shanghai steel trade chamber of commerce. He reckons steel trading business should timely turn to foreign markets, seek new development market.

Grasp the needs of foreign infrastructure construction

From Ren's view, the highlight of the growth point of future economy would be infrastructure investment, except science and technology innovation and energy revolution. Indeed, infrastructure construction like ports,railway, highway will bring flow of personnel, material and capital, and lead the society economy to realize further development.This is not only for developing countries. Developed countries also realized the strong pull force of infrastructure construction in the future. According to a conservative prediction from authority, the US would invest 8200 billion dollars in infrastructure field like energy, transportation and water-related areas, the annual investment would be 455 billion.

Let alone of these new facilities, the existing infrastructure is also required to be updated and maintained. According to the data from planning and construction of New York City Bureau, for New York, the aging problem of the city's infrastructure is  serious, there would be $47.3 billion of security guarantee and function maintenance invested in the following 5 years. At present, besides government budget, there is still a funding gap of $34.2 billion, among which $26.3 billion of infrastructure from transportation area(mainly include road, metro and port). These data don't include new infrastructure an d investment demands in infrastructure expansion in New York.

It is not difficult to see that the United States, as a developed country, still has a huge demand for infrastructure construction, and can not be completely provide it by themselves. In addition, the demand for infrastructure construction would be more intense for developing countries. Ren Qingping said with confidence, "the demand for steel in Southeast Asia has been steadily developing. Say, Indonesia, Vietnam's economy is good, their steel demand is growing, but their domestic steel production capacity growth is not so fast, hence unable to meet their own needs. This is a rare opportunity for the steel traders in our country. "

It's the same situation in South Asia, which is closely related to China. In India alone, according to the World Steel Association statistics, its steel production was 81.3 million tons in 2013. And the demand of steel will be further pulled by the plan, which related to build 100 smart cities, modern logistics center and residential area. It is predicted that India's steel demand will grow to about $300 million tons. For the current India, to meet this demand, they must quickly "climb the stairs". It is reported that India, in the second and third quarters of this year, has imported $1.34 million from China, accounted for 32% of the total imports of steel. This means that China's steel products in India has a wide range of market demand.

In South America area, some less developed countries, although with rich in resources, there is no external transport channels as the infrastructure can not keep pace with the economy. For these countries, the infrastructure lag has seriously restricted their development. In Africa, infrastructure is even more disadvantaged, and there is a serious shortage of decent rail and ports. Africa is also rich in resources, but resource utilization is low because of the backward of infrastructure. "The need for infrastructure in these areas is obvious. These construction requires a lot of steel, their domestic steel production capacity obviously can't meet the needs in short term, so the demand for foreign steel imports is foreseeable." Ren Qingping said.

Broad prospects in foreign market demand

As foreign infrastructure demand for such a huge market, is China's steel exports a big opportunity? Ren Qingping gives a positive answer: "both developed countries and developing countries require the development of infrastructure construction. The reasons they ultimately did not reach their goals are nothing more than lack of capital, experience and steel supply. On these points, the advantage for domestic steel to seize the foreign infrastructure market is very obvious."

In the above reasons, the funding problem has become the first factor to consider. In the United States, for example, since 2009, the U.S. President Barack Obama has been trying to expand domestic infrastructure investment to boost the U.S. economy, and create employment opportunities. But due to the economic recession and the government budget deficit, it's unable to meet the huge infrastructure funding needs of the United states. Not to mention the emerging economy, funding problem has become the main obstacle to the development of many countries in the construction of infrastructure. And this is an opportunity for China.

Since the beginning of this year, China's direct investment in the Asian infrastructure market, has reached a new height. During the APEC meeting, President Xi Flopping announced the establishment of the Silk Road Fund, and $40 billion contributed by China. Since then, China, as well as India, Singapore and other 22 countries, jointly decided to set up an Asian infrastructure investment bank, in order to provide financial support in infrastructure development for the developing countries in the region.

"In addition to funds, China's experience accumulated in large-scale infrastructure construction is another important reason that China's steel will outshine." Ren Qingping said with confidence. Many domestic large-scale construction project created a large number of mature design and construction team, which lay the foundation of talent team and building experience. This also means that in the future, China will not only participate in the investment of construction projects, but also will gradually design in a Chinese way.

In addition, Ren Qingping also revealed to the author: "in the future, India is certainly a great potential market. But for now, a lot of large steel projects from the land acquisition process have been postponed or canceled, due to the impact of land, policies, regulations and other constraints.Therefore, a large number of domestic steel demand in India has to be met by importing from abroad"

"China's construction steel specifications varieties, transport conditions are also relatively good. In the case of excess domestic production capacity, demand slowdown, steel also have the will to export, which is an favorable condition. "Ren Qingping explained," in addition, the price of domestic steel prices also has advantage. "

The needs of the infrastructure market, undoubtedly will bring more opportunities for domestic steel traders. With the high-speed rail as a representative, Prime Minister Li Kenning himself introduced it to the world. It is reported that China has reached an agreement with India, Thailand and other countries, and will gradually build high-speed rail projects in the future.

"And 'The Belt and Road 'construction has brought domestic steel production's demand a big opportunity, especially for general domestic steel trade enterprises. In this market, steel mills or larger-scale steel trade enterprises don't have the ability to completely cover all the needs of foreign markets." Ren Qingping said that on the domestic steel market, problems like the slowdown in demand growth, price competition, overcapacity and other cannot be overcome in the short term . Therefore, for the existing steel trade, the next step should be to look to foreign markets, especially the distribution market. They should not only follow the big companies "going abroad", but to look for their own suitable place to develop. Specifically, in the initial stage, the domestic steel traders could cooperate with large contractors like China Communications Construction Co, Chinese Construction Engineering Corporation, etc., actively cooperate with them to expand in overseas markets, look from domestic to foreign market, pay attention to the steel demand of these foreign infrastructure. But this is far from enough, the steel trade business should make a further step to directly find a target market, and actively cooperate with the local traders, importers, and then transformed into a stable relationship.

At the same time, steel traders should not only know how to use trade to export products in the future, but also know how to extend service to foreign market. Because there are a lot of drawbacks in product trade, such as price competition, anti-dumping and so on. "But don't be scared  by temporary anti-dumping, because the market demand is certainly there. "Speaking of here, Ren Qingping gave the author a real example, a few days ago, a client from Sri Lanka came to find him talking about the cooperation of steel trade. Previously, because of the civil war there, a lot of infrastructure has stalled, but in recent years, investment in infrastructure has gradually started because of political stability. "Customers came on to us by their own, this is our opportunity. Although so far it has not been finalized, but it's enough to explain the needs of the market has opened to china. "

From this discussion, Ren Qingping also realized that as the steel traders, they can not simply rely on the price to do the export trade of steel, but to do more research of the international market, to look for new demand and growth point, to explore new ways to provide high-quality  service. "when it develops to a certain extent, the steel traders can develop the market with local enterprises, deepen the trade channel to distribution channel gradually, and invest by participating shares etc., in order to further strengthen cooperation. For more backward areas, the steel traders can also use their mature domestic approach, including their own marketing experience in foreign distribution and delivery market. "He added.

Entering into foreign markets also needs to be cautious

Of course, the steel trade should not and could not flood into foreign market like a swarm of bees. "Before this, the steel traders should actively learn the international market demand for steel, develop their own niche market, pay attention to steel's variety and specifications needed in infrastructure construction in these areas, to fully understand the import policy, market demand and service mode of target market. " Ren Qingping reminded the domestic steel traders not to blindly follow the trend, but to do adequate market analysis before entering the it." This requires domestic steel trade contractors closely follow foreign contractors and design departments to understand oversea market, to understand and follow up the project information, so as to better serve foreign market. "

Ren Qingping said frankly, according to his understanding, the current domestic steel trade and international demand for steel trade is still in the primary stage. But it can be imagined, the future cooperation of domestic and foreign trade in steel will be more in-depth, and even do not exclude that some steel mills will transfer some of the capacity abroad. Speaking of here, Ren Qingping called on: domestic steel traders must be the first to try tomato, don't wait for the mature market to do it, that would be too late. Now is the right timing, put your fingers on it now. He who pays attention to the market first, who seizes the market first will get benefit. "

(source: China Iron and Steel News Network)