Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Bridget Freas, CFA | 11-05-2010 11:29 AM

More Consolidation Coming to Chinese Steel Industry

CFO of China Gerui, Edward Meng sees opportunities for his firm to consolidate the high-end cold rolled steel market in China.

Bridget Freas: Hi. My name is Bridget Freas. I'm an Equity Analyst with Morningstar. Joining me from China Gerui is CFO, Edward Meng. China Gerui is a specialty steel processor focused on the construction, electrical and packaging markets within China.

Edward, good morning.

Edward Meng: Good morning. Thank you for having me here.

Freas: Thank you for being here. Just to start off, I'd like to get a sense for what you are seeing in terms of demand going forward. Obviously, in China, overall steel consumption has grown dramatically in the last couple of years, but has shown some signs of weakening in the last couple of months. What are you seeing in your end-markets and what's your outlook for the next year or two?

Meng: Good question. Actually we are in this niche market of cold-rolled steel products. So, ever since 2007, despite the weak market in an overall crude steel industry, we continue to see very strong demand for the product that we produce. And we expect that trend is going to continue to grow at a very healthy pace. Right now in China, the situation is, although China is a net exporter of crude steel, but China is still a net importer of the kind of products that cold-rolled steel, that we produce high-end, high-precision.

Also that's provides a opportunity for us to further capitalize on the replacement of import, at the same time, continue to supply the increasing demand in the domestic China market because of the overall growth of the consumption power, growth of the middle class, which are the ultimate end-user of our products. Going forward, we see that and this trend is going to continue. And the company's well-positioned as the market leader right now to capitalize on this opportunity.

The other thing is, this cold-rolled steel market is not really moving in tandem with crude steel market, while that over the recent couple of months, we have seen the bill of excess supply, which actually is driving down the steel price in general -- the steel price. But we have seen this that actually demand for our products has been continuing to be very strong. And for that respect, we are very confident for the Company's growth going forward in the next couple of years.

Freas: Just looking at the competitive environment, when we think of Chinese steel producers, we think of some of the big names that have 50 or 100 times the capacity of China Gerui and some of these big players actually do participate in the narrow strip cold-rolled coil space. Yet, as you said earlier, you've been able to hang on to the number one market share. So, what do you think keeps these steels giants from using their operating leverage to really take a commanding position in this market, given the high profitability and strong demand growth outlook?

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article