Analysis of the impact of Cold Rolling steel industry dynamics on Yuanjing Automation Co., Ltd.'s export business

The global cold-rolled steel industry is currently in a critical stage of intelligent upgrading and green transformation. This trend has a multi-dimensional impact on our export business. The main opportunities and challenges are analyzed as follows:

1. Incremental opportunities in emerging markets

Southeast Asia/India market expansion

With the restructuring of the global industrial chain, Southeast Asia and India are accelerating the formation of automotive and home appliance manufacturing industry clusters. Data shows that the demand for Cold Rolling steel in the region will maintain an annual compound growth rate of 4-6% from 2024 to 2025, directly driving a surge in demand for production line construction. Our company can focus on the equipment replacement window period in Vietnam, Thailand, and other countries in the field of new energy vehicle steel.

RCEP policy dividends

(1) Tariff advantage: After the implementation of the agreement, the tariff on core components such as Cold Rolling Mill frames exported to Indonesia/Malaysia will be reduced from 8% to 3%, driving the price of the whole machine down by 5-8%, significantly enhancing the bidding competitiveness.

(2) Standard coordination: ASEAN countries have accelerated the adoption of China's GB standard, reducing our equipment transformation costs by about 15%.

(3) Cooperation model innovation: Through cooperation with local partners such as Indonesian PT companies, we can build Advanced stainless steel rolling technology solutions and use the rules of origin cumulation to maintain a gross profit margin of 18-22%.

2. Steel demand in developed economies will be affected by the trade environment

In developed economies, steel demand will show a "first rise and then fall" trend from 2021 to 2022. Driven by the post-epidemic economic recovery, demand rebounded in 2021, but returned to weakness in 2022 against the backdrop of high inflation and tight monetary policy. The increase in demand brought by the US "Infrastructure Act" was partially offset by the overcapacity caused by the return of manufacturing, and the average annual growth rate is expected to remain at around 0.5% from 2023 to 2025. The implementation of the EU Carbon Border Tax (CBAM) has prompted the steel industry to accelerate its green transformation. From 2024, the proportion of electric arc furnace steel will exceed 45%, but the overall demand growth is limited due to energy costs. Japan and South Korea are facing the dual pressures of deteriorating population structure and industrial relocation. Demand may fall back to 90% of the pre-epidemic level in 2025.

Emerging markets are showing obvious differentiation: India, relying on the expansion of manufacturing PMI and infrastructure investment, will see its cold rolled stainless steel market trends growth rate jump to more than 6% from 2023, and is expected to become the world's second-largest consumer in 2025. ASEAN countries benefit from the transfer of the industrial chain, and the demand for automobiles and electronic steel continues to increase, and will maintain a compound growth rate of 4-5% from 2024 to 2025. Latin America and Africa are constrained by the debt crisis and exchange rate fluctuations, and demand has fluctuated in a "sawtooth" shape, but special steel imports continue to increase, driven by new energy projects.

The global steel trade pattern is being reshaped: the energy reconstruction caused by the Russian-Ukrainian conflict in 2023 has prompted the construction of multiple direct reduced iron projects in the Middle East, and the region may become a new net export pole in 2025. Under the carbon tariff system, the "green steel" premium continues to expand, and the low-carbon steel trade volume is expected to account for 30% of the global total in 2025. China's capacity replacement and environmental protection production restrictions have promoted the rebalancing of global supply and demand. After 2024, the profit margin of overseas steel mills is expected to be restored to a reasonable range of 8-10%.

3. Risk response suggestions

Logistics optimization: Set up overseas warehouses in Vietnam to shorten the delivery cycle in East Asia to within 45 days;

Risk hedging: Insure export credit insurance for high-risk markets such as Russia and South America, with a coverage rate of not less than 85%.

Technical pre-research: Set up a special fund to carry out low-carbon equipment research and development, and complete the certification of all products that meet CBAM standards by 2025.

4. Trend prediction and strategic suggestions

The global cold rolled stainless steel market trends are showing three major changes: the Middle East has become a new net export pole, the proportion of "green steel" trade has risen to 30%, and the profit margin of overseas steel mills has been restored to 8-10%. Suggestions for our company:

Focus on the India-ASEAN growth pole, and achieve 40% of revenue in this region by 2025;

Establish a rapid response mechanism for technical compliance, and reserve 15% of the flexible R&D budget to respond to regulatory changes.

Explore cooperation opportunities with the Middle East direct reduced iron project to form a new profit growth point.