"Minimal profit margin" promotes China's steel industry to step up its search for transformation

Xinhua Net Hai December 18 (Reporter Li Rong) "This year China's steel industry produced a record 630 million tons of crude steel, but the profit margin is the lowest in the domestic industry." Raw Materials Division, Ministry of Industry and Information Technology, China Deputy Director Luo Tiejun revealed this information at the China Steel Market Outlook and "My Steel Net" annual meeting on the 18th.

According to the official’s judgment, the Chinese steel industry is entering an “low growth and low profit” track. In the upcoming 2011, the production and consumption of China's steel industry will have an increase, “but the magnitude can not be very large”, and the steel industry may have reached a stage “top shock zone”. This is not a short-term situation that will promote the Chinese steel industry's drive for transformation and upgrading.

According to the latest statistics from the Ministry of Industry and Information Technology, China's crude steel production this year will reach a scale of 630 million tons, and the industry's operation will show a trend of “high before and after low”, reaching a high point in April and showing a full year low in June. From the perspective of operational performance this year, the profit level of the iron and steel industry is not optimistic. The average profit rate of domestic industries is 6%, and the steel industry is only 3.5%. It is the lowest among all industries.

Many analysts in the industry believe that the Chinese steel industry is a typical “two squeezed” industry, that is, one is being squeezed by the cost of raw materials in the upper reaches, and the other is being pressured by market supply and demand caused by excessive supply. extrusion. Data show that from 2005 to 2010, the domestic steel price index rose from 94.18 to 125.8, an increase of only 33%; while during the same period, the price of imported ore soared from US$67 per ton to US$145, an increase of up to 116%. .

Luo Tiejun believes that the reason why the Chinese steel industry has dropped the “final list” of profit margins is that profit margins have become narrow, and its phased “total issues” are an important aspect, in addition to the “abnormally high ore prices” belt. The relations between the abnormal upstream and downstream industrial chains have come to an end. "Ore prices erode the profits of steel."

"Two squeezed" is making the Chinese steel industry enter a stage of "low growth and low profit". Some information agencies including “My Steel Net” believe that the domestic crude steel output in the new year may increase to 660 million tons; steel exports will also be equivalent to this year, or slightly lower, at about 40 million tons.” Compared with previous years, this is a low level."

A phased “era of low profits” is prompting the arrival of the “adjustment era” for the Chinese steel industry. Luo Tiejun said that the adjustment of the steel industry is a "adjustment in development" and a "three-in-one" elimination of backwardness, mergers, reorganizations, and technological transformations. It cannot be separated from "one by one."

According to relevant data, during the “Eleventh Five-Year Plan” period, the Chinese steel industry steadily promoted the elimination of backward production capacity, eliminated a total of over 116 million tons of backward iron-making capacity and nearly 70 million tons of steel-making capacity, which was beyond the original target value. The restructuring of domestic steel companies is also advancing. The goal is to form 3 to 5 large-scale international steel giants with international competitiveness.

Luo Tiejun said: “The elimination of backwardness is the precondition, and it is the focus of the adjustment structure of the steel industry; mergers and reorganizations are the means and channels for enhancing the competitiveness of the industry and must not be simply viewed as the purpose. The technological transformation of enterprises is the support of the former two. The point is the most critical path.” The Chinese steel industry must successfully complete the process of structural adjustment and ultimately need to find a true “development drive.”

The competent authorities in China are adopting strict and pragmatic attitudes and measures for the restructuring of the steel industry. In the elimination of backward small blast furnaces, the industry threshold has been increased from 300 cubic meters of furnace capacity to 400 cubic meters. "As for the blast furnace with 500 cubic meters or more, it will be managed with comprehensive energy consumption indicators. It is not simply based on capacity." Luo Tiejun believes that backward production capacity must be eliminated, but not "hard elimination," but it should be given " Way out." The final goal of the elimination work should be "optimized structure."

It has been observed that in the adjustment process of China's steel industry, it will be a pattern of "national control of the overall situation and enterprises seeking development." The state will regulate the overall layout of the steel industry and take a cautious attitude toward new large-scale projects. As for the implementation of specific technological reforms, “will be done by companies themselves”.

For the issue of China's total iron and steel that has caused heated discussions, Luo Tiejun believes that “the total amount of steel is determined by the overall rate of development of China’s economy” and the market should have the ability to adjust. "Of course the macro department should also have an estimate of it."

In the next five years, it was known as the “strategic opportunity period” and the tough period for the Chinese steel industry in the industry, and it was also the “decisive period” for the large-scale equipment of Chinese steel companies. An industry insider such as Dean Wu Dongying of the Baosteel Group Economic Management Research Institute stated that when the financial crisis broke out, “it was actually a very good time for the transformation of the Chinese steel industry”, but due to the constraints of all parties, some opportunities were missed. Now that the problems and countermeasures are once again facing, the key is to implement them.