Wednesday , April 21 2021

Liu Zhenjiang, Party Committee secretary and secretary-general of the China Steel Association: The steel industry has reached 10 years of success More challenges will be faced next year |

Liu Zhenjiang, Party Committee secretary and secretary general of the Iron and Steel Association of China Source: All reporter Peng Fei

Due to overcapacity, the steel industry once fell into the abyss, but since the beginning of the recovery in 2016, the industry performance in 2018 has completely improved and reached almost 10 years of success, seems to be a matter of fact.

"The performance of the Chinese steel industry in 2018 is the best year of the 10 years since the financial crisis." The 14th Bohai Sea Steel Market Forum and the 2018 Lange Steel Network Conference took place the morning of November 24. "The China Iron and Steel Industry Association (hereinafter referred to as the China Steel Association) and the Party's Secretary General, Liu Zhenjiang, made this briefing at the opening.

"Daily Economic News" reporter noted that although it is not yet until the end of the year, the trial of Liu Zhenjiang on the industry development this year is not reasonable, because compared to the same period of the history, steel industry operating indicators have achieved good results since 2018. And fluctuation is minimal.

De-ability to help the steel industry achieve 10 years of success

"Steel production has increased, steel prices have stabilized within a reasonable range, and corporate profits have improved even more. The quality and efficiency of the industry's operations are in a more stable and better state year by year," said Liu Zhenjiang .

According to the latest data from the China Steel Association, the average daily production of crude steel in the main steel companies in the country in early November was 1,196.4 thousand tons, an increase of 0.57% over the end of October. At the end of November, steel inventories of major steel companies were 12.228 million tonnes, up 0.07% from end-October.

Previously, on November 10, Qu Xiuli, vice president of the China Steel Association, publicly stated that annual output of crude steel maintained a small growth trend, expected to exceed 900 million tons. In the fourth quarter, the efficiency of steel companies will decline and growth will continue throughout the year.

In the exchange with the reporter of the "Daily Economic News", the person in charge of the steel company said that the benefits are good, and it is not the most intuitive to see the participating companies. "It's hard to find a front row position this year.All a few years ago.You are not able to get the toll for the meeting."

As the current steel industry as a whole has improved, Liu Zhenjiang believes that "there is a change in (business) business concept, but more because of the supply-side structural reforms, which makes the Chinese industry face the future with a new look".

In early 2016, the State Council proposed a total of 1 to 150 million tons of crude steel capacity during the 13th period of the Five Year Plan. In 2016 and 2017, the cumulative reduction in crude steel production capacity in the country exceeded 120 million tons and more than 80% of the target tasks of the upper limit were completed.

According to information released by the Ministry of Industry and Information Technology, it is expected to reduce the capacity of crude steel by 30 million tons by 2018. Judging from the current capacity reduction, the goal of reducing steel production capacity in 150 million tonnes will be completed two years ahead of schedule. In addition, the 140 million tons of strip steel that had long interrupted the market order were fully released in 2017.

"By 2016, we will quickly reverse the unsustainable situation in 2015. In 2016 and 2017, we continued to play for two years and by 2018 we went further." Liu Zhenjiang concluded.

In the first nine months of this year, the total profit of the members of the China Steel Association was 230 billion yuan, a year-on-year increase of 86.01%, the profit rate of sales was 7.5% , an increase of 2.88 percentage points over the same period of the previous year and the profitability of the steel industry returned to the industrial average.

A person at the Bohai Iron and Steel Company told the Daily Economic News that supply-side reforms have changed the supply-demand relationship in the steel market, the oversupply situation has improved, and steel prices have been strongly supported.

On November 21, the China Iron and Steel Association released a report stating that at the end of October China CSPI steel rose 0.02 points, or 0.07%, and increased 5.76 points, or 4.97% . In fact, since 2017, domestic steel prices have shown a bullish trend.

CSPI China Steel Price Index Source: China Iron and Steel Association

The market may have large fluctuations in 2019

According to the China Steel Association, after entering October, the domestic market is still in the high season of steel demand, steel production remains at a high level and steel prices remain generally stable. In the later period, as the weather becomes cold and the intensity of demand weakens, the price of steel will fluctuate.

"Since the fourth quarter, the steel industry has changed steadily and overall volatility is not great, but in the fourth quarter and 2019, there will be more challenges." Faced with hundreds of representatives of steel and steel companies, Liu Zhenjiang said.

However, compared to the steady improvement in 2018, the steel industry that is undergoing supply-side reforms may cause volatility in the market in 2019 due to overproduction.

Han Weidong, a senior specialist at Lange Steel and vice president of Tianjin Youfa Steel Group, said the main issue is the industry, and demand will be stable in 2019. If production goes up too much, there will be volatility in the market.

The basis of Han Weidong is that in 2017, China's crude steel output was 832 million tons. Under the premise that the steel strip was not clarified last year, China's crude steel output should exceed the 900 million mark for the first time in 2018.

At the same time, Han Weidong told the Daily Economic News that substitution capacity among steel companies will be put into production later this year and next year, which will inevitably lead to steady increase in steel output.

According to Chen Kexin, chief analyst at the Lange Steel Economic Research Center, the reason why steel companies are increasing production is that the profit level of steel is very high. "The profit per ton of steel products has reached 1,000 yuan. Of course we should take advantage of the favorable opportunity to expand production."

Indeed, increased capacity utilization is also one of the original intentions to eliminate overcapacity. According to the China Steel Association, from January to September this year, the capacity utilization rate of the steel industry was 78.1%, higher than the national industrial average. According to the previous plan of the Ministry of Industry and Information Technology, crude steel production capacity will be less than 1 billion tonnes by 2020, the capacity utilization rate will increase to 80% and the concentration of the 10 largest steel mills will reach 60%.

Han Weidong said domestic steel demand is expected to be in line with 2018 in 2019, but this product will break the balance, and market volatility is inevitable.

The reporter "Daily Economic News" noted that in late 2018, the steel market fluctuations that worry Han Weidong showed some signs. Lange Steel data show that in November the spot market accelerated and billet plummeted for three consecutive weeks, falling to 3,400 / t on Wednesday, and the cumulative fall in the three weeks reached 360 yuan per ton, above the highest point this year, reaching 4,110 yuan Tonnes fell more than 17%.

A person from the steel trading company told the reporter from the "Daily Economic News" that the current steel terminal demand is not good, the stock of steelworks continues to accumulate, production is always at a high level, and the frequency of fluctuation of the market price is expected to increase.

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