Overcapacity, weak demand, environmental pressure, the steel industry chills. Zhang Guangning, president of China Iron and Steel Association, revealed that in the first five months of this year, 101 member steel enterprises of China Steel Association achieved sales revenue of 1.3 trillion yuan, down 16.9% year-on-year. The main business loss was 16.481 billion yuan, an increase of 10.361 billion yuan. Yuan; 40 households with loss-making enterprises, accounting for 39.6% of the number of statistical member enterprises.
Both the government and the industry are looking for ways to deal with it. Compressing production capacity, pushing intelligence, promoting mergers and acquisitions, and supporting production capacity to go global, the industry's transformation and development is growing. It is reported that the Ministry of Industry and Information Technology is about to release the "Steel Industry Transformation and Development Action Plan (2015~2017)", and the "Steel Industry Development Plan (2016~2020)" has also entered the preparation stage.
What are the challenges facing the external market environment and the steel industry itself? How do steel companies seize the opportunity to achieve transformation... The Daily Economic News reporter (hereinafter referred to as NBD) interviewed Chi Jingdong, vice president of China Iron and Steel Association.
Talking about the challenge
Ten thousand yuan of GDP steel consumption hit a "60% off"
NBD: What challenges does the steel industry face today?
Chi Jingdong: From the perspective of the external macro market environment, the current GDP growth rate has dropped to around 7%, the growth rate of fixed asset investment has been around 12%, and the investment in real estate, infrastructure, industrial products, etc. has declined, so the demand for steel has declined. In the long run, the decline in China's steel consumption intensity is a big trend. In the past, 10,000 yuan of GDP could drive about 0.2 tons of steel consumption. Last year, 10,000 yuan of GDP consumption steel has dropped to 0.12 tons.
From the inside of the industry, there are now 1.2 billion tons of steel production capacity in the country, but the demand for steel is about 700 million to 800 million tons. Overcapacity is the biggest challenge facing the steel industry today. Every steel company wants to release its own production capacity, increase production, and then obtain orders through price reduction, which causes the price of the whole industry to fall, which causes vicious competition in the industry. Therefore, the steel industry is now in urgent need of reducing excess capacity.
However, it cannot be said that the steel industry has no prospects. At present, although the increase in steel demand in China has decreased, the output value accounts for a small proportion of GDP, but the total amount of steel consumed each year is still relatively large. In addition, China's industrialization and urbanization have not yet been completed, and the demand for steel products will remain at a certain scale.
NBD: The government has been promoting compression capacity. What is the current effect? What are the difficulties?
Chi Jingdong: As far as I know, the effect of current capacity withdrawal is not obvious. On the one hand, because of the relatively large investment in steel, the construction period is long and it is difficult to withdraw in the short term. On the other hand, although China's current steel companies are facing pressure from profitability, there is still no difficulty in bankruptcy. Under this circumstance, enterprises will not voluntarily withdraw from the market, but will stay in the market by vicious competition such as price cuts. In addition, the macro economy is now showing signs of recovery, and some companies are still trying to maintain capacity and wait for the market to develop.
The effective elimination of production capacity mainly depends on the market. If some enterprises are indeed difficult to maintain, they will naturally choose to go bankrupt and withdraw from the market. At present, many companies are not as bad as this.
Talk about development
To accelerate the transformation and upgrading of the industry structure
NBD: Is it feasible to promote industry development through mergers and acquisitions?
Chi Jingdong: On the one hand, China's steel market does have problems such as low industrial concentration and excessive production capacity. Too many enterprises lead to asymmetric information and disorderly competition. Therefore, steel companies need to do some integration. However, there are many types of steel products. Although the annual consumption is 700 million tons, some small varieties consume only 10,000 or even hundreds of tons per year. For example, the pinion in a watch consumes only a few hundred tons a year. Therefore, the steel industry needs both large and medium-sized enterprises as well as small and micro enterprises. It requires both large-scale enterprises and some special enterprises.
In addition, corporate mergers and acquisitions need to respect the laws of the market. I believe that the current market environment for promoting mergers and acquisitions is not yet mature. The reason for mergers and acquisitions is that enterprises are unsustainable and hope to be purchased by other companies. On the other hand, large enterprises expect the market to improve in the future and expand the scale through mergers. Currently neither of these situations exist. The current merger and reorganization of steel enterprises is also rare.
NBD: It is said that the Ministry of Industry and Information Technology will promote the intelligent demonstration of the steel industry. How do you think the steel industry is taking advantage of opportunities to transform into intelligence?
Chi Jingdong: The steel industry is a process industry, and each process is fixed. Therefore, the steel industry is one of the most promising industries to transform into smart manufacturing. But the goal of improving intelligence is to improve efficiency. To increase the level of intelligence, iron and steel enterprises need capital and technology investment, which requires high-quality products and benefits to carry.
At present, it is still very difficult for steel companies to improve product quality and efficiency by introducing intelligent equipment. If you spend a lot of money to introduce high-end smart equipment, but the products produced are the same as the products of the existing production line, there is no improvement in product grade, increase in added value, and cost reduction. This kind of intelligence is meaningless. Therefore, the transformation of steel companies into intelligence needs to carefully calculate whether the economy is cost-effective under the expected market conditions. In addition, we must also consider the technical conditions of the existing equipment, the cost of resettling employees after the machine is replaced.
NBD: "Steel Industry Transformation and Development Action Plan (2015~2017)" and "Steel Industry Development Plan (2016~2020)" will be released one after another. Which plans will point out the direction of industry development?
Chi Jingdong: As far as I know, these plans are on the one hand to propose a fair market competition environment. At present, some enterprises that fail to meet environmental standards and violate regulations have still existed, which is unfair to enterprises that strictly enforce environmental protection requirements. This requires the government to strengthen supervision. Secondly, it is necessary to promote the transformation and upgrading of the industry structure, mainly to improve the quality and grade of steel products. Once again, the level of intelligence in the entire steel industry is improving. Not only is production necessary to be intelligent, but sales, management and other aspects need to be intelligent. Of course, this requires innovation. Finally, it is necessary to promote green manufacturing in the steel industry and achieve cleaner production. This requires cooperation in the supply of raw materials, production processes, etc., as well as the development of cutting-edge technologies for energy conservation and environmental protection.
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