Excessive overcapacity in the steel industry

Overcapacity is one of the important factors that have always suppressed the economic benefits of steel companies. All members of the China Iron and Steel Association and the Ministry of Industry and Information Technology have stated that the steel industry faces a long-term and complex environment, and that the industry must rely on itself and rely on market mechanisms to overcome its difficulties.

Zhang Changfu stated that in 2012, the domestic steel industry was operating at “two highs and two lows”. High-cost, high-capacity production is faced with low growth in production value and low returns. At the same time, the industry’s crude steel production, consumption, and prices have all formed “record” data indicators.

According to the data of China Steel Association, from the aspect of consumption, the increment of crude steel consumption has seen the smallest increase in the past ten years. The apparent consumption of crude steel of 1,856,000 tons on the average daily average of the previous 10 months is estimated to be 679 million tons of crude steel in 2012, an increase of about 1.8% year-on-year. From the price level, the price of steel fell sharply year-on-year. From January to October this year, steel prices fell to levels close to 1994. The price of sheet metal fell below the level of 1994 even more in August.

“In the period of economic growth, the steel industry has formed huge production capacity. When the economy is declining, the demand is insufficient. The issue of overcapacity is a major factor in forming the current predicament,” said Zhang Dezhao, Director of the Iron and Steel Division of the Raw Materials Division of the Ministry of Industry and Information Technology. However, the new capacity increase will not be reduced in the next two years. This will be a big mountain that has plagued the steel industry for a long time.

Zhang Changfu said that investment in fixed assets in the steel industry is still high this year. From January to October, the investment in fixed assets of the steel industry totaled 414.27 billion yuan, a year-on-year increase of 3.9%. Although the growth rate has decreased significantly, the investment amount still exceeds the level of 386.05 billion yuan in 2011, and the overcapacity is further aggravated.

Jia Liangqun, chief analyst of my steel network, revealed that the total steel production capacity will exceed 1 billion tons by the end of this year, while large-scale steel products do not have products that are in short supply.

However, from the perspective of the recent domestic economic situation, stable growth measures have been gradually put in place, and capital injection and infrastructure construction have been significantly accelerated, which has played a catalytic role in the recovery of the steel industry.

"The recent market has signs of recovery, but the expected value can not be too high, do not blindly optimistic." Zhang Changfu said that the situation of oversupply of products is difficult to change in the short term, while the international market is also more difficult to export.

In the face of difficulties, what should the steel industry do? Industry experts said that there is a policy dependency in the steel industry. However, despite the introduction of multiple industry normative regulations and policies in the past few years, the effectiveness is not obvious.

Zhang Changfu believes: "We must rely on ourselves and don't expect too much national policy. We must overcome the difficulties and lay the foundation for our survival and development." Zhang Dezhao also emphasized that he hopes to give more play to the role of the market and use the market mechanism to promote industrial transformation and upgrading. .

Zhang Dejun said that the management of the steel industry should adapt to new situations and changes, and eliminate the combination of backwardness, mergers and reorganizations, and industrial upgrading. The focus of this year's work includes environmental protection and other demonstration projects in Hebei, Jiangsu, Chongqing, Yunnan, and Xinjiang, and will be fully rolled out throughout the country next year.