There are indications that the benefits of steel plants are beginning to be seen as “ice fires”. In the first half of the year, 63 of the 88 priority steel plants measured by the china steel association (cica) were profitable, with only six of them earning more than 500 million, making a profit of $8,098 million, or 53. 4 per cent of the total profit. At the same time, out of 25 lost steel plants, seven lost more than $500 million, the loss was $5,322 million, or 69. 32 per cent of the total loss。
While the president of the china steel association and the chairman of the bao gang group, xu lo jiang, revealed this set of data at the 31 july meeting of the standing council of the china steel association, both the look and the tone were full of concern. Because this set of data means that real shuffles in the steel industry are beginning to appear and that some of the steel plants that are dominant in technological products will survive, on the contrary, some of the weak and unmeritorious steel plants will be “failed”。
The head of the steel plant who attended the meeting told journalists that since the beginning of the year, the price of raw materials such as iron ore, coke (1124, 3. 00, 0. 27 per cent) had fallen, and that steel factories had begun to work on management and costs, and that their performance had begun to improve, but unlike in previous years when large-scale capital investment in the country had boosted the whole industry, many enterprises, with the exception of a few profitable steel plants, had become overstretched by financial pressures, had a high level of asset indebtedness, had deteriorated operations, had been severely affected by normal production operations, and individual firms had become unsustainable. In his view, national regulation of high-energy industries was constantly being scaled up, while steel plants faced multiple pressures, such as huge environmental inputs and technological adaptations, and overcapacity. The situation of steel plants, some of which were uncompetitive, environmentally friendly, and managed, was likely to deteriorate, and many of them might be shut down or even bankrupt this year。
It is understood that, in order to ban new production capacity, to control the total amount of production capacity and to gradually resolve the problem of excess capacity, on 31 july the ministry of industry and communications introduced the measures for the replacement of productive capacity in sectors with severe overcapacity, which require the construction of projects with severe excess capacity in sectors such as iron and steel, electrolytic aluminium, cement, tablet glass (1029, 3. 00, 0. 29 per cent) to establish a programme for the replacement of capacity with equivalent or reduced replacements。
According to the data obtained by the china steel association, the profits of the steel industry during the first half of the year were 7,480 million yuan, of which 3,829 million yuan were realized by the family. “the situation is not positive, since, in terms of the composition of profits, profits from the steel main operation have been reduced by only $1. 525 billion, and the contribution of steel profits has been mainly from increased earnings such as investment earnings and out-of-business revenues.” xu lo jiang said to the economic reference newspaper。
It is noteworthy that the current liquidity rate in the steel sector is falling further, exacerbating financial constraints. The most recent data from the china-china steel association show that the cost of domestic large and medium steel was 9. 35 per cent higher by the end of june, with financial costs increasing by 29. 25 per cent and sales costs increasing by 18. 03 per cent. In addition, the accounts receivable of these enterprises increased by 13. 05 per cent over the same period and the accounts payable increased by 6. 38 per cent。
On the other hand, bank borrowing continued to increase and the level of indebtedness was high. Journalists learned that inter-bank borrowing by large and medium steel enterprises had increased by 6. 39 per cent over the same period in late june, with an average asset-liability ratio of 69. 27 per cent. Although the debt ratio did not exceed the red line, it was noteworthy that 46 enterprises with a debt ratio above average accounted for 52. 27 per cent of the total number of large and medium steel enterprises and 19 of the total number of businesses with a debt ratio of over 80 per cent, or 21. 59 per cent. “in the context of the continuing low level of profitability in the industry as a whole and the rigorous credit scrutiny of the banking system, the financial risk of some enterprises has increased.” a steel factory person told a journalist。
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“the current problem of overcapacity remains acute.” xu lo jiang told journalists that central and local efforts to resolve the iron and steel overcapacity situation were advancing in the first half of the year, and that the serious market situation had left companies acutely aware of the negative effects of overcapacity on industrial health. According to the preliminary statistics of the central steel association, our crude steel capacity currently stands at about 1. 14 billion tons. On the other hand, in terms of market demand, apart from the relatively good performance of a small number of automobiles and shipbuilding industries, other industries have generally performed, or even declined, further exacerbating their supply-to-demand tensions。
“in the domestic steel industry, the excess capacity, coupled with the imbalance in supply and demand in the market itself, remains difficult.” my iron and steel network consulting director, xu, told chun about the economics reference reporter. On the one hand, he pointed out that while the fall in the price of imported iron ore far exceeded the fall in steel prices in the first half of the year, allowing production costs in steel plants to shift downwards, led to an increase in profitability, the price of steel (3069,100,0. 32 per cent) in the short term could hardly rise significantly if crude steel production remained high in the second half of the year. On the other hand, most steel plants are currently operating in an unoptimistic state, largely struggling on the profit-loss line, and in the second half of the year their operations will be further aggravated, with the number of lost steel plants likely to increase further, and even with some being eliminated from the market, which is not a bad thing for the steel industry, which is beset by excess capacity。
Responsible editor: zhang dei
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