Qu Xiuli talks about the economic operation of the steel industry

“Because of the decline in demand and the high level of steel production, the contradiction between oversupply in the domestic market is more prominent, the vicious competition in the market is becoming increasingly fierce, and the price of steel continues to accelerate. The price of imported iron ore and other raw fuels has dropped significantly, but it cannot compensate for the fall in steel prices. The losses caused by the steel enterprises are difficult to increase substantially, and the steel industry has suffered a large loss.” Recently, Qu Xiuli, vice chairman of the China Iron and Steel Association, spoke of the characteristics of the steel industry in the first half of 2015 and the trend of the latter. Under the background of difficult and financing problems and environmental law enforcement, the two-level differentiation of business operations is further evident, and the production and operation situation facing the steel industry is even more severe.

Crude steel production fell first, steel prices accelerated

“Since the beginning of this year, domestic crude steel output has experienced the first decline for many years, and steel prices have hit the lowest level since the index was compiled.” Qu Xiuli pointed out that in the first half of this year, the global economy is slowly recovering, and China’s economy continues to suffer downward pressure on the steel industry. There have been some new developments in the operation.

In terms of output: from January to May 2015, the output of crude steel and pig iron decreased by 1.58% and 2.41% respectively, and the growth rate of steel output dropped significantly by 4.27 percentage points from the first half of last year. Among them, the output of crude steel and pig iron in steel association members is slightly smaller than the national average, which reflects that under the current market environment, member companies are still insufficient to reduce production and limit production.

Although crude steel output fell year-on-year this year, the daily output of crude steel is still high. From January to May 2015, the national average daily production of crude steel was 2,225,700 tons, of which the daily production of crude steel reached 2.297 million tons, which is the second highest level in history. At the same time, industrial concentration is still declining, and the proportion of the top 10 companies in the production of crude steel fell from 35.87% in the same period last year to 34.39%.

In terms of variety structure, the output of long products decreased year-on-year, and the output of sheet and strip and pipe increased year-on-year. From January to May 2015, the national long product output was 203.38 million tons, down 2.49% year-on-year; sheet and strip production was 203.09 million tons, up 5.83% year-on-year; pipe production was 36.56 million tons, up 9.04% year-on-year; The output was 2.08 million tons, down 20.30% year-on-year.

In terms of import and export: steel exports continued to grow, imports fell year-on-year; export prices fell more than imports, and import and export spreads expanded. From January to May 2015, China exported 43.52 million tons of steel, up 28.2% year-on-year; imported steel was 5.49 million tons, down 10.3% year-on-year. In the same period, imported iron ore was 378 million tons, down 1.1% year-on-year. China's export steel tofu crude steel accounted for 13.3% of crude steel production, and net exports of steel to crude steel accounted for 11.6% of crude steel production.

From January to May, the average price of China's export steel was US$630.07/ton, down by US$163.59/ton, a decrease of 20.61%. The average price of steel imports during the same period was US$1173.61/ton, down US$72.61/ton, a decrease of 5.83. %; import and export spreads were $543.54/ton, an increase from the same period last year ($452.56/ton in the same period last year).

On the demand side: steel demand fell, apparent consumption of crude steel decreased. From January to May 2015, China's apparent consumption of crude steel was 310 million tons, down 5.1% year-on-year; in the same period, China's crude steel output decreased by 5.47 million tons, net exports increased by 10.77 million tons, and apparent consumption decreased by 16.24 million. Tons; exports failed to make up for the gap in consumption decline.

In terms of inventory: the current steel stocks are lower than the same period last year. Qu Xiuli pointed out that the decline in steel social stocks was mainly due to the downward trend of steel prices, the weak willingness to purchase and the strict control of credit. Enterprise inventories also showed a monthly decline from February, but due to sluggish market demand and sales difficulties, the current enterprise inventory is higher than the beginning of the year and higher than the same period last year.

In terms of price: steel prices continued to fall, and long products fell more than plates. In the first half of the year, the steel prices in the domestic market continued to accelerate and decline year-on-year, starting in April and hitting a record low. At the end of June, the CSPI steel price index fell to 66.69 points, down 19.74% from the beginning of the year and down 28.28% year-on-year, the lowest level since the index was compiled in 2001. Among them, the long product price index decreased by 19.6% compared with the beginning of the year, down 29.29% year-on-year; the sheet price index decreased by 20.89% compared with the beginning of the year, down 28.72%.

In terms of investment: due to the impact of the national economy entering a new normal, falling steel demand, strict control over new capacity projects in overcapacity industries, and clean-up projects under construction, fixed assets investment in the steel industry was significantly suppressed. From January to May 2015, the fixed assets investment of the steel industry decreased by 8.6% year-on-year, among which the investment in ferrous metal smelting and rolling industry continued to decline, with a decrease of 6.2%; the investment in ferrous metal mining and dressing industry declined sharply, with a decrease of 15.8%.

Significant growth in investment income, further differentiation of enterprises

Qu Xiuli pointed out that since the beginning of this year, steel prices have continued to fall, which has brought greater pressure on the production and operation of steel enterprises and the improvement of efficiency. Although the price of imported iron ore fell sharply in the early period, but the rapid rebound in the later period, the steel industry is still in a loss state. Affected by the substantial increase in investment income, the overall economic benefits have improved, but basically at a low profit level.

According to the statistics of the Steel Association, from January to May 2015, the sales revenue of member steel enterprises was 1301.7 billion yuan, down 16.9% year-on-year; the profit and tax was 32.2 billion yuan, up 1.18% year-on-year; the profit and loss reached a profit of 528 million yuan. The growth rate was 387.69%, mainly because the base was too low last year. The sales profit rate was 0.04%, an increase of 0.03 percentage points over the same period of last year, but the profit level is still at the lowest level in the industrial sector. The loss side expanded further, reaching 39.6%.

"From the perspective of the composition of total profit, the profit of the main business has increased substantially, and the investment income is the main source of enterprise benefits." Qu Xiuli pointed out that from January to May 2015, the profit of the main business of large and medium-sized steel enterprises was 16.481 billion yuan. , a significant increase of 169.28% year-on-year, investment income is the main source of steel enterprise profits. From the perspective of enterprises, the differentiation is further evident. There are 61 profitable enterprises with a profit of 15.48 billion yuan, a year-on-year increase of 43.94%; 40 loss-making enterprises with a loss of 14.959 billion yuan, an increase of 40.45%.

Steel prices have fallen sharply. In analyzing the main factors affecting the efficiency of steel enterprises, Qu Xiuli said that this was mainly affected by the sharp decline in steel settlement prices. From January to May 2015, the average average settlement price of steel for large and medium-sized iron and steel enterprises was 2,530 yuan / ton, down 703 yuan / ton, a decrease of 21.57%.

Manufacturing costs have fallen dramatically. From January to May 2015, the manufacturing cost of steel products for large and medium-sized iron and steel enterprises also dropped sharply, with an average decline of about 20%. The manufacturing cost of steelmaking pig iron decreased by 28.39% year-on-year. This aspect is affected by the sharp drop in the prices of raw materials such as iron ore and coal. On the other hand, it is also the result of steel companies generally strengthening internal management, benchmarking potential, and adopting various measures to reduce costs and increase efficiency.

Financial expenses have dropped significantly. From January to May 2015, the financial expenses of large and medium-sized steel companies fell by 7.19% year-on-year. "This has the impact of both the decline in corporate borrowing and the impact of the national interest rate cut policy." Qu Xiuli said. As the country cut interest rates continuously and some enterprises actively reduced bank loans, the financial expenses decreased significantly. The overall expenses during the period decreased, but the management fees and sales expenses still increased slightly.

Liquidity is even tighter. At the end of May, the asset-liability ratio of large and medium-sized iron and steel enterprises was 68.80%, a year-on-year decrease of 1.23 percentage points. According to statistics, the lowest asset-liability ratio is 23.16%, and the highest is 136.58%. From January to May 2015, the inventory occupancy of large and medium-sized iron and steel enterprises fell by 11.46%, indicating that the capital turnover rate was accelerated; the net amount of accounts receivable increased by 10.55%, indicating that corporate funds are still tight and the funding risks still exist. At the end of May, the average current ratio of large and medium-sized steel enterprises was 68.09%, a year-on-year decrease of 2.96 percentage points. The current ratio of all scale enterprises decreased year-on-year, reflecting the tighter liquidity of enterprises.

Qu Xiuli pointed out that since last year, enterprises have generally strengthened fund management, not only to reduce inventory, but also to actively control the scale of borrowing. Some enterprises have been affected by the pumping, which has led to a decline in corporate debt levels.

Steel demand may still face four major problems in the later stages of improvement

Qu Xiuli pointed out that the effect of the steady growth policy is gradually emerging, the market situation will be improved, and the policies supporting the real economy are frequent, and it is expected to improve the operating environment of some enterprises. However, under the downward pressure of the economy, steel companies should still correctly understand the current problems in the industry. It mainly includes the following four aspects:

First, in an environment of increased vicious competition, steel prices are unlikely to rise sharply.

At present, the overcapacity of steel production is obvious. Under the influence of the apparent demand for domestic steel and the decline in crude steel production, the contradiction between oversupply in the steel market is intensifying. At the same time, the industrial concentration of the steel industry is still declining, the competition in the vicious market is more intense, and price competition will still be the most effective means for enterprises to seize the market. In addition, the Chinese economy has entered a new normal, and the market for raw materials for steel production such as iron ore and coal will be in a state of oversupply for a long time, and prices are returning to the process. However, the price of iron ore is very easy to rebound. Qu Xiuli suggested that iron ore has entered the buyer's market. The situation of oversupply is irreversible. The price of imported iron ore is in a reasonable return state. Buy less, buy more, and buy the rhythm. It is an effective means to reduce business risks and improve profitability.

Second, the funds are tense, and the problems of financing and financing are still outstanding.

“Because the banking system strictly controls the scale of credit in industries with overcapacity and the difficulty in profitability of steel companies, enterprises generally feel that the funds are tight, and the problems of financing and financing are outstanding. In particular, some small and medium-sized enterprises and loss-making enterprises encounter bank loans and limit loans. It is more difficult to operate." Qu Xiuli said. Difficulties in financing and financing will continue, and ensuring the security of the capital chain is the top priority of the company. The key to steel enterprises is to have no cash flow and no production, to increase the company's own hematopoietic function. Secondly, efforts should be made to reduce the inventory of finished products, dispose of non-performing assets, and strictly control accounts receivable.

Third, market competition is more cruel, and differentiation among enterprises will intensify.

At present, the steel industry is in the period of structural adjustment, transformation and upgrading. In the fierce market competition, due to the constraints of reform, resource endowment, market environment and enterprise conditions, the differentiation trend between steel enterprises will be more obvious, low cost. Strategy, differentiated strategy, unique and leading product strategy, and the transformation strategy from manufacturers to service providers will be the road to future survival and development of steel companies. Different companies will face the test of survival or withdrawal.

Qu Xiuli pointed out that the steel industry needs structural adjustment and mergers and acquisitions. At the same time, we must see that due to the large scale of assets of iron and steel enterprises, the intensive personnel and capital, the local economy, employment stability, and the quality of financial institutions' assets are greatly affected. The willingness of local governments and financial institutions to withdraw is not strong, and it is difficult for enterprises to withdraw. In addition, due to the current lack of policy support and a smooth exit channel, the elimination of backwardness, mergers and acquisitions is extremely difficult, and the process of resolving excess capacity will be painful and lengthy.

Fourth, the enforcement of environmental protection has increased, and the operational pressure of enterprises in the latter period has continued to increase.

The new environmental protection law, which was implemented this year, has raised emission standards, increased penalties, and urged steel companies to increase their environmental protection investment. The corresponding environmental protection costs of steel per ton have increased by tens of yuan to hundreds of yuan, enabling enterprises to produce and operate. more difficult. Some enterprises that fail to meet environmental standards are in danger of reducing production or shutting down production.

In addition, as the country further strengthens its support and people's livelihood work, the labor costs of enterprises will also rise. The operational pressure of enterprises continues to increase, and the task of improving the quality and efficiency of economic operations is even more arduous.

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