Iron and steel: bustling is to stay is to stay

The once splendid iron and steel industry is now shrouded in shadows and facing cruel elimination or transformation. From Fujian steel trader to Shanxi Shanxi Haixin Steel, deep down the bankruptcy gate, a downward trend from the lower reaches of the upstream forced to withdraw. Someone fled the industry, some fell, and others were building new production bases.

Up to now, China's steelmaking capacity has reached 1 billion tons, and its steel production has reached 700 million tons. The production capacity has clearly exceeded the demand. As the world's largest steel-producing country and consumer country, China's steel output is equivalent to the sum of the United States, Russia, and Japan, ranked in the 2-4 ranking.

In the remaining years, leaving or leaving, this is a problem.

2014 "Bankruptcy" Fermentation 2014 is definitely a worthy year for the steel industry. Many people in the industry believe that the Chinese steel industry will focus on bankruptcy incidents from this year. This is also true.

Since March 18 this year, steel enterprises that were once ranked among the four major diamond enterprises of private enterprises have completely halted production. Since the bankruptcy of steel enterprises broke the curtain this year, several steel companies have successively joined the “bankruptcy door” echelon, and these steel enterprises have Once was one of the leading companies in the industry.

Breaking the capital chain has become the most deadly wound of these steel companies.

The most representative is a steel company in Shanxi Province. It reflects the capital chain issue that is estimated to be the most comprehensive, such as defaulting on workers' wages, arrears of construction funds, arrears of suppliers’ materials, arrears of banks, and so on. There are funding problems in the production process.

After this, on June 30th, a steel company located in Xiaoxing'anling was exposed to bankruptcy because of defaulting on employee wages. Nearly a thousand employees and factory managers had a conflict that day.

The bankruptcy door continued to the southwest. On July 3, a steel company in the southwestern region held a cadre conference to announce that the company implemented “judicial reform”, and public information showed that the so-called “judicial reorganization” was also aimed at solving the funding problem.

The morbidity expansion lays down bankruptcy. These steel companies that have been trapped in the “bankruptcy door” look at the capacity. Most of them are between 5 million and 6 million tons of crude steel/year, and they are medium-sized steel enterprises. They do not seem to be in the background of the overall surplus of the domestic steel industry. Conspicuous, but its bankruptcy process, has exposed the root cause of the ill-conditioned expansion of the steel industry in the past few years.

In 2007, in order to speed up the elimination of the backward production capacity of the steel industry, the State Council issued a document requesting that all provinces iron and steel industry should eliminate backward production capacity and shut down small ironmaking and small steelmaking. However, this policy has not received the desired results, but has stimulated Another round of capacity expansion.

The data show that the national steel output was 127 million tons in 2000 and 780 million tons in 2013. The maximum annual consumption also reached 750 million tons, and the production capacity reached 1 billion tons. Industry researchers said that at the time, everyone was optimistic about the future demand for steel, but also by the national policy to eliminate backward production capacity, companies are large capacity.

For example, a Shanxi steel company shut down 600,000 tons of backward production capacity at the time, from 2.6 million tons to 2 million tons, but before that, the capacity of the new area he started building reached 2.3 million tons, this time almost crazy expansion of capacity, The total investment reaches 6 billion yuan. However, only a half of the board factories that were built were built. The reason is that the subsequent decline in the price of sheet metal, coupled with financial pressure, led to its forced abandonment of the project.

A steel company located in Xiaoxing'anling also envisages the establishment of a ten million-ton iron and steel company in the future. However, it has yet to realize its goal and has disclosed an anecdote that employees are owed wages.

In addition, although state-owned enterprises and private enterprises are all expanding their production capacity, private enterprises are significantly faster.

According to statistics from relevant agencies, the current private production capacity accounts for more than half of the total capacity of steel enterprises in the country. The number of blast furnaces in private steel enterprises totals 441, with a total volume of 308,400 m3, while the state-owned enterprises have a total of 244 blast furnaces with a total volume of 35.75. Million m3.

Now, these steel enterprises have inherited huge sums of money because of their previous expansion. For example, the book value of a steel company in Shanxi is only RMB 10.068 billion. However, the conservative figure of existing liabilities and external guarantees is RMB 10.459 billion, and the debt ratio is over 100%; The total debt of the steel enterprises in Xiaoxing'anling is approximately 190 billion yuan, and the debt ratio is approximately 80%; a steel company in the southwest has built a new area of ​​antimony-vanadium-titanium and has suffered more than 10 billion short-term losses.

According to industry insiders, due to the previous “sick expansion” of the domestic steel industry, the issue of the capital chain will continue to erupt in the steel industry.

The gloom of profits is no longer glorious. According to statistics from the China Steel Association, the total debt ratio of Chinese steel companies is close to 70%. Among key steel companies, many companies have a debt ratio of over 90%. Miao Changxing, deputy director of the Policy Department of the Ministry of Industry and Information Technology, said that the total liabilities of the Chinese steel industry are about 3 trillion yuan.

Analysts said that since the beginning of 2002, China’s steel production capacity and production have been continuously rising. In 2013, China’s crude steel production capacity exceeded 1 billion tons, and actual demand was less than 800 million tons. This year, China’s crude steel production capacity is expected to reach 1.07 billion tons. In the past five years, the capacity utilization rate of the steel industry in China has been fluctuating below 80%, and the overcapacity situation is serious.

A large excess of production capacity will lead to a long-term downturn in the profits of the steel industry.

The unified view now formed by people in the industry is that the current average profit rate of the Chinese steel industry has fallen to the bottom of the industrial sector, and as production capacity continues to expand, there has been a further decline in profits.

In the first half of this year, the average profit of the steel industry also plummeted, from 6% in January to the current 5.1%. According to data released by the China Iron and Steel Association at the end of June, its member iron and steel enterprises realized profits of 2.267 billion yuan in the first half of the year, with an average sales profit rate of only 0.13%, which is the lowest in the industry.

In addition, from the perspective of profit composition, the main iron and steel industry is still losing money. In the first half of the year, the profit of RMB 2.267 billion included investment income of RMB 4.321 billion and net non-operating income of RMB 3.88 billion. After deducting these factors, the iron and steel industry still suffered major losses.

On the other hand, the profitability of many steel enterprises is still based on the adjustment of the depreciation period of fixed assets. On July 10, Hebei Iron & Steel announced the 2014 semi-annual performance forecast that the net profit for the first half of the year is expected to increase by 318%-344% year-on-year, and the profit will be approximately 320-340 million yuan. At the same time, the announcement shows that Hebei Iron & Steel has changed its fixed position accordingly. The depreciation period of assets will reduce the depreciation of fixed assets by 2 billion yuan, and increase the net profit and owner's equity of the company for 2014 by 1.5 billion yuan.

In addition to Hebei Iron and Steel, Shagang, Valin Steel, Shougang Iron and Steel, and Stellar Technology and other steel listed companies also released performance forecasts, net profit rose year-on-year. Among them, Valin Steel expects to make a profit of 10 million to 30 million yuan in the first half of 2014, which will turn a profit year-on-year.

However, these figures still do not allow the market to return to the confidence of the steel industry. Some people in the industry believe that some steel companies have achieved an increase in their performance through adjusting their losses or relying on subsidies. “Chongqing Iron and Steel, Shandong Iron and Steel, Hebei Iron and Steel are typical, and the former rely on subsidies. The latter two will reduce costs and increase profits by extending the depreciation period of equipment."

It is not easy to reverse the downturn in the short term. In 2014, provinces and cities in various provinces carried out liquidation and rectification of illegal steel projects. The implementation of differential price policies such as punitive electricity price and water price for non-compliance companies will all help to curb capacity expansion. However, according to incomplete statistics, it is estimated that at least 87 million tons of blast furnaces are under construction and planned for construction in 2014 and beyond, and it is expected that the utilization rate of ironmaking capacity will return to a reasonable range at least three years.