The issue of excess capacity shows where the steel industry is going

After several years of rapid development, China's steel industry is on its way to a peak, and the problem of overcapacity is gradually emerging. At the 7th Bohai Rim Steel Market Forum held recently, relevant persons from the Ministry of Industry and Information Technology pointed out that during the “12th Five-Year Plan” period, China’s steel demand will enter the top of the peak arc, about 800 million tons, and the industry will show a low growth rate. Low-profit operating trends. Raising steel standards and accelerating product upgrades will be an important task for the steel industry during the “12th Five-Year Plan” period.
Demand will enter the peak During the "Eleventh Five-Year Plan" period, China's steel production capacity will grow rapidly. In 2010, the country’s crude steel production reached 627 million tons, and in 2011 it is expected to exceed 700 million tons. While the rapid growth of steel production capacity, the industry still maintains a low level of profitability.
The Ministry of Industry and Information Technology estimates based on the national economic development level that the demand for the steel industry during the 12th Five-Year Plan period will be between 710 million tons and 800 million tons, and the demand will reach the top of the peak arc and reach the highest point. Luo Tiejun, deputy director of the Department of Raw Materials Industry under the Ministry of Industry and Information Technology, said that the highest demand in the steel industry may occur during the “12th Five-Year Plan” or even the “Thirteenth Five-Year Plan” period. The peak value is about 800 million tons, and this peak may last for ten years. fifteen years.
“In the continuous development of production capacity and the pressure of upstream and downstream prices, the profits of the steel industry have been unsatisfactory. Especially after entering the end of October, the price of steel fell sharply, affecting the profit level of the industry.” According to Luo Tiejun, this year In the 10 months, the sales margin of the steel industry was only 2.91%, which was less than 2% after deducting the profits of Baotou Steel Rare Earth. The iron and steel industry has had an overall profit margin of less than 3% for two consecutive years.
In October, the domestic steel market experienced the largest wave of decline during the year. Data show that at the end of October, Lange Steel's comprehensive national steel price index was 171.7, a sharp drop of 7.1% from the previous month, and the national average price of long products and plates fell by 340 yuan from the end of last month. Which long products fell 7.3%; plate fell 6.6%. The oversupply of domestic resources, slowing demand, and tight funding have caused manufacturers to lose confidence and the steel price has broken down.
Luo Tiejun said that at present, the steel industry is faced with severe challenges such as high resource prices, slower demand growth, and increased environmental pressure. The homogenization of product competition is intensifying. It is expected that the industry will show a low growth rate and low profit during the “12th Five-Year Plan” period. Running situation.
The "12th Five-Year Plan" ushered in the transition period, "the market environment is forcing steel to enter the key stage of changing the direction of development." Luo Tiejun bluntly, speeding up product upgrades will be the "12th Five-Year Plan" during the steel industry's most important task. A small number of large steel companies can focus on the development of high-performance steel products. For most steel companies, the quality and stability of the “big and wide” products should be improved.
Luo Tiejun revealed that during the "12th Five-Year Plan" period, the supervisory level will raise the standards for steel and promote the upgrading of products. “From July, China’s construction projects have given priority to the use of Grade III rebar. The next step will be to reform the rebar production standards. The original plan is to complete the plan within two years. At present, it is planned to complete the formulation of rebar production standards in the first half of next year. It is forbidden to produce Class II rebar.” Luo Tiejun said that in the future, through the coordination of upstream and downstream, creating conditions for the transformation and upgrading of the steel industry.
Li Yongjun, deputy director of the Comprehensive Department of the China Iron and Steel Association, pointed out that when it is difficult to achieve breakthroughs in the steelmaking and ironmaking processes, the Chinese steel industry needs to integrate industrial chains upstream and downstream. "The integration of the steel industry is based on the vertical extension of the iron and steel industry and diversification. The key point is to break the industry boundaries and reduce the overall operating costs of the industrial chain." Li Yongjun said bluntly.
At present, the characteristics of "resources are king" of the global steel industry have already appeared. ArcelorMittal, the world's largest steel manufacturing group, has proposed that the self-sufficiency rate of ore in the future will reach 70%. Obviously, China's steel industry also needs to gradually develop upstream and downstream.
Li Yongjun said that in the future, China should gradually incorporate the iron ore industry into the steel industry and strengthen the integration of capital in steel production and distribution and processing enterprises.

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