The era of meager profit in the steel industry is the key to controlling the total production

Despite the meager profit era, the steel industry's worse moment may not have arrived. The further slowdown of the macro economy next year will be a high probability event, which will lead to further shrinking of the downstream demand of the steel industry, and the characteristics of iron ore that are easy to rise and fall will undoubtedly increase the difficulty of the operation of the steel industry. However, the upgrading and transformation of the steel industry implies opportunities. The differential development of high-end steel products by steel companies is a breakthrough. Even if the whole industry is still in a low-profit operation, those steel enterprises that are committed to developing high-quality special steel varieties are still worth looking forward to. . The worst moment has not yet arrived. It is not too difficult to take stock of the performance of China's steel industry in the past few years. It can be said in one sentence: Under the double squeeze of high-priced mines and the contradiction between supply and demand, the low-profit status will be maintained for a long time. In October, 77 large and medium-sized steel enterprises in the China Iron and Steel Association had 25 losses, and the sales profit rate was only 0.47%, which was at the lowest level in history. Although the situation was severe, the 0.47% profit rate still let Luo Bingsheng, deputy secretary of the China Iron and Steel Industry Association Party Committee, take a breath. He said: "You can see that the loss is more than the profit. The demand for social steel will weaken next year. The low-efficiency trend of the steel industry will continue. The data show that from January to October, the sales profit rate of China's large and medium-sized steel companies was only 2.8%, lower than the average profit level of China's industrial sector. If the investment income of iron and steel enterprises is deducted by 5.494 billion yuan, the profit of the main steel industry is actually only 63.845 billion yuan, and the sales profit rate is only 2.58%, which is lower than the bank interest rate. But a worse moment may not have arrived yet. Hu Yanping, an analyst at China United Steel Network, said that due to the complex and volatile external environment, the investment is restricted by real estate regulation and the lack of endogenous consumption, the further slowdown of macroeconomics in 2012 is a high probability event. Under the background of further slowdown in macroeconomic growth, the performance of the major steel industry is not very optimistic, which will lead to further shrinking demand in the downstream of the steel industry. In addition, the characteristics of iron ore easy to rise and fall will undoubtedly increase the difficulty of the steel industry. According to a report released by Huatai United Securities recently, high production, high cost and low downstream demand growth are the fundamental reasons for the decline in profitability of the steel industry. Iron ore continues to be highly dependent on imports, steel mills have insufficient purchasing power, and the industry continues its low-profit operation next year. In the judgment of iron ore price trend, Hu Yanping believes that the global and domestic iron ore supply and demand relationship is difficult to fundamentally change in 2012, and iron ore prices may decline slightly. Guo Jin Securities (600109, shares it) steel industry analyst Wang Zhaohua reminded that steel mills usually have one to one and a half months of iron ore inventory, so the sharp drop in iron ore prices in October caused huge assets for steel companies Loss, which means that steel companies may have a very poor situation in the fourth quarter. Controlling the total amount of production is the key. On the one hand, the year-on-year decline in demand, on the other hand, the year-on-year increase in output growth. The contradiction of oversupply continues to accumulate and intensify, bringing the supply-demand relationship at the end of September to the most tense state. This led to a comprehensive and sharp drop in steel prices in October.” Luo Bingsheng said the crux of the steel industry. In the past 10 years, China's steel industry has experienced an amazing scale expansion. From 2000 to 2009, China's crude steel output grew at an average annual rate of 27.2%. It is this extensive expansion that has inevitably encountered resources and environmental bottlenecks in the industry, which has caused the steel industry to fall into the era of low profits. Luo Bingsheng said that both GDP (gross domestic product), fixed asset investment, and industrial added value have slowed down this year. The GDP and industrial added value are on a quarterly basis, and the demand for steel is gradually weakening. At the same time, from the perspective of steel production and supply, it has shown a growing trend. Data show that in the first quarter of this year, China's crude steel output increased by 8.7% year-on-year, an increase of 13.58 million tons; the first half of the year increased by 9.6%, an increase of 30.66 million tons; the first three quarters increased by 10.7%, an increase of 50.83 million tons. From these figures, it can be found that the growth rate of China's crude steel production level is gradually increasing. Luo Bingsheng said that the current slowdown in economic growth will continue in the next year, and GDP growth is expected to fall back to 8.5% or even lower. The main feature of China's steel industry development is the pull of market demand. The slowdown in economic growth next year will have a major impact on the steel industry. The demand for steel in the whole society will be significantly weaker than in 2011. "In this case, we should proceed from the reality of social demand, insist on organizing production according to actual needs, control the total amount of steel production, and achieve a basic balance between supply and demand in the domestic steel market. If the total production cannot be effectively controlled, it will continue this year next year. The situation of oversupply in the domestic market, overall decline in market prices, and difficulties in business operations may even lead to greater difficulties." Luo Bingsheng stressed. Judging from the slowdown in the growth of the downstream steel industry, Luo Bingsheng’s judgment can basically be confirmed. Whether in the automotive, construction machinery or shipbuilding industries, the growth rate of the industry has slowed sharply. The demand for steel in these industries is obviously difficult to increase significantly in the short term. In fact, this situation has already attracted the attention of steel mills, and many steel mills have begun to take measures such as maintenance and shutdown. According to statistics from the Bureau of Statistics, in October, China's crude steel output was 54.67 million tons, and the average daily production level was 1.76 million tons, down 130,000 tons from the previous month, which was 8.4% lower than the average daily production level of 1.93 million tons from January to September. High-end products receive policy support However, from a longer-term perspective, given that China's economic development is still in a steady growth stage, the steel industry is expected to be extremely strong. On the one hand, after the most difficult time, the steel industry has a huge upward rebound in profitability; on the other hand, the third steel industry program document recently, “The 12th Five-Year Development Plan for the Iron and Steel Industry” implies the government’s regulatory thinking. The transformation also gives the industry new expectations. From the perspective of production prospects, the “12th Five-Year Development Plan for the Iron and Steel Industry” predicts that by 2015 China's crude steel consumption will reach 750 million tons. Li Xinchuang, deputy secretary general of China Steel Association, said that the industry is very controversial in forecasting future crude steel consumption. However, this data may be conservative. China's steel output is expected to reach 700 million tons this year. From this point of view, there is still room for development in the steel industry in the future. It is worth noting that the “Twelfth Five-Year Development Plan for the Iron and Steel Industry” regards the quality of varieties as the primary goal of planning, instead of the previous total control to curb excess capacity. In this regard, Luo Tiejun, deputy director of the Raw Materials Industry Department of the Ministry of Industry and Information Technology, explained that steel materials are the most widely used structural materials and important functional materials. China's steel industry still has shortcomings in the quality of steel products. The scale of China's steel industry has been large, and it has already had the basis for transformation from large to strong. The steel industry should realize the transformation from focusing on scale expansion to focusing on variety quality and efficiency, relying on technological progress, scientific management and talent growth. Li Xinchuang believes that in order to meet the needs of industrial transformation and upgrading, steel enterprises should put product upgrades in the first place, and increase the quality, grade and stability of steel products with a large amount of breadth as the top priority of product structure adjustment. At the same time, accelerate the development of key steel products, encourage powerful steel enterprises to develop high-end steel products, while avoiding investment waste and disorderly competition of high-end products. Li Shijun, chief analyst of China Steel Association, said that the slowdown in demand growth, industrial upgrading of steel industry, environmental resource constraints, and homogenization competition will be the four major challenges facing China's steel industry. We must attach importance to cultivating and upgrading the high-end competitiveness, and accurately grasp the characteristics of the world economic structure entering the adjustment period, and strive to cultivate new advantages for China's development. The direction of these all-industry efforts, the new development advantage in the gestation is the potential investment opportunities brought about by the transformation and upgrading of the steel industry, but the steel industry has to reproduce the past chapters, and it still needs to wait for some time.

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