The National Development and Reform Commission recently approved two projects, namely Baosteel Zhanjiang Base and Wugang Fangcheng Port Base, with a total investment of over 100 billion yuan. Many people have questioned why these two major projects were launched at a time when the steel production capacity was in full surplus. However, according to some experts, this move can, on the one hand, further optimize the layout of China's steel industry. On the Other hand, it can also restrict the blind expansion of steel production capacity in other regions and promote the integration of the industry.
The layout adjustment of China's steel industry is nearing completion According to the information released by the National Development and Reform Commission, the construction scale of Baosteel Zhanjiang Base is 9.2 million tons of iron, 10 million tons of steel and 9.38 million tons of steel, with a total investment of 69.68 billion yuan; the construction of Fangchenggang Base at Wugang The annual output of iron is 8.5 million tons, steel is 9.2 million tons, steel is 8.6 million tons, and the total investment is 63.99 billion yuan.
When the two major projects were approved, China's steel production capacity was in a state of oversupply. Wu Wen, general manager of “Steel Houseâ€, said that before 2010, the overcapacity in the Chinese steel industry was structural and phased. However, since 2012, the industry has entered a stage of oversupply, that is, the major steel products have been oversupply, and there is little room for further growth in steel consumption. Overcapacity as a major contradiction in the operation of the steel market will persist for a long time.
Based on this, the Development and Reform Commission stressed that the construction of the two major projects is based on the premise of reducing the existing steel production capacity. Among them, Guangdong's cumulative crude steel production capacity was 16.14 million tons, and Guangxi and Wuhan Iron and Steel had a total compressed crude steel production capacity of 10.7 million tons.
It is understood that Baosteel Zhanjiang Base is an important part of Baosteel's "two-corner" strategy (the Yangtze River Delta, the Pearl River Delta, and the northwestern side). The project began to declare as early as the "Eleventh Five-Year Plan" period. Although the national steel production capacity is in excess, Guangdong has a regional shortage: 50 million tons of steel are consumed each year, and its own production capacity is more than 10 million tons. "Northern Steel South" consumes a lot of manpower and material resources.
The WISCO Fangchenggang Base is part of WISCO's "Central and Southwestern" strategy. The project is based on the development of the western region and radiates the Beibu Gulf area. With this project, the inland Wugang has found a seaport that will reverse the disadvantage of high logistics costs.
Luo Tiejun, deputy director of the Department of Raw Materials of the Ministry of Industry and Information Technology, said that the approval of the two projects marked the near completion of the adjustment of China's steel strategy, and also represents an orderly advancement of the 12th Five-Year Plan. He pointed out that after the launch of the two major projects, the blind expansion of iron production capacity in other regions will create constraints.
The continued decline in the profit margin of steel entered the market and forced the adjustment phase. The iron and steel industry, as a basic industry, has a strong driving effect on investment and has always been the focus of macroeconomic control. However, with the massive release of production capacity in recent years, the profitability of the steel industry has been declining year by year, and it is now on the verge of losses. This market environment has created a favorable time window for structural adjustment of the steel industry.
Qu Xiuli, deputy secretary-general of the China Iron and Steel Association, said that in the first four months of this year, large and medium-sized steel companies realized a profit of 1.148 billion yuan, a decrease of nearly 97% from 34.213 billion yuan in the same period last year. The 0.1% sales margin of the steel industry is also at the bottom of the industry.
“Some people say that steel trade companies are more difficult than steel companies, but the actual situation may not be the case. Because steel traders have funds, they can do something else. But steel companies cannot, and its stoves must be opened to produce continuously. Now steel prices In such a downturn, the entire industry is very difficult, said Qu Xiuli.
As the country lowers the deposit reserve ratio and accelerates project approval, the expansion of domestic demand will bring certain opportunities for the steel industry. However, at the same time, including the increase in environmental protection investment and the adjustment of the price of railway freight and other factors, the cost of steel production is difficult to reduce. In the short term, it is difficult to reverse the high cost and low efficiency of the steel industry.
Shi Hongwei, director of the Center for Economic Research of the Metallurgical Industry, said that with the completion of Baosteel's Zhanjiang base and Wugang Fangchenggang base, the steel in the north will no longer go south, which will intensify the survival of the fittest in regions with overcapacity. Luo Tiejun said that in the short term, the Ministry of Industry and Information Technology will not issue support policies for the steel industry, nor will it impose restrictions on the industry, and hope that the industry will push the market to a new stage of adjustment. At present, China's top ten steel companies account for only 42.8% of the country's total crude steel production, which is still a long way from the 60% target in the 12th Five-Year Plan.
Listed companies or companies that have benefited from the approval of asset integration at Baosteel Zhanjiang Base and Wugang Fangchenggang Base have also caused no significant problems at the listed company level. On the next day after the news was announced, Liushan Iron & Steel Co., Ltd., which is located in Guangdong and controlled by Baosteel Group, suffered a daily limit, while Guangxi Steel Co., Ltd., which is located in Guangxi and controlled by the Wuhan Iron and Steel Group, also rose 2.87%.
Baoshan Iron & Steel Co., Ltd., a major listed company of Baosteel Group, once stated that due to the long construction period and large capital investment of the Zhanjiang Iron and Steel Project, it will take time before the project achieves production, standards, and efficiency. Therefore, the company has given priority to investing in the Zhanjiang Steel project. It is agreed that Baosteel Group will invest in the Zhanjiang Steel project, but reserves the right to choose the right to purchase this project in the future.
If Baosteel chooses to purchase Zhanjiang Steel in the future, it will inevitably compete with its peers in the same region. When Songshan Songshan Iron and Steel will go to where it will be, it will not be treated as a “shell†and is an issue that many investors are interested in.
Liusteel also faces the same problem. Guohai Securities researcher Li Huikun believes that the Fangchenggang project approved this time is a thin plate, which seems to overlap with Liugang Group's plate. Fangchenggang is about 360 kilometers away from Liuzhou. Layout of 2 million tons of steel mills in such two regions will surely involve the reintegration of resources. If the listed company “Liu Gang Steel†is used as a platform, injecting the assets of Guangxi Iron and Steel Group (the Fangchenggang Project Implementation Unit) into a listed company may be a way to solve this problem.
Li Huikun also pointed out that the Fangchenggang project of WISCO and the product positioning of Baosteel Zhanjiang project are similar, and the two are not far apart. According to the development experience of the European steel industry, the steel subjects that are too close to each other can easily cause excessive competition and weaken each other's competitiveness. The two great behemoths of the Zhanjiang project and the Fangchenggang project, how to achieve coordinated development in the future is an issue to be observed.
The layout adjustment of China's steel industry is nearing completion According to the information released by the National Development and Reform Commission, the construction scale of Baosteel Zhanjiang Base is 9.2 million tons of iron, 10 million tons of steel and 9.38 million tons of steel, with a total investment of 69.68 billion yuan; the construction of Fangchenggang Base at Wugang The annual output of iron is 8.5 million tons, steel is 9.2 million tons, steel is 8.6 million tons, and the total investment is 63.99 billion yuan.
When the two major projects were approved, China's steel production capacity was in a state of oversupply. Wu Wen, general manager of “Steel Houseâ€, said that before 2010, the overcapacity in the Chinese steel industry was structural and phased. However, since 2012, the industry has entered a stage of oversupply, that is, the major steel products have been oversupply, and there is little room for further growth in steel consumption. Overcapacity as a major contradiction in the operation of the steel market will persist for a long time.
Based on this, the Development and Reform Commission stressed that the construction of the two major projects is based on the premise of reducing the existing steel production capacity. Among them, Guangdong's cumulative crude steel production capacity was 16.14 million tons, and Guangxi and Wuhan Iron and Steel had a total compressed crude steel production capacity of 10.7 million tons.
It is understood that Baosteel Zhanjiang Base is an important part of Baosteel's "two-corner" strategy (the Yangtze River Delta, the Pearl River Delta, and the northwestern side). The project began to declare as early as the "Eleventh Five-Year Plan" period. Although the national steel production capacity is in excess, Guangdong has a regional shortage: 50 million tons of steel are consumed each year, and its own production capacity is more than 10 million tons. "Northern Steel South" consumes a lot of manpower and material resources.
The WISCO Fangchenggang Base is part of WISCO's "Central and Southwestern" strategy. The project is based on the development of the western region and radiates the Beibu Gulf area. With this project, the inland Wugang has found a seaport that will reverse the disadvantage of high logistics costs.
Luo Tiejun, deputy director of the Department of Raw Materials of the Ministry of Industry and Information Technology, said that the approval of the two projects marked the near completion of the adjustment of China's steel strategy, and also represents an orderly advancement of the 12th Five-Year Plan. He pointed out that after the launch of the two major projects, the blind expansion of iron production capacity in other regions will create constraints.
The continued decline in the profit margin of steel entered the market and forced the adjustment phase. The iron and steel industry, as a basic industry, has a strong driving effect on investment and has always been the focus of macroeconomic control. However, with the massive release of production capacity in recent years, the profitability of the steel industry has been declining year by year, and it is now on the verge of losses. This market environment has created a favorable time window for structural adjustment of the steel industry.
Qu Xiuli, deputy secretary-general of the China Iron and Steel Association, said that in the first four months of this year, large and medium-sized steel companies realized a profit of 1.148 billion yuan, a decrease of nearly 97% from 34.213 billion yuan in the same period last year. The 0.1% sales margin of the steel industry is also at the bottom of the industry.
“Some people say that steel trade companies are more difficult than steel companies, but the actual situation may not be the case. Because steel traders have funds, they can do something else. But steel companies cannot, and its stoves must be opened to produce continuously. Now steel prices In such a downturn, the entire industry is very difficult, said Qu Xiuli.
As the country lowers the deposit reserve ratio and accelerates project approval, the expansion of domestic demand will bring certain opportunities for the steel industry. However, at the same time, including the increase in environmental protection investment and the adjustment of the price of railway freight and other factors, the cost of steel production is difficult to reduce. In the short term, it is difficult to reverse the high cost and low efficiency of the steel industry.
Shi Hongwei, director of the Center for Economic Research of the Metallurgical Industry, said that with the completion of Baosteel's Zhanjiang base and Wugang Fangchenggang base, the steel in the north will no longer go south, which will intensify the survival of the fittest in regions with overcapacity. Luo Tiejun said that in the short term, the Ministry of Industry and Information Technology will not issue support policies for the steel industry, nor will it impose restrictions on the industry, and hope that the industry will push the market to a new stage of adjustment. At present, China's top ten steel companies account for only 42.8% of the country's total crude steel production, which is still a long way from the 60% target in the 12th Five-Year Plan.
Listed companies or companies that have benefited from the approval of asset integration at Baosteel Zhanjiang Base and Wugang Fangchenggang Base have also caused no significant problems at the listed company level. On the next day after the news was announced, Liushan Iron & Steel Co., Ltd., which is located in Guangdong and controlled by Baosteel Group, suffered a daily limit, while Guangxi Steel Co., Ltd., which is located in Guangxi and controlled by the Wuhan Iron and Steel Group, also rose 2.87%.
Baoshan Iron & Steel Co., Ltd., a major listed company of Baosteel Group, once stated that due to the long construction period and large capital investment of the Zhanjiang Iron and Steel Project, it will take time before the project achieves production, standards, and efficiency. Therefore, the company has given priority to investing in the Zhanjiang Steel project. It is agreed that Baosteel Group will invest in the Zhanjiang Steel project, but reserves the right to choose the right to purchase this project in the future.
If Baosteel chooses to purchase Zhanjiang Steel in the future, it will inevitably compete with its peers in the same region. When Songshan Songshan Iron and Steel will go to where it will be, it will not be treated as a “shell†and is an issue that many investors are interested in.
Liusteel also faces the same problem. Guohai Securities researcher Li Huikun believes that the Fangchenggang project approved this time is a thin plate, which seems to overlap with Liugang Group's plate. Fangchenggang is about 360 kilometers away from Liuzhou. Layout of 2 million tons of steel mills in such two regions will surely involve the reintegration of resources. If the listed company “Liu Gang Steel†is used as a platform, injecting the assets of Guangxi Iron and Steel Group (the Fangchenggang Project Implementation Unit) into a listed company may be a way to solve this problem.
Li Huikun also pointed out that the Fangchenggang project of WISCO and the product positioning of Baosteel Zhanjiang project are similar, and the two are not far apart. According to the development experience of the European steel industry, the steel subjects that are too close to each other can easily cause excessive competition and weaken each other's competitiveness. The two great behemoths of the Zhanjiang project and the Fangchenggang project, how to achieve coordinated development in the future is an issue to be observed.
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