Reduction of output and loss of Hebei steel enterprises intensified polarization

Steel prices have fallen, inventories have increased, exports have decreased, and profits have fallen. The steel industry in Hebei Province, China’s largest steel province, has been hit hard by the global financial crisis.
Song Jijun, vice president of the Hebei Metallurgical Industry Association, said in an interview with the China Industry News reporter that during this difficult period, the polarization of steel companies in Hebei Province will become more serious. Some small and medium-sized iron and steel enterprises that do not have energy-saving emission reductions, environmental protection standards, poorly-digested capacity, poor management, and lack of funds will be eliminated. For the state-owned key large-scale iron and steel enterprises, the opportunity is greater than the challenge. They will accelerate the optimization and upgrading of the industrial structure and mergers and acquisitions. For some powerful private steel companies, they should work hard to adapt and fundamentally adjust, and strive to shift from survival to development.
Ebb Tide opens
The reporter learned from the China Iron and Steel Association that compared to the average level in the first half of the year, steel profits fell sharply by 81.6% in September, and the loss of large and medium-sized steel enterprises reached 32.4%; in October, the Chinese steel industry saw its first full-industry monthly in 10 years. Loss. Since the deterioration of the situation in August, domestic steel companies have only experienced more than one month from profit to loss.
In Hebei, most small and medium-sized steel companies in Hebei, Hebei, Tangshan, Langfang and other places have been in production or semi-discontinued state since August. There are 41 strip production lines in the Tangshan area, and only 12 are currently in production. The Hebei Iron and Steel Group also announced production cuts of 10% to 20% on the basis of a 20% cut in October.
“The weak global economy and the persistence of domestic inflation pressures have determined that the steel industry will not be able to shake off the downturn in a short period of time. Under such a severe environment, it will inevitably be a process of industry restructuring and scouring,” Song Jijun pointed out. Calling for so many years of limited production capacity, elimination of backwardness, the effect is not very satisfactory, an important reason is that the existence of these small steel mills has market demand. Now that the situation has really changed, the shrinking market will eventually make small steel mills disappear from the industry.
For such powerful Hebei private steel companies as Tianjin, Guofeng, Wenfeng, Puyang, etc., there are challenges and opportunities coexist. At present, it is necessary to study coping strategies, improve competitiveness, and take effective emergency measures as soon as possible, otherwise it may also be eliminated.
For Hebei Iron and Steel Group Corporation, it is time for a fundamental adjustment period focusing on the upgrading of products, technological equipment, and corporate organizational structure. Song Jijun believes that Hebei Iron and Steel Group Co., Ltd. can use this period of downturn in the entire industry to speed up mergers and acquisitions, because technology and scale have become the two cornerstones for the survival and development of steel companies.
Reduced production price limit may not work
Under the severe situation, the reduction of production and price has become the consensus of many steel companies in Hebei.
However, Song Jijun believes that in the face of the global economic recession, the steel industry's measures to reduce production are unlikely to be effective. This is because the issue of overcapacity in the iron and steel industry in China, which has not been solved for many years, has been fully demonstrated under the traction of the financial crisis.
According to the data from China Steel Association, if the production capacity is based on June, the annual output of the Chinese steel industry will reach 570 million tons, and the output capacity in September will be only 470 million tons. Song Jijun hopes to eliminate the eliminated 100 million tons of backward production capacity from the entire industry through this round of market downturn. In this way, the entire industry will really embark on a healthy and sustainable development track.
"Reducing production has a certain effect on insured prices and inhibiting further declines in the market, but it is not a solution." Song Jijun emphasized that due to the low concentration of China's steel industry, the two most difficult things to solve for a long time are the inability to control "yield" timely and effectively. With “price”, it is difficult to stabilize steel prices quickly in the short term because of the limited production of several major steel groups.
In response to a series of favorable policies for expanding domestic demand introduced by the country, Song Jijun believes that these policies have a lagging effect and it is expected that the impact will only begin to show up in the industry within half a year. The domestic economic situation has reversed the current difficult situation, and it will generally take until the end of 2009. He believes: "From now to the first half of next year is very likely to be the most difficult period. The overall steel market in the fourth quarter is difficult to get rid of the weak running pattern."

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