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Crude steel production is growing too fast, steel industry oversupply pressure appears

2018-05-21


Data released by the National Bureau of Statistics on May 15 showed that in April, my country's crude steel output reached 76.7 million tons, an increase of 4.8 percent year-on-year; the average daily output of crude steel was 2.5567 million tons, a record high. Xu Liying, a researcher at the Lange Iron and Steel Research Center, told the first financial reporter that since the beginning of this year, due to the elimination of ground steel, off-balance sheet data has been shifted to the table, and steel production has been at a relatively high level. However, considering factors such as environmental protection and production restrictions in many places, the market generally predicted that the average daily output of crude steel in April would be around 2.45 million tons (that is, near the peak level of 2.441 million tons last year). However, from the published data, 4

Published by the National Bureau of Statistics on May 15DataIt shows that in April, my country's crude steel output reached 76.7 million tons, a year-on-year increase of 4.8; the average daily output of crude steel was 2.5567 million tons, a record high.

Xu Liying, a researcher at the Lange Iron and Steel Research Center, told the first financial reporter that since the beginning of this year, due to the elimination of ground steel, off-balance sheet data has been shifted to the table, and steel production has been at a relatively high level. However, taking into account factors such as environmental protection and production restrictions in many places, the market generally predicted that the average daily output of crude steel in April would be around 2.45 million tons (that is, near the peak of 2.441 million tons last year). However, according to the published data, the daily output of crude steel in April was 115700 tons higher than last year's peak, greatly exceeding market expectations.

Judging from the month-on-month data, the average daily output of crude steel in April increased by 170200 tons from the previous month. According to the data released by the China Iron and Steel Association, the average daily output of member companies in April increased by 131000 tons from the previous month. It can be seen that the increase in crude steel output is mainly concentrated in large and medium-sized steel companies.

Since April, with the gradual release of demand, the speed of steel market transactions has accelerated, and steel prices have rebounded rapidly. On the supply side, with the continuous improvement of industry efficiency, the continued high steel prices have promoted supply production to a certain extent. According to Lange Steel Network market monitoring data, in early May 2018 (May 7), the national steel composite price index rose 97.4 percent from the beginning of 2016 (February 1), an increase of nearly double.

In Xu Liying's view, the large increase in profits brought about by the maintenance of high steel prices is undoubtedly the main reason for the continuous increase in crude steel production this year. In the first quarter, the overall profit of the ferrous metal smelting and rolling processing industry increased by 64.1. In the same period, the total profit of large and medium-sized iron and steel enterprises was 56.932 billion yuan, compared with 23.284 billion yuan in the same period last year. Obviously, large and medium-sized iron and steel enterprises have stronger profitability.

First quarter of 2018 SteelListingThe effect of corporate deleveraging is obvious,SalesExpenses, management expenses and financial expenses all showed a downward trend, the asset-liability ratio decreased, cash flow improved, operating income increased, and the overall profit margin performance was better.

Under the general environment of a good industry situation, the impulse of iron and steel enterprises to expand production capacity and increase production cannot be avoided. It has been reported that with the improvement of the efficiency of steel mills, some zombie enterprises have secretly resumed production. In addition, some iron and steel enterprises changed electricity last year, and the production capacity of electric furnaces was also released in succession during the year.

The China Iron and Steel Association warned that the excessive growth of crude steel production has created greater downward pressure on the market and brought hidden dangers to the normal operation of the entire industry. The steel industry may once again oversupply.

"Steel prices rose last year and many steel companies made money and want to continue this year. But they don't see that China's economy has shifted from high-speed growth to high-quality development, and the GDP growth target of about 6.5 percent means that the demand for steel is not as great." China Steel Association Secretary General Liu Zhenjiang said.

From the perspective of enterprise production and operation, high profits will inevitably bring high output. But can steel mills fully release capacity? Shanghai Steel UnionInformationDirector Xu Xiangchun thinks maybe not. Xu Xiangchun said that the China Steel Association only counted the output of key steel enterprises, and the output of non-key steel enterprises was not included in the table. Environmental protection production restrictions have a greater impact on these enterprises. Such as Xuzhou area production restrictions, Tangshan area non-heating season blast furnace implementation of 10-15% production restrictions, Wu'an area most steel mills blast furnace production restrictions of 50%, etc., environmental protection production restrictions make steel production potential is limited, it is expected that the increase in steel production in May will not be too much.

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