In the first quarter of this year, the revenue and profit of China’s steel industry decreased due to supply constraints, shrinking demand, rising costs and other factors.
On April 25, China Iron and Steel Industry Association held an information conference for the first quarter of 2022. The data showed that the operating revenue of iron and steel enterprises of China Iron and Steel Association members in the first quarter was 1499.3 billion yuan, a year-on-year decrease of 3.26%; The total profit was 55.3 billion yuan, a year-on-year decrease of 25.8%.
Qu Xiuli, vice president and Secretary General of China Iron and Steel Industry Association, said at the press conference that affected by factors such as the tightening situation of epidemic prevention and control in some regions and the rapid rise of bulk commodity prices, iron and steel enterprises are facing difficulties such as blocked logistics and transportation and sharp rise in costs. Stricter environmental protection control and arduous carbon reduction tasks also bring new challenges to their production and operation.
Qu Xiuli said that in the next step, in accordance with the requirements of “stabilizing production, ensuring supply, controlling costs, preventing risks, improving quality and stabilizing benefits”, CISA will closely track the changes in markets outside China, continue to strengthen the monitoring and analysis of economic operation, take the balance of supply and demand as the goal, strengthen industry self-discipline, maintain the elasticity of supply, and strive to promote the stable operation of the whole industry on the basis of ensuring supply and stable price.
weak supply and demand benefit decline
Affected by the superposition of multiple factors such as staggered peak production in heating season, scattered and frequent outbreaks of epidemic diseases and limited circulation of personnel and materials, the market demand is relatively weak, and the steel production is at a low level.
In the first quarter, China’s pig iron output was 201 million tons, a year-on-year decrease of 11.0%; The steel output was 243 million tons, a year-on-year decrease of 10.5%; Steel output was 312 million tons, a year-on-year decrease of 5.9%. From the perspective of daily output level, in the first quarter, China’s average daily output of steel was 2.742 million tons, although it decreased significantly year-on-year, but it was higher than the average daily output of 2.4731 million tons in the fourth quarter of last year.
In terms of demand, since March, China’s epidemic has shown a trend of local aggregation and multi-point distribution, and the demand for downstream steel has started slowly. According to the calculation of the Steel Association, in the first quarter, the actual steel consumption in the main steel industry decreased by 5% year-on-year, including 7% in the construction industry and 2% in the manufacturing industry. Over the same period, China’s apparent steel consumption was about 235 million tons, a year-on-year decrease of 9.5%.
Shi Hongwei, deputy secretary of China Iron and Steel Association, said that with the control of the epidemic, the improvement of the supply chain and industrial chain of the iron and steel industry, and the gradual smoothness of bulk logistics, iron and steel consumption is optimistic in the later stage. In the second half of this year, the steel consumption base will not be weaker than that in the same period last year, and the suppressed demand in the early stage will be released.
Under the background of weak supply and demand, the economic benefits of the iron and steel industry decreased year-on-year. According to the statistics of iron and Steel Association members, the business income of iron and steel enterprises decreased by 99.3% year-on-year in the first quarter; Profits and taxes reached 82.9 billion yuan, a year-on-year decrease of 19.66%; The total profit was 55.3 billion yuan, a year-on-year decrease of 25.8%, with a month-on-month recovery trend. The asset liability structure of enterprises was further optimized. At the end of March, the asset liability ratio of member steel enterprises was 61.08%, a year-on-year decrease of 1.73 percentage points.
Qu Xiuli analyzed that at present, the international bulk commodity market fluctuates greatly, and the prices of raw and fuel materials such as iron ore, coking coal, coke and scrap steel for steel production rise rapidly and continue to be high. Superimposed on the impact of stricter epidemic prevention and control on personnel flow and logistics transportation, the cost of iron and steel enterprises continues to rise, making it more difficult to improve economic benefits.
According to the monitoring of CISA, at the end of March, the imported ore price of China iron ore price index (ciopi) was US $158.39/ton, an increase of 33.2% over the beginning of the year. In the first quarter, the average market prices of coking coal, metallurgical coke and scrap steel were 2813 yuan / ton, 3167 yuan / ton and 3665 yuan / ton respectively, with a year-on-year increase of 75.1%, 27.0% and 13.5% respectively.
Qu Xiuli said that affected by the epidemic, the control of expressways has been strengthened, the policy standards are not unified, the automobile transportation capacity has decreased, some logistics nodes such as ports, docks and warehouses have encountered problems such as limited operation and insufficient personnel, and the land transportation capacity, warehouse receiving and inspection capacity and port dredging capacity have decreased, resulting in poor transportation of raw materials, energy and other production materials and poor export and shipment of products, Enterprises are faced with difficulties in entering the factory, production organization and contract execution.
steel industry merger and reorganization acceleration
Xinyu Iron & Steel Co.Ltd(600782) ( Xinyu Iron & Steel Co.Ltd(600782) . SH) announced on April 24 that on April 23, Jiangxi state owned capital operation Holding Group Co., Ltd. and China Baowu signed a free transfer agreement of state-owned equity, and Jiangxi state control will transfer 51% of its equity of Xingang group to China Baowu free of charge.
Prior to the transfer, Jiangxi state holding held 100% of the equity of Xinyu Iron and Steel Group Co., Ltd., the controlling shareholder of Xinyu Iron & Steel Co.Ltd(600782) and the shareholding ratio decreased to 49% after the transfer. After the transfer, China Baowu will indirectly control Xinyu Iron & Steel Co.Ltd(600782) 44.81% of the shares through Xingang group, and the actual controller of Xinyu Iron & Steel Co.Ltd(600782) will also be changed from SASAC of Jiangxi Province to SASAC of the State Council.
Since the second half of 2019, China Baowu has successively reorganized Chinese iron and steel enterprises: in September 2019, it reorganized Anhui state-owned Masteel group; In August 2020, Taiyuan Iron and Steel Group, a state-owned enterprise in Shanxi Province, was jointly restructured. In September, it took over Chongqing Iron & Steel Company Limited(601005) (01053. HK), hosted Sinosteel group in October, and acquired Xinxing Ductile Iron Pipes Co.Ltd(000778) Xinjiang company and private enterprise Yili iron and steel in November; In February 2021, it announced the merger of Kunming Steel holding, a state-owned enterprise in Yunnan, and planned to restructure Shangang group in July; In January 2022, Baowu entrusted Baotou Steel Group with steel pipe and other businesses.
At present, the strategic reorganization of Shangang group by China Baowu iron and Steel Group Co., Ltd. is being promoted. At the end of March, Anyang Iron & Steel Inc(600569) announced that Fangda iron and Steel Group plans to participate in the equity bidding of Angang Group for mixed ownership reform. If the mixed ownership reform can be successfully implemented, the actual controller of Anyang Iron & Steel Inc(600569) will be changed.
Wang Jing, a researcher of Lange Iron and Steel Research Center, analyzed that the merger and reorganization of the iron and steel industry is continuously promoted. On the one hand, it has the role of policy guidance, on the other hand, after entering the mature period, merger and reorganization is the inevitable trend of industry development and the spontaneous market behavior of enterprises.
On February 7 this year, the Ministry of industry and information technology and other three departments issued the guiding opinions on promoting the high-quality development of the iron and steel industry, which clearly encouraged industry leading enterprises to implement merger and reorganization and build a number of world-class super large iron and steel enterprise groups. Peng Huagang, Secretary General of SASAC, also made it clear at the press conference of the state information office in January this year that this year, we will steadily promote the restructuring and integration of iron and steel and other fields, and timely study and establish a new central enterprise group in relevant fields.
Wang Jing said that the iron and steel industry has entered a high-quality development stage, and China’s per capita crude steel consumption has reached the level at the peak of per capita crude steel consumption in developed countries in the past. The industry reduction is imperative. The national development and Reform Commission proposed to continue to reduce crude steel production in 2022, which will still be the window period of integration and reorganization at present and in the next few years. The development logic of the iron and steel industry is also changing. Capacity integration and reduction optimization are inevitable laws. The improvement of concentration and product structure optimization will become the main theme of industrial development. Secondly, on this basis, the comprehensive competitiveness of iron and steel enterprises and products will be improved.
\u3000\u3000 “With the advancement of production capacity integration, the improvement of the concentration of the iron and steel industry is a deterministic trend. The reduction of the number of enterprises can optimize the competitive structure of the industry and reduce disorderly competition, which is conducive to stabilize the market price fluctuation and promote the stability of steel prices to a certain extent. The integration of tail enterprises is also conducive to focusing on subdivided areas, improving the bargaining power of upstream and downstream, weakening the periodicity of the industry and promoting the profitability of the industry and enterprises Profits are more stable. ” Wang Jing said.
