In the first half of the year, the global economic recovery was slow, China's economic growth rate slowed down, structural adjustment efforts increased, and steel demand growth slowed down. However, domestic crude steel production increased significantly, and the situation of oversupply in the market did not change, resulting in sustained low steel prices. Due to the smaller decrease in iron ore prices than steel prices, production costs for enterprises remained high, making business operations very difficult and economic benefits minimal.

1 Characteristics of Steel Industry Operation in the First Half of the Year

oneCrude steel production continues to grow, with daily production levels at a high level

In the first half of the year, the national production of pig iron, crude steel, and steel (including recycled materials) was 357.54 million tons, 389.87 million tons, and 516.96 million tons, respectively, with year-on-year growth rates of 7%, 7.4%, and 10.2%, respectively. The growth rates increased by two-8, six, and four percentage points compared to the same period last year; The national average daily production of crude steel is 210000 tons, equivalent to an annual production of 786 million tons of crude steel. In the first half of the year, the daily production level fluctuated at a high level in each month. In June, the daily production was 210000 tons, a decrease of 7000 tons compared to the previous month, a decrease of 0.32%, showing a downward trend, but still at a relatively high level.

twoSteel inventory first increased and then decreased, still remaining high

In the first half of the year, the social inventory of steel in major markets across the country first increased and then decreased, remaining at a high level. At the end of March, the inventory reached 19.97 million tons, and by the end of June, it had decreased to 15.46 million tons. Although it continued to decline in the second quarter, it still increased by 3.58 million tons or 30.13% compared to the beginning of the year; Basically unchanged from the same period last year.

The inventory of member steel companies also rose first and then fell, staying at a high level. After reaching 14.83 million tons at the end of March, the inventory of enterprises decreased month by month. At the end of June, the steel inventory was 13.1 million tons, an increase of 3.02 million tons from the beginning of the year, with a growth rate of 29.96%; Compared to the same period last year, there was an increase of 20000 tons, or 75%.

threeSteel imports have slightly decreased, while exports have maintained growth

In the first half of the year, a total of 6.83 million tons of imported steel were imported, a year-on-year decrease of 1.8%; Exported 30.69 million tons of steel, a year-on-year increase of 12.6%; The net export of imported and exported steel was 23.86 million tons, including 300000 tons of steel billets. The total net export of raw steel was approximately 25.09 million tons. In the first half of the year, the cumulative import of iron ore reached 3.84 billion tons, a year-on-year increase of 4.9%. The average import price was 13 billion US dollars per ton, a year-on-year decrease of 25 US dollars per ton.

According to the above data, the apparent consumption of crude steel in China in the first half of the year was 364.8 million tons, an increase of 23.24 million tons year-on-year, with a growth rate of six percent. Considering the increase in both corporate and social inventories, as well as the representativeness of the sample of corporate and social inventories, the actual consumption growth rate of crude steel is lower than the apparent consumption growth rate of crude steel, and even lower than the production growth rate of crude steel.

fourFixed assets investment grew at a low speed, and the investment power of enterprises was insufficient

In the first half of the year, the iron and steel industry completed 303.5 billion yuan of fixed assets investment, a year-on-year increase of 26%, which is far lower than the 20.1% growth rate of fixed assets investment and the 17.1% growth rate of manufacturing industry. Among them, the investment in the black metal mining and beneficiation industry was 67.9 billion yuan, a year-on-year increase of 7.8%, a decrease of 15 percentage points from the same period last year; The investment in the black smelting and rolling processing industry was 235.6 billion yuan, a year-on-year increase of 3%, a decrease of 1 percentage point compared to the same period last year. As of the end of June, the investment completed by key statistical steel enterprises accounted for only 7.81% of the annual planned investment, and the implementation progress of investment plans by other enterprises was only 30.153%. This indicates that the investment motivation of steel enterprises, especially key statistical enterprises, was insufficient in the first half of the year. If the annual planned investment can be implemented, a large amount of investment will be completed in the second half of the year.

fiveThe decline in steel prices is much greater than the decrease in imported iron ore prices

Since February this year, steel prices have continued to decline. At the end of February, the comprehensive price index of steel reached 11 to 12 points, but by the end of June it had dropped to 98.52 points, a decrease of 45% from the beginning of the year and 69% from the same period last year. By the end of July, although the comprehensive steel price index had slightly rebounded from the first week of July, it was still only 100.48 points. At the same time, the price of iron ore has decreased, but the decrease is smaller than the decrease in steel prices. In the first half of the year, China imported 38.4 billion tons of iron ore, with an average import price only decreasing by $25/ton year-on-year, and steel production costs remained high.

sixThe profitability of the enterprise is still very low, and the business situation is severe

In the first half of the year, member steel enterprises achieved sales revenue of 1799.8 billion yuan, a year-on-year increase of 0.94%; Realize a profit and tax of 39.79 billion yuan, a year-on-year increase of 49%; After offsetting profits and losses, a profit of 6.67 billion yuan was achieved, with an average sales profit margin of only 0.13%, which is the lowest in the national industrial industry; Out of 86 member companies, 35 are operating at a loss, with a loss rate of 40.7%; In June, due to the continued decline in steel prices, member companies incurred a total loss of 6.9 billion yuan after offsetting profits and losses, marking the first loss of the year.

From the perspective of profit composition, the main steel industry still incurs losses. In the first half of the year, a profit of 2.67 billion yuan was achieved, including investment income of 4.1 billion yuan and net non operating income and expenditure of 3.88 billion yuan. After deducting these factors, the main steel industry still suffered significant losses.

2 The main issues that should be paid attention to at present

oneSteel demand growth is lower than production growth, and supply will continue to exceed demand

In the first half of the year, the gross domestic product increased by 7.6% year-on-year, with a growth rate of 7.7% in the first quarter and 7.5% in the second quarter, indicating a significant slowdown in the national economic growth rate. National fixed assets investment (excluding farmers) increased by 20.1% year on year, 0.8 percentage points lower than that in the first quarter; Real estate development investment increased by 20.3% year-on-year, an increase of 0.1 percentage points from the first quarter growth rate; The added value of industries above designated size increased by 9.3% year-on-year, a decrease of 0.2 percentage points from the first quarter growth rate. Major steel consuming industries such as real estate, machinery, and automobiles still have rapid growth, and steel demand will maintain a certain level of growth.

In the first half of the year, the average daily production of crude steel in China was 210000 tons, equivalent to an annual output of 786 million tons. In June, the average daily production was 210000 tons, although slightly lower than May, it was still at a relatively high level, which put pressure on the market. In the current situation where social and corporate inventories of steel are still high, if steel production cannot be effectively controlled in the second half of the year, the situation of oversupply in the market will be difficult to alleviate.

twoThe industry's difficult situation has not improved

In the first half of the year, although there were still slight profits in the entire industry, the business situation of the enterprise did not improve much compared to last year. This year's total profit has increased by 30.4%, mainly due to a lower base last year. From the perspective of monthly profit realization this year, it shows a decreasing trend month by month; At the same time, there has been a significant increase in the number of loss making enterprises, with the loss area increasing by 3.5 percentage points compared to the same period last year. This situation reminds us that many enterprises' production and operation conditions this year are even more difficult than the same period last year.

threeEnterprise funds are tight, strict control of operational risks

At the end of June, the key statistics showed that bank loans of steel enterprises increased by 105.156 billion yuan year-on-year, an increase of 8.8%. Among them, short-term loans increased by 11.25 trillion yuan, an increase of 1.65%; Long term loans decreased by 799.9 billion yuan, a decrease of 2%. Accounts receivable and accounts payable both increased year-on-year, with accounts receivable increasing by 1.962 billion yuan and accounts payable increasing by 21.43 billion yuan. At present, steel enterprises are facing difficulties in operation with low profitability, and they need to strictly control operational risks.

fourInternational trade frictions are increasing, making exports more difficult

Since 2013, due to the slow recovery of the international economy and increasing international trade protection, several countries such as the European Union, the United States, Australia, and Canada have launched anti-dumping and anti subsidy investigations on China's steel product exports, especially some ASEAN countries, which have strongly reflected on China's steel product exports. With the increasing number of trade friction incidents against China, the difficulty of exporting steel products from our country will further increase. Export enterprises should adjust their export product strategies in a timely manner, increase the export of high-end products, and reduce the export of low-end products.

3 The next key tasks for the steel industry

At present, China's economy is in a critical period of transformation and upgrading, and the economic environment is more complex. The economy has both growth momentum and downward pressure, which brings uncertainty to the operation of the steel industry and makes enterprise production and operation still face great difficulties and severe challenges.

oneSeize opportunities, embrace challenges, and proactively transform and upgrade

Since the 18th National Congress of the Communist Party of China, the country has accelerated the pace of reform, adjusted institutional settings, delegated or abolished a large number of administrative approval powers, further clarified policies for industries with overcapacity, accelerated the elimination of outdated production capacity, and stricter supervision of energy conservation and environmental protection. Most steel enterprises will face new requirements for improving emission reduction and consumption reduction standards, and some enterprises may even have a sense of crisis of being eliminated. But at the same time, the reform has also brought new opportunities for enterprises to transform and upgrade. Strict quality, environmental protection, and safety standards will force enterprises to raise various standards and enhance the drive for sustainable development. Enterprises should actively transform and upgrade, and benefit from early transformation.

twoProactively cooperate to effectively resolve excess production capacity

The Iron and Steel Association will actively cooperate with relevant national departments to resolve excess production capacity. Cooperate to carry out the audit work for enterprises that meet the requirements of the "Steel Industry Standard Conditions", refine the standards according to the conditions based on the first batch of initial review, and use this as an opportunity to promote the elimination of outdated production capacity. Enterprises should also closely monitor and resolve policies and measures related to production capacity, re-examine their own enterprises, and promptly report any difficulties and problems encountered. The association will actively communicate with relevant departments to reflect the demands of enterprises. In addition, enterprises should combine the work of resolving national production capacity with their own production and operation. Firstly, they should eliminate outdated and ineffective production capacity, decisively shut down low-level production capacity that suffers serious losses, and strive to achieve the effect of both eliminating backwardness and reducing losses while increasing efficiency.

threeStrengthen self-discipline and coordination to promote market stability

Give full play to the role of the association, continue to do a good job in self-discipline and coordination in terms of variety output, sales, exports, etc., and promote market stability. One is to organize relevant enterprises to discuss and negotiate, reasonably control the production of key varieties, strictly prevent rapid growth of production, and expand the coordination scope between varieties and enterprises when conditions are ripe; Secondly, we need to strengthen the coordination of supply and demand in the domestic market, regulate the sales behavior of enterprises, streamline the mechanism for forming steel product prices, maintain market stability and overall industry interests, promote win-win cooperation, and avoid vicious competition; Thirdly, we will promote steel exports in a standardized and orderly manner, strengthen information exchange and self-discipline among export enterprises, promote the export of high-end products, and curb the export of low-end products; The fourth is to strengthen export warning work, enhance coordination and communication with major exporting countries or regions' steel organizations, improve understanding, and reduce trade frictions.

fourIn depth“ Benchmarking and tapping potential;, Vigorously reduce costs and increase efficiency

In the face of a severe market environment, further development is needed; Benchmarking and tapping potential; Activity. The association should refine the content of enterprise benchmarking, expand the scope of benchmarking enterprises, and promote the industry through methods such as promoting typical experiences and organizing special seminars; Benchmarking and tapping potential; Continuously deepening work, vigorously reducing costs and expenses, and striving to improve industry profitability. Take practical measures to improve the uniformity of benchmarking standards and the timeliness and comparability of data, in order to enable steel enterprises to compare costs and tap into their own potential in a complex and ever-changing market environment; Ensure profitability; Provide important references.

fiveContinue to promote the work of iron ore spot trading platform

As of May 8th this year, the one-year anniversary of the establishment of the iron ore spot trading platform has seen a trading volume of around 15 million tons, exceeding expectations. The platform is an innovation that explores more fair, open, and transparent price discovery in the context of changes in the pricing mechanism of iron ore trade. Platform trading is conducive to reducing doubts and frictions between upstream and downstream enterprises, providing a communication and transparent channel for everyone, and is the future development direction. At present, the Chinese government's cancellation of iron ore import qualifications is not a relaxation of management, but a change in regulatory mode, no longer conducting pre-approval, but strengthening supervision of market order. With the government strengthening supervision, it is believed that more transactions will be transferred to the platform.

In the future, the focus of the iron ore spot trading platform will still be to further expand the platform's trading volume. To change the service concept, strive to provide high-quality services for both supply and demand sides, and continuously expand the platform's spot trading functions; Call on member companies, especially large enterprises, to take the lead in increasing their procurement volume on the platform; Continue to promote major foreign iron ore suppliers to increase their resource allocation on the platform. In short, the spot trading platform for iron ore plays an important role in discovering prices and promoting fair trade, and member companies should continue to strongly support it.