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“二十年里最差的一年”!钢铁行业寒冬延续 业内人士呼吁“减少内卷”|年度盘点

“The worst year in twenty years”! Steel industry continues cold winter, industry insiders call for “reduction of internal volume” | Annual Inventory

cls.cn ·  Dec 30, 2023 09:49

① Under the double squeeze of supply and demand, the profit level of the steel industry declined sharply in 2023. The production and sales sides of the steel industry chain all felt the “cold winter” of the industry. Some industry insiders said, “This is the worst year in more than 20 years in the industry.” ② Industry insiders called for “reducing internal volume and strengthening industry self-regulation and production limits” to promote the development of high-precision products.

Financial Services Association, December 29 (Reporter Zhang Liangde) In 2023, the steel industry's business environment seems to be worse than last year. Due to insufficient downstream demand for terminals and the fact that raw fuel prices are still high, the profit level of the steel industry fell sharply this year under the double squeeze of supply and demand, and the production and sales side of the steel industry chain felt the “cold winter” of the industry.

As demand for downstream consumer terminals falls, steel companies are still producing at full horsepower, and market competition intensifies, domestic steel companies have fallen into a strange circle where the more they produce, the less they make money. Some industry insiders called for “reducing internal volume and strengthening industry self-discipline and production limits.”

The “cold winter” of the steel industry continues

The “chill” in the steel industry this year was somewhat harsh, and the production and sales sides of the steel industry chain clearly felt the profound changes in the market. First, the head of a leading company in Hebei steel production said within the company that in the next few years, 30%, 40%, or even 50% of steel companies will be eliminated from the market competition. During field research on the Tangshan iron and steel market in the fourth quarter, the head of a steel sales company also said, “This is the worst year in more than 20 years in the business.”

Judging from industry sales data, the steel industry also showed a year-on-year decline in various indicators this year. Statistics from the China Iron and Steel Association show that in the first three quarters of this year, the key statistics were steel companies' revenue of 4.66 trillion yuan, down 1.74% year on year, and total profit of 62.1 billion yuan, down 34.11% year on year. The average profit margin was only 1.33%.

The profit of the steel industry in 2022 fell by more than 90% from the peak in 2021. The industry once claimed that the industry's cold winter had arrived, but the “chill” in the steel industry seems to be even heavier this year. Wu Jianhua, a steel analyst at the Shanghai Steel Union Steel Business Group, told the Financial Federation: “Steel mills were in a state of loss for most months this year. When steel prices rose in the fourth quarter, steel mill profits recovered, so the profit level of the steel industry is expected to be worse for the whole year than in 2022.”

Judging from the financial statements of listed steel companies, not only has the profit situation declined this year, but the main financial indicators of some steel companies have also begun to decline.

The net cash flow from the operating activities of many steel companies declined markedly. The company explained that the net cash flow from the operating activities of Angang Steel (000898.SZ) was 2,774 billion yuan in the third quarter of this year, down 55.24% from 6.198 billion yuan in the same period last year. The net cash flow of Ma Steel (600808.SH) in the third quarter also fell to 1,839 billion yuan, down 69.39% from 6.06 billion yuan in the same period last year. The company explained that the decline in steel prices this year exceeded the decline in raw material prices, which caused Gross profit from steel products and net cash inflows from operating activities declined.

The gross profit of various steel companies also declined markedly. Angang Steel Co., Ltd., Chongqing Steel (601005.SH), and gross sales margins were -0.29% and -0.39%, respectively, and gross profit from product production became negative. Meanwhile, the “good students” CITIC Special Steel (000708.SZ) and Valin Steel (000932.SZ) were also affected. The gross margins for the third quarter were 13.66% and 9.86%, respectively, down slightly by 1.64 points and 0.93 points.

Meanwhile, the downturn in the business situation has also prompted steel companies to start a tight period. Other financial indicators for some steel companies have also declined. For example, Angang Steel Co., Ltd. increased the scale of bill financing in order to save financing costs. The company's notes payable in the third quarter were 15.930 billion yuan, up 35.66% year on year; the company's long-term loans increased to 3,569 million yuan, an increase of 494.83% year on year; and R&D expenses fell from 565 million yuan in the same period last year to 357 million yuan, beginning to reduce the cost of trial production of new products.

The industry continued to decline for the second year, and the challenges faced by steel companies were even more serious. Steel companies not only needed to face the macro environment and the complex environment of the industry market, but also tested the steel companies' own ability to operate in terms of management ability, product structure, financial ability, and sales ability, but also a test of the development strategies of some steel companies.

Industry insiders call for a “reduction in internal volume” to increase the development of high-precision products

China's steel production capacity growth stage has basically reached an inflection point. Recently, at the 2024 China Steel Market Outlook and “My Steel” annual meeting, He Wenbo, Party Secretary and Executive Chairman of the China Iron and Steel Association, said that total steel consumption has peaked, and the decline is an inevitable trend.

End customers in the domestic steel market have changed markedly this year. Construction steel production and sales have all declined markedly, and demand in the industrial steel market has increased. The market generally expects that as China's real estate market enters a stage of transformation and development, it will be difficult for future demand for traditional construction steels such as rebar to reproduce the high growth situation in the past. However, there is still some room for growth in steels related to high-end manufacturing, such as new energy vehicles, shipbuilding industry, high-end equipment manufacturing, etc.

According to Mysteel research, the estimated cumulative output of the five major steel varieties in 2023 is 884 million tons, an increase of 2.3% year on year; of these, rebar fell 3.5% year on year, and hot coil increased 7%. In addition, production of primary materials other than the five major varieties increased by nearly 25 million tons in 2023. Wu Jianhua anticipates that for some time to come, demand for steel in the new energy, steel structure, shipbuilding and other industries will increase, although real estate demand is still under downward pressure.

In the downward cycle of the steel industry, some steel companies have taken different countermeasures. Some steel mills have obtained a better competitive environment in the regional market through relocation and site selection, reducing transportation costs, and improving the regional competitive structure.

For example, Liugang Co., Ltd. (601003.SH) transferred part of its production capacity to the Fangchenggang area, improving raw material transportation conditions and opening a window for overseas market development. A company source said, “The new plant reduces transportation costs by about 200 yuan/ton compared to the old factory area, and at the same time, the production energy efficiency of the new plant is higher.”

Meanwhile, Anyang Steel (600569.SH) has also built a new factory area based on Zhoukou Port, the only major port in the country, in Henan Province, to reduce the transportation costs of raw materials and finished products using the superior resources of Zhoukou Port's rail and water intermodal transportation. According to the reporter's understanding, production has now begun at its Zhoukou plant, and the cost advantage of a ton of steel is quite obvious.

In addition, some steel companies in Hebei have increased their preference for regions with a better competitive environment, such as Liangguang. Guangxi Qiji Steel, a subsidiary of Qian'an Jiujiang Wire Co., Ltd., has officially started production this year, while Jingye Group has also acquired Guangdong Taidu Steel and Guangdong North Guangdong United Steel in the past two years, respectively. There are also some steel companies that explore overseas markets by going overseas. For example, Jianlong Group invests in Indonesia's Dexin Steel and Malaysia's Donggang, and Hegang Group's acquisition of Serbia's Smederevo Steel Works.

Wu Jianhua said that when steel companies expand overseas, they cannot directly obtain a better competitive environment in the market, but it can relatively ease the high domestic supply pressure. In the future, steel companies will also need to carry out deep industry-university-research integration and collaborative innovation, and basically complete high-quality, high-efficiency, low-cost, and zero-risk digital transformation to enable the green transformation, high-quality development, and strong chain operation of the steel industry. This can greatly enhance the international competitiveness of the entire steel industry, rather than relying only on low-value-added products and homogenized competition; they still need to produce high, sophisticated, and sophisticated high-value-added products, etc.

It can also be seen from the financial reports of listed companies that steel companies with a large share of high-end products are more capable of coping with cyclical fluctuations. Examples include Valin Steel, Nangang Steel (600282.SH), CITIC Special Steel, Jiuli Special Steel (002318.SZ), Wujin Stainless (603878.SH), Changbao (002478.SZ), etc.

According to people from Valin Steel Company, the company's steel products account for more than 60%. Most of these products are custom-made products, and the gross margin of the products has remained relatively good, while building materials products can only maintain a low gross profit for most months of this year.

People from Wujin Stainless Company said that the company's products are mostly used in high-end equipment fields such as power plant boilers, new energy, semiconductors, petroleum and petrochemicals, and hydrogen storage. As demand in the downstream industry rises, the company is still in the production capacity expansion stage. The company is still in the market layout of high-end stainless steel pipes for new energy such as photovoltaics, photothermal hydrogen energy, etc., and planning for later projects has begun. This is in stark contrast to the situation of other steel companies in the steel industry.

Wu Jianhua believes that in the face of the current competitive situation in the industry, steel companies should respond positively to the call of the times, promote self-discipline in the industry, reduce disorderly competition and unnecessary bloodless production, consolidate the core competitiveness of products through technological innovation, accelerate transformation to high-end, green, efficient and intelligent, and firmly follow the path of high-quality development.

The translation is provided by third-party software.


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