Financial Services Association, January 30 (Reporter Zhang Liangde) 2023 is known as “the hardest year for the steel industry in 20 years”. While the operating performance of most companies in the steel industry declined or lost money, Baosteel's (600019.SH) performance remained stable, exceeding the expectations of the industry and investors.

Hu Wangming, Party Secretary and Chairman of Baowu Group, mentioned in his New Year message a few days ago that in 2023, the steel industry entered the sixth round of downward cycle mainly characterized by volume reduction and structural adjustment, and enterprise production and operation faced huge challenges. The company adjusted its business strategy according to the times and circumstances, proposed a “four-way” business program with ordered production, marginal output, profitable income, and cash profit. Through account settlement and lean operation, the company continuously improves operational efficiency, efficiency and operating performance levels, and effectively responds to cyclical changes. The main production and operation indicators have steadily ranked first in the industry.

In 2023, Baosteel achieved total operating income of 346.926 billion yuan, a year-on-year decrease of 6%; realized net profit of 12.007 billion yuan, a year-on-year decrease of 1.48%; deducted non-net profit of 10.692 billion yuan, an increase of 2.51% over the previous year. This performance was very impressive in the face of a sharp decline in the overall profitability of the steel industry.

Differentiation strategies and competition for greening and differentiated products, and seizing the development opportunities of product exports may be the key for the company to maintain a good level of profit this year.

Wang Juan, secretary of the company's board of directors, said at an investor exchange event in November that the proportion of the company's differentiated products exceeds 50%, and it is growing at a rate of one million tons every year, which further enhances the company's ability to withstand cyclical risks. At the same time, the company is strengthening its international layout and seeking an environment with energy endowment advantages and downstream demand markets. This year, Baosteel has secured an export volume of 5 million tons, aiming for 6 million tons.

Regarding the business environment of the steel industry in 2024, Hu Wangming believes that China's steel industry is still in the long-term adjustment stage and is facing multiple pressures and challenges.

In the downturn of the industry, it is usually an opportunity for leading companies to expand mergers and acquisitions. Wang Juan said that Baosteel will continue to carry out mergers, acquisitions and restructuring in the future.

According to Wang Juan's analysis, the industry as a whole has entered a new stage of stock structure optimization and adjustment. It is very difficult for steel companies to increase production capacity and production domestically. In the future, the process of structural optimization and restructuring of existing production capacity will require mergers and restructuring between steel companies to achieve high-quality development.

Regarding the future pattern of mergers and acquisitions in the steel industry, Wang Juan believes that there will be three main forms: one is the merger and acquisition integration of local state-owned enterprises with a degree of integration and complementarity with their own products; second, the mergers and acquisitions of local state-owned enterprises; third, restructuring between private enterprises and private enterprises or local state-owned enterprises; at the same time, the industry's stock production capacity will be optimized and upgraded within the next few years, and the added value and technical content of domestic steel products will be newly improved.