In 2024, China's steel industry is in a critical period of structural transformation, the pressure to improve quality, increase efficiency and reduce cost continues to increase, and steel industry enterprises are facing opportunities and new challenges. How to face the transformation and upgrading of the supply chain of China's steel industry, the construction of new quality productivity and how to avoid risks are the common topics concerned by the industry.
In this context, from March 29 to 30, the 16th China Steel Summit Forum was held in Zhengzhou, Henan Province. The forum was supported by Henan Provincial People's Government and Zhengzhou Municipal People's Government, sponsored by China Iron and Steel Industry Association, China Metal Materials Circulation Association, Zhengzhou Jinshui District People's Government, Henan Steel Network Technology Group Co., LTD.
There are "three high and three low" characteristics in the steel industry
"In recent years, the steel industry has shown the characteristics of 'high output, high cost, high inventory, low demand, low price and low efficiency'." Jiang Wei, deputy secretary of the Party Committee of the China Iron and Steel Industry Association, vice president and Secretary-General, said that the reason for this feature is that the supply side of the elastic release is too large, the upstream raw material end of the price support, the steel price inhibition, it is urgent to unify the thinking of the industry, reduce the production intensity, eliminate vicious competition, and ensure that the steel mill inventory as soon as possible to return to the normal level of previous years.
At present, the operation of China's steel industry has four characteristics. First, China's steel production has remained above 1 billion tons for four consecutive years, and apparent consumption has declined for the first time for three consecutive years, and has fallen below the previous high point for the first time. "China's industrialization process has not yet been completed, and the large-scale development of the steel industry will take a long time." "Jiang Wei said.
Second, production capacity increased significantly, output was released too quickly, and enterprise inventories hit a new high in the same period. From the statistics of the China Steel Association in early March, the key statistics of steel enterprises steel inventory of 19.52 million tons, an increase of 1.5 million tons, an increase of 8.4%; An increase of 1.82 million tons over the same period last year, an increase of 10.3%, is at a historical high. Jiang Wei said that there is a significant positive correlation between the level of inventory and sales profit margin, and the higher the inventory, the lower the sales profit margin. The current enterprise inventory is at the highest level in the history of the same period, and reducing inventory as soon as possible is the primary task of the current industry to ensure efficiency.
Third, the adjustment of product structure has accelerated significantly. As the development of real estate and other industries changes, the output of related products is also changing. Jiang Wei said that overall, the real estate still has no obvious bottoming recovery trend, manufacturing steel, large-scale equipment updates, consumer goods upgrades, will produce a certain amount of new demand for high-end steel, construction steel enterprises must adjust the product structure.
Fourth, steel prices have fallen significantly, fuel prices are high, corporate efficiency has declined sharply, and some companies' cash flow is tight. According to Wind statistics, among the 18 listed companies of Pusteel, there are 12 pre-losses in 2023, accounting for more than 60%; Net profits fell year-on-year for nine companies. As of the end of February 2024, China's net material price index (CSP) was 11192 points, down 0.67% from the end of January, down 0.87% from the beginning of the year, down 5.34% year-on-year. The average CSP in February was 1,216, down 40 percent from a year earlier.
"After the Spring Festival in 2024, rebar prices began to fall, accelerating in March, and then imported iron ore prices also began to fall." "Jiang Wei said.
Jia Kang, former director of the Institute of Financial Science of the Ministry of Finance, said that global steel production has continued to grow in recent years, and China, as the world's largest steel producer, accounts for "half of the country's output", but it also faces the challenge of fluctuating demand.
Li Tao, counselor of the Henan Provincial government and former director of the provincial Department of Industry and Information Technology, said that since the beginning of this year, some steel enterprises have been reducing production or even stopping production for maintenance. Whether the steel demand plateau period can be longer, this year is a key node. If the plateau period can continue, it can provide a longer buffer period for enterprises, but companies still need to plan early and be ready to deal with the impact of falling steel demand.
As far as China's steel industry is concerned, the key point that production enterprises should grasp at present is the inventory problem. Li Tao believes that in the rapidly changing market, especially in such a state where the current price has fallen more, enterprises can not smash the goods in their hands. "As long as you don't hit your hand, you're a winner. It's not complicated." On the other hand, in his view, even if the demand for steel falls in the future, enterprises can reduce the amount but absolutely cannot reduce the quality. "We can change from a quantity country to a quality country, as long as the quality does not decline and the reduction in production is not terrible." Li Tao said that to build a steel power to do a good job of exports, China's steel to internationalization, including the internationalization of raw materials, products and production capacity internationalization. China's steel industry should speed up the global industrial layout, and further expand the "circle of friends" while improving product quality.
Steel enterprises: to make good use of futures tools to avoid risk
"Whether it is a trading enterprise or a warehousing, logistics, processing, distribution enterprise, we must take risk prevention and control as the top priority of the enterprise, the survival of the event to grasp, grasp, grasp, grasp, do not leave space, do not leave gaps, do not leave regrets, rather miss, do not do wrong." Otherwise, at best, it will be a great loss, at worst it will be a complete failure." Chen Leiming, executive chairman and secretary-general of China Metal Materials Circulation Association, stressed the importance of risk aversion in the meeting.
At the meeting, Chen Leiming detailed how companies use futures and derivatives to avoid market risks. Companies can use a combination of derivatives such as futures and options to reduce the impact of price fluctuations, he said. Establish hedging strategy to hedge spot market risk and achieve stable operation. Including the development of a clear hedging purpose, internal control system, capital management rules, business processes and approval mechanisms, risk management measures. Making decisions based on market research. When deciding whether to hedge, enterprises need to conduct market research and stress testing to identify and quantify risks, and then make decisions on whether to hedge.
He says to monitor base changes. The basis is the relationship between spot and futures prices, by monitoring the change of the basis, enterprises can better grasp the market dynamics, so as to make more effective hedging decisions. You can also directly participate in futures market trading to hedge the price risk in the spot market, by trading in the opposite direction in the futures market, lock the price of the commodity at a certain point in the future and reduce the uncertainty caused by price fluctuations.
Participating enterprise traders also told reporters that this year's steel demand delay and the reduction of raw material prices led to a decline in the price of finished materials, as the steel industry chain should make reasonable use of futures tools to avoid risks.
"From the general direction, the transformation of 2024 capacity structure and demand structure is still a very obvious trend, whether it is supply or demand will continue the more obvious differentiation phenomenon, and the supply and demand of industrial materials will be better than that of building materials." The supply side adjusts through profit, but the low profit pattern may not be as volatile as last year, so the performance of demand industries and exports will become more important. The core of the contradiction in the steel industry will actually focus on changes in the difference between supply and demand, and enterprises will use futures tools to control inventory risks." Haitong futures investment advisory Department black group leader Qiu Yihong said at the 29th sub-forum.
Future: The integration of data and reality is the inevitable choice of new quality productivity
Chen Leing said that in the future, the steel industry will show a balance of supply and demand, a reasonable structure, demand recovery, efficient coordination of the supply chain, the deep integration of digital technology and the real economy, fundamental changes in the model, green development, value reconstruction, the gradual expansion of the international space, the ore discourse power greatly improved "ten new ecology".
"With the continuous strengthening of environmental protection policies, the steel industry is facing the pressure of emission reduction and green production, enterprises must increase investment in environmental protection, promote cleaner production technology, in order to achieve sustainable development, in the era of information revolution and new technological revolution digital economy development tide, the steel industry 'real integration' is an inevitable choice to create new quality productivity." Jia Kang said at the meeting.
Jiang Wei believes that in the future, we should focus on solving the three major industry pain points of controlling capacity expansion, promoting industrial concentration, and ensuring resource security. At the same time, he suggested that in the context of the downward trend of the steel industry, enterprises should adhere to the principle of "three sets of three do not" : sales set production, do not turn cash into inventory; Efficiency of delivery, do not produce operational "blood loss"; To order sales, do not turn cash into receivables, and resolutely do not produce a broken window effect. Steel enterprises should unite, participate more in and use the steel industry EPD platform, China's low carbon emission steel standards, and actively respond to CBAM and low carbon trade barriers.
"New quality productive forces are the productive forces that meet the needs of high-quality development of China's economy. The iron and steel industry, as an important basic industry of the national economy, plays an important role in the future industrial innovation and development. At present, the supply and demand relationship of the steel market will usher in new adjustments." China Steel net chairman Yao Hongchao said.
