Steel enterprise profits rose 151%, the industry worried about the expansion of production impulses

(Source: Panoramic Vision)

Economic Observer reporter Dong Ruiqiang went to the production capacity and increased production. In the context of production capacity, the dramatic scene appeared in the steel industry.

According to the latest statistics from the National Bureau of Statistics, in the first half of this year, the country's crude steel output was 450 million tons, and steel output was 530 million tons, up 6% year-on-year. In the first quarter, the country produced 212 million tons of crude steel, an increase of 5.4% year-on-year, and the average daily production of crude steel was 2,357,200 tons, the highest in the same period in history.

In June alone, crude steel output reached 80.2 million tons, up 7.5% year-on-year, and daily average steel production reached 2.673 million tons. This is another historical high value after the crude steel output in April and May reached a new high.

Analysts told the Economic Observer that the average daily output of crude steel in the country from January to May this year was 2.449 million tons, an increase of 170,000 tons from the average daily output of last year. If the annual crude steel output is calculated based on the 2.617 million tons of crude steel per day in May, it will reach 955 million tons this year.

This is worrying the industry.

Liu Zhenjiang, secretary-general of China Steel Association, said: "The excessive growth of crude steel output will undoubtedly bring greater downward pressure on the steel market this year. If such high production growth rate is maintained in the second half of the year, it will further increase the steel market risk. ."

Why not increase and increase?

Zeng Jiesheng, chief analyst of Ouye Yunshang, told the Economic Observer that huge market profits are the main reason for steel mills to start production at full capacity. Large and small steel mills are driven by profits, and even some enterprises that have been shut down have resumed production. Possible.

According to the latest data of China Steel Association, in the first half of this year, the steel and steel enterprises of China Steel Association realized sales income of 1.97 trillion yuan, a year-on-year increase of 15.33%; profits and taxes of 214.493 billion yuan, an increase of 103.77%; realized profit of 139.273 billion yuan, an increase of 151.15 %, the sales profit rate basically reaches the profit level of industrial enterprises above the national scale.

On July 25, Zhong Yong, president of China Iron and Steel Association, said at the enlarged meeting of the executive director of China Steel Association that the industry was running steadily in the first half of this year. Member companies have 75 asset-liability ratios that have fallen year-on-year, accounting for 75% of statistical companies.

The Economic Observer reported that the reporters did not fully count. As of now, more than 20 listed steel companies have released their first-half results for the first half of 2018, and the total profit is nearly three times that of the same period in 2017.

Among them, it is worth noting that the largest absolute value of net profit is Angang Steel (000898). The net profit for the first half of the year is 3.492 billion yuan, up 91.55% year-on-year; Anyang (600569) has the largest increase in net profit, up 3142%-3682% year-on-year. . Hualing (000932) also increased by 253%-274% year-on-year.

Luo Tiejun, inspector of the Raw Materials Industry Department of the Ministry of Industry and Information Technology, believes that driven by high profits, the impulses for capacity expansion of some regions and enterprises are increasing. "Some companies do not fulfill the capacity replacement requirements, 'stopping and dismantling', and expand production capacity in disguise. In the first half of the year, strict prevention of new capacity has become the primary problem facing capacity."

In fact, according to policy requirements, it is not easy to equate de-capacity with production, or to confuse the two. The amount of output depends mainly on the relationship between supply and demand and price changes. The change in output is to adapt to meet market demand. The enterprise decides independently according to changes in market supply and demand, and the market has the final say.

Li Xinchuang, president of the Metallurgical Industry Planning and Research Institute, told the Economic Observer that the comprehensive utilization rate of industrial production capacity in the first quarter of this year has recovered to a reasonable range of about 80%. The capacity utilization rate in the second quarter was 78.5%, an increase of 2.8 percentage points year-on-year. In his view, the reasonable return of capacity utilization is mainly due to the deepening of de-capacity, and the superior production capacity has been better played.

It is understood that the ratio of the actual annual production volume of the industry to the production capacity of all production lines is the capacity utilization rate. The biggest factor affecting the capacity utilization rate should be the market supply and demand relationship.

Zeng Jiesheng said: "When supply is less than demand, capacity utilization increases, or even exceeds 100%, and vice versa. When supply is more than necessary, moderate competition is conducive to promoting technological progress, rational allocation of resources, and improvement of comprehensive social benefits. If the supply seriously exceeds the effective demand, there will be overcapacity."

Before 2016, there was a serious overcapacity, and the industry continued to fall into a cycle of “going to capacity and increasing production”, and the capacity utilization rate continued to decline. According to the China Steel Association, the utilization rate of China's crude steel capacity has shown a significant downward trend in the past decade. After 2012, it has fallen to a reasonable level. In 2015, the production capacity was nearly 1.2 billion tons. In the same year, the domestic steel market demand was only 700 million. Tons, the capacity utilization rate is less than 67%, and the whole industry is in a loss situation.

However, although the output continues to increase, the capacity utilization rate has achieved a reasonable return. This shows that since the de-capacity, the market supply and demand performance is better.

In addition, some experts pointed out that the previous production of “strip steel” was not included in the official crude steel output statistics. After the “strip steel” was banned, its corresponding demand did not disappear, and the compliance steel mill passed Increased production meets this demand. Reflected in the statistics, it seems that the output is much. Experts believe that if this factor is not taken into account, the output is indeed too high. It is not ruled out that the industry will have a situation of oversupply in the second half of the year.

However, Wang Guoqing believes that the domestic economy will not change in the second half of this year. Although the infrastructure investment is under pressure, it is still expected to grow steadily. The new construction and construction area growth rate resilience is still in place, and the manufacturing industry is also expected. Become an important growth direction for demand.

Zeng Jiesheng told the Economic Observer that “the steel market in the second half of this year will not continue to rise as it is now, and the probability of a correction in the middle is quite large. The macro environment will be more severe, and the impact of Sino-US trade disputes will be reflected. After half a year, steel exports will fall."

Going to the second half of the capacity test

In the past two years, the Chinese industry has cumulatively dissolved excess capacity of over 120 million tons, and 140 million tons of “strip steel” capacity was banned, achieving a substantial balance from overcapacity to supply and demand, and steel companies continued to improve. This year, we will continue to resolve the capacity of 30 million tons of crude steel, which is the last 20% of the target of the “13th Five-Year Plan” to reduce the crude steel production capacity of 150 million tons.

According to the "Three-Year Action Plan for Resolutely Fighting the Pollution Prevention and Control of Industry and Communication Industry" issued by the Ministry of Industry and Information Technology recently, the production capacity will be reduced by 30 million tons in 2018, and the goal of reducing production capacity by 150 million tons during the 13th Five-Year Plan period will be completed ahead of schedule.

This means that the industry will solve an unprecedented test in the second half of this year.

The province of Hebei will play an important role in this exam. According to its planning arrangement, Hebei Province will reduce its production capacity by 12 million tons this year, 14 million tons in 2019, and 14 million tons in 2020. By the end of 2020, Hebei's production capacity should be controlled within 200 million tons. It is reported that in the first half of this year, Hebei has reduced the steelmaking capacity by 10.53 million tons.

Li Xinchuang told the Economic Observer that "it is very remarkable to complete the 120 million tons of tasks within two years. It is more difficult to remove 30 million tons of crude steel capacity this year than the previous two years."

Wang Guoqing said that the capacity that was easy to go in the early stage has basically been resolved, and the difficulty of this part of the resolution will increase. However, this year's production capacity will not be as bold as 2017, and it is important to stabilize the results and prevent new capacity.

At the same time, Li Yanjie, director of the Futures Research Center of the Metallurgical Industry Economic Development Research Center, told the Economic Observer that the biggest problem in this year's capacity is to prevent new capacity in the name of capacity replacement. However, the recovery of profits has stimulated the impulse of many companies to expand their production capacity. Even the “strip steel” may try to resume production in various forms. He believes that "capacity can be built, but it must meet the relevant replacement conditions."

However, it is not easy to do this. Xia Wenyong, the chairman of Xinyu Group Co., Ltd. believes that the more the industry is doing well, the more attention should be paid to preventing the enterprises from being shut down and resuming production, and strictly controlling the production capacity to be enlarged in the replacement. For example, the replacement of a 100-ton converter to another place is not the same as the capacity built ten years ago. If it is replaced, the capacity will be amplified. "If you don't solve this problem, the industry may enter a new cycle." Xia Wenyong said frankly, if the industry is still losing money, what else should it take to engage in environmental protection? Therefore, controlling the expansion of production capacity must strictly enforce environmental protection, quality, safety, technology and other regulatory standards. , completely shut down the backward production capacity.

In addition, in the view of Changchun, the president of China Steel Association, maintaining the smooth operation of the industry in the second half of the year is the most important task. "It is necessary to focus on consolidating the results of production capacity, unswervingly resolving excess capacity, prohibiting new capacity and preventing the resurgence of 'strip steel' and establishing a long-term mechanism."

Continued tightening of environmental policies

In addition to the production capacity, the restraining effect of environmental protection and production restrictions on supply is also increasing. In particular, the Beijing-Tianjin-Hebei and surrounding “2+26” cities have stricter production restriction policies, and some steel mills limit production by more than 50%.

Recently, the Ministry of Ecology and Environment has issued the "Working Plan for Enterprise Ultra-low Emissions Reconstruction (Draft for Comment)", which is an important measure to improve pollution discharge standards and implement deadlines.

Tian Weiyong, director of the Environmental Supervision Bureau of the Ministry of Ecology and Environment, told the Economic Observer that the "Announcement on the Implementation of Special Emission Limits for Air Pollutants in the Beijing-Tianjin-Hebei Air Pollution Transmission Channels" issued earlier this year requires existing, thermal power and other industries from this year. From October 1st, special emission limits for sulfur dioxide, nitrogen oxides, particulate matter and volatile organic compounds will be implemented. "The policy standards will be tightened and will be gradually extended to other cities," he said.

It is understood that the land area of ​​Beijing-Tianjin-Hebei and surrounding areas only accounts for 7.2% of the country, but it produces 43% of the country's and 45% of coke. The resource and environmental carrying capacity is close to the upper limit, and the environmental protection of steel enterprises in the region is uneven. Effective capacity still accounts for a considerable proportion. In the opinion of industry experts, this year, the resolution of 30 million tons of production capacity, Beijing-Tianjin-Hebei and surrounding areas is a top priority.

Li Xinchuang said that what is more important is that the differential environmental protection policy will be further deepened in the second half of the year, and enterprises that are backward in environmental protection will be forced to withdraw from the market.

"Environmental protection will continue to be exerted in the second half of the year, and production will be restrained." Wang Guoqing told the Economic Observer that the environmental protection production in key steel producing areas such as Tangshan and Wu'an will continue to strengthen in the second half of the year. The 43-day emission reduction and production limit will increase the output of Wu'an Steel Enterprise's blast furnace to 25-35% in the third quarter. National blue sky defense warfare, heating season limited production and other policies will further become an important constraint to the steel market supply.

She expects cumulative production in the second half of the year to be significantly lower than the first half. At the same time, she believes that based on the high profitability of steel production and operation this year, the cumulative supply in the second half of the year will exceed the level of the same period in 2017, with the adjustment of smelting raw materials, technological improvement and the increase in output of electric furnace steel.

"In the second half of the year, although the industry's operation is facing some pressure, the overall supply and demand is relatively stable, and there is room for improvement. From July onwards, the steel stocks will rise and fall, and the inventory pressure will be small in the second half of the year." Wang Guoqing said that the second half is expected The steel market will be at a high level of volatility and cautiously optimistic, with steel prices running between 4,300 and 4,600 yuan per ton. The focus of steel prices will move further this year, with an overall increase of around 10%.

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