The pace of overcapacity reduction accelerated the short-term stability of the steel market

                                                                        Column:Company News Time:2021-11-03
                                                                        Recently, the editor learned from the Dongfeng Yueda Kia dealer in Guangzhou that while the official price of the Sierra Tuco (Equipped image library Reputation Platform) was reduced by rmb4000 recently......

                                                                           Since last November, supply side reform has become a high-frequency word, widely concerned by public opinion. What is supply-side reform? It is to start from the supply and production end, through the liberation of productivity, enhance competitiveness to promote economic development. Specifically, we will cut overcapacity, reduce inventory, deleverage, cut costs, and strengthen areas of weakness. Among them, overcapacity was placed in the first place, which is a strong medicine and good medicine for the iron and steel industry with serious overcapacity.

                                                                          According to cISA data, from January to November 2015, the national crude steel output of 738.38 million tons, down 2.2% year on year, the same period last year for 1.9% growth; Steel output was 1,028.12 million tons, up 1%, or 3.5 percentage points lower than last year. In the first 11 months, key iron and steel enterprises suffered a total loss of 53.132 billion yuan, a record. Although the data show that China's crude steel output in 2015 for the first time negative growth, released a positive signal to the market, but the iron and steel enterprises continue to high losses, reflecting the difficult survival of the iron and steel industry. In 2015, the steel industry broke out again due to the failure of the capital chain caused by steel enterprises, bankruptcy phenomenon, making steel enterprises at the edge of the "line of life and death". Steel enterprise reform has reached the "arrow, have to send" degree.

                                                                          According to rough estimates, China's crude steel production capacity is about 1.2 billion tons, oversupply is the most fundamental problem of the steel industry. In addition to the "root of the disease" not only to prohibit the construction of new capacity projects, more important is for the existing iron and steel enterprises, especially those half-dead "zombie enterprises", accelerate the pace of its bankruptcy exit from the market, so as to achieve excess capacity, reduce the market supply pressure, achieve the purpose of industrial balance and balance between supply and demand. The government also through strengthening environmental protection, energy consumption, quality, safety and other hard constraints and other channels to force steel enterprises to actively reduce capacity, encourage steel enterprises merger and reorganization, out of part of the capacity.

                                                                          owever, the reform of steel enterprises brings not only capacity reduction, but also a series of chain reactions, such as employment, tax, debt and so on. This means that overcapacity reduction cannot be achieved overnight. In the future, it will be mainly carried out gradually and steadily.

                                                                          At present, China's steel overcapacity, mainly concentrated in the construction of steel and other low-end steel, steel enterprises between the uneven product quality. At the same time, high-quality special steel still depends on imports to fill. Therefore, the future steel enterprises can no longer keep the "old" life, in the capacity at the same time, but also from technological innovation, improve product quality, promote enterprise product upgrading, accelerate the high-end, intelligent, green aspects of transformation and production.

                                                                          So can reform bring light to the depressed steel industry? Rome was not built in a day, it is easy to say to capacity, and it is difficult to do it. It is difficult to play a role in the decline of steel prices in the short term.

                                                                          Recent steel prices continue to refresh the new record low, not only because of oversupply, industry capital chain fracture, capital market slump, vicious competition between enterprises are dragging down steel prices. Although the data shows that the current pace of capacity reduction has accelerated, it is indeed in the initial stage of 2016 to stop the fall of steel prices, it can be said that the short-term effect has emerged, but the long-term need to see how the "curative effect" really entered the implementation stage.

                                                                          In the future, we can not only focus on reducing capacity, but also stimulate the growth of actual steel demand; Only when both supply and demand are mobilized can the real purpose of reform be realized. Only solve their own long-term structural contradictions, is the hope of the industry out of trouble transformation.