The status quo of overcapacity in the steel industry As of the end of 2008, China's crude steel production capacity reached 660 million tons, crude steel production reached 500 million tons, domestic apparent consumption amounted to 453 million tons, and direct exports equivalent to 60 million tons of crude steel, and production capacity exceeded production capacity. 160 million tons, more than 200 million tons of domestic consumption. According to European and American countries, the capacity utilization rate is obviously lower than 79%-83% as the standard of excess production capacity. The Chinese steel industry has already experienced excess capacity in 2008.
Since entering the year of 2009, with the implementation of policies and measures to expand domestic demand and ensure growth, the steel industry has continued to improve. Since February 2009, crude steel production has exceeded the level of the same period of last year. At the same time, the production and sales rate has begun to recover, and stocks are also falling. By May 2009, the production and sales rate had returned to normal levels, and 89 domestic large and medium-sized steel plants had made their first profit since their losses in October 2008. According to the new production capacity and the elimination of backward production capacity, it is estimated that the crude steel production capacity in 2009 is roughly flat with the 660 million tons at the end of last year, with the maximum not exceeding 700 million tons. According to the data from the National Bureau of Statistics, China's crude steel production reached 49.43 million tons in June, and reached a record high, which was a year-on-year increase of nearly 6%, which translates into a daily output of 1.684 million tons. Calculated by 660 million tons of annual production capacity, the capacity utilization rate has been restored to more than 90%. Even with the annual capacity of 700 million tons, the capacity utilization rate has exceeded 85%. The capacity utilization rate of the steel industry has returned to normal levels, and excess capacity has begun to ease.
Although the overall situation of the steel industry in June was positive, there was a clear structural overhang in the steel industry. The main performance was high-end excess capacity and relatively low-end production capacity. Due to the tightening of the market over a period of time and the encouragement of industrial policies, China's high value-added steel products such as stainless steel, heavy plate, hot-rolled and cold-rolled sheet have expanded rapidly. In recent years, China has added about 50 million tons of crude steel annually, of which 90% of the corresponding varieties are plates. Taking cold-rolled sheet as an example, from 2001 to 2007, the production capacity of various types of cold-rolling mills (including cold-rolling mills and cold-rolled strip mills) in China increased from 13 million tons to 50 million tons, and by the end of 2008, it reached 75 million. Tons, far faster than the growth rate of all steel production capacity in China during the same period.
However, since the beginning of 2009, the market demand for plates and wire rods has been significantly different. Demand for building materials, especially rebar and wire rod products, has risen rapidly. The output of rails for construction steel, especially railroad construction, has reached a record high. Enterprises have already experienced phenomena of over-loading production, while hot-rolled coils, mid-plates and other sheet metal products have been marketed. There is a clear oversupply situation. As reflected in the production of enterprises, the large-scale iron and steel enterprises that transform into the main production plates are mostly cutting output. The small and medium-sized iron and steel enterprises mainly engaged in production of wire rods are accelerating the production of horsepower. Most of the construction steel manufacturers even have to shut down or have closed production capacity. All started again. The vast majority of the top 50 companies ranked in this year’s production increase are small and medium-sized private steel enterprises with a capacity of less than 5 million tons. Large companies such as Baosteel, Wuhan Iron and Steel and Anshan Iron & Steel have all restricted production. The proportion is roughly 20%. In addition, the structural overcapacity of China's steel industry is still reflected in the number of lagging production capacity with high energy consumption and large pollution. At the end of 2008, iron production capacity that did not meet industrial acceptance standards was about 160 million tons, and steel production capacity was about 190 million tons, a considerable part of which was blindly built in the past few years.
Judgment of demand and excess capacity in the steel industry in the next few years China's steel consumption has not yet reached the saturation point. From the experience of developed countries, when a country's per capita GDP reaches US$6,000, industrialization is basically completed, and the proportion of the tertiary industry exceeds 50%, steel consumption will reach a saturation point. The three basic conditions required for steel consumption to reach saturation point have not been achieved in China. Therefore, China's steel consumption will continue to grow in the future. But need to pay attention to the following questions:
First, the growth rate of steel demand will slow down. From the general rule of the change of steel consumption intensity, the level of per capita GDP between US$1,000 and US$2,000 in the early stage of industrialization shows that the intensity of steel consumption shows a rapid upward trend; in the middle and late stages of industrialization, the level of per capita GDP between US$2,000 and US$4,000, the intensity of steel consumption will remain at a relatively low level. High level; After per capita GDP exceeds 4,000 US dollars, the intensity of steel consumption will continue to decline. Although China is still in the middle stage of industrialization, in recent years, the amount of crude steel consumed per unit of GDP has been declining year by year. China's billion-dollar GDP consumption in 2003 was 1,906 tons, in 2006 it was 1,832 tons, in 2007 it was 1,761 tons, and in 2008 it was reduced to 1,506 tons. As the pressure on ore, water, energy and environmental protection in the development of the steel industry continues to increase and the country vigorously promotes the transformation of the growth mode, the intensity of steel consumption in China will continue to decrease in the future, and the growth rate of steel demand will also gradually decline.
Second, the steel industry will still face greater overcapacity pressure in the coming years. From the perspective of steel supply, Shougang Caofeidian Base, Baoshan Iron and Steel Zhanjiang Base, Wugang Fangchenggang Base, Yanbu Steel Bayuquan Base and large steel bases in Huanghua, Jingtang, Rizhao and Nansha will be completed and put into operation in the next few years. The steel production capacity will be There is a big increase. From the demand point of view, the current demand recovery is mainly driven by the country’s infrastructure investment, but the demand for this expansion based on fiscal investment is difficult to sustain. The national 4 trillion investment plan will be completed in 2010, infrastructure investment will be greatly reduced by then, and large-scale infrastructure construction in 2008-2010 will also form a huge crowding-out effect on future investments, making future infrastructure investment low. At normal levels. Therefore, the prosperity of the steel industry since May and June 2009 has a lot of particularities. As the steel production capacity continues to expand, the growth of steel demand slows down or even declines. In the future, the steel industry will still face greater overcapacity pressure.
Third, there may be new changes in the structural overcapacity of the steel industry. The tight supply of wire rods that has emerged since 2009 is mainly driven by the country’s large-scale infrastructure construction. As the future urbanization rate in China is likely to remain at a relatively stable level, the country’s large-scale infrastructure will follow this round. At the end of the investment, the demand for wire rods will be reduced and there will be huge pressures on overcapacity. On the other hand, the demand for high-end products such as plates and profiles will develop in a good direction. The major demand for plates and profiles is mainly in industries such as automobiles, home appliances, ships, and steel structures. These industries will have better development prospects in the coming years.
First of all, China's per capita GDP has reached the period of large-scale automobile entering the family, and the automobile industry will maintain rapid growth. Second, the proportion of steel structures in developed countries is more than 20%, while the proportion of steel structures in China is currently less than 10,000. In one part, the development potential is very huge. Third, automobiles, ships, containers, and household appliances are industries in which China has international competitiveness and the competitiveness continues to increase. With the recovery of the developed countries’ economies, the export of these products will further increase. This led to the growth of indirect steel exports.
Countermeasures to Solve the Contradictions between Supply and Demand in the Iron and Steel Industry in China First, we must maintain a moderate growth in steel production capacity. With the continued advancement of urbanization and the rapid growth of major steel-consuming industries such as machinery and equipment and automobiles, the apparent demand for steel in China will continue to grow. Therefore, the production capacity of the steel industry should maintain a modest increase to meet the needs of economic and social development. It is necessary to prevent the excessive growth of investment and the formation of new overcapacity, and avoid the situation of tight supply due to excessive restrictions on new investment. However, the country’s industrial policy should draw lessons from the structural overcapacity that has existed since the end of 2008, allowing greater room for investment decisions in the specific product structure.
Second, increase efforts to eliminate backward production capacity. Eliminating outdated production capacity is not only an important means of optimizing the structure of the steel industry, but also a major measure to curb excess production capacity. However, in the implementation process, although the central government puts forward specific targets for the steel industry's access standards and elimination of outdated production capacity, local governments often adopt alternatives to retain these backward production capacity due to local growth and taxation considerations. In the future, on the one hand, we must intensify the inspection of local governments to eliminate the implementation of backward production capacity. On the other hand, we must implement strict differential electricity prices and water price policies for backward production enterprises, making them economically unprofitable and forcing them to voluntarily withdraw. In addition, the elimination of outdated production capacity should be more based on environmental protection indicators and energy consumption, water consumption indicators as a standard. The current practice of using equipment scale as an admission standard often prompts companies to adopt simple measures to expand equipment size and production capacity. This not only does not reduce backward production capacity, but also leads to an increase in lagging production capacity.
Third, promote enterprises to improve their technological innovation capabilities. Although the overall equipment level of large-scale iron and steel enterprises in China is close to the advanced level in foreign countries, there is still a large gap between independent innovation capability, technological level, and quality control, which results in a high level of homogeneous competition among large-scale iron and steel enterprises' plate products. The steel industry has a structural overcapacity. On the other hand, China still needs to import about 7 million tons of key varieties of steel every year to meet domestic needs. Therefore, it is necessary to encourage and support large-scale steel companies to increase R&D investment, strengthen international cooperation and improve innovation capabilities, and constantly develop new products to achieve differentiated competition.
Fourth, continue to expand domestic and international demand. Although the excess production capacity in the steel industry at the end of 2008 has been greatly eased, there will be a large amount of investment in the next two years to create new production capacity, and market demand will still have great uncertainty. In order to maintain the balance of supply and demand in the steel industry, on the one hand, we must continue to implement the 4 trillion fixed assets investment plan and the ten major industrial restructuring and revitalization plans, and stimulate the growth of domestic steel demand through the recovery of the domestic economy. At the same time, steel procurement for key national investment projects will be tilted toward large steel companies to increase the capacity utilization rate of large-scale steel companies. On the other hand, the export situation of steel is still very serious. In the first half of 2009, the total steel export volume has dropped by 65.45%. Therefore, it is still necessary to maintain the current high export tax rebate rate and lower export tariffs to promote the recovery of steel exports.
Since entering the year of 2009, with the implementation of policies and measures to expand domestic demand and ensure growth, the steel industry has continued to improve. Since February 2009, crude steel production has exceeded the level of the same period of last year. At the same time, the production and sales rate has begun to recover, and stocks are also falling. By May 2009, the production and sales rate had returned to normal levels, and 89 domestic large and medium-sized steel plants had made their first profit since their losses in October 2008. According to the new production capacity and the elimination of backward production capacity, it is estimated that the crude steel production capacity in 2009 is roughly flat with the 660 million tons at the end of last year, with the maximum not exceeding 700 million tons. According to the data from the National Bureau of Statistics, China's crude steel production reached 49.43 million tons in June, and reached a record high, which was a year-on-year increase of nearly 6%, which translates into a daily output of 1.684 million tons. Calculated by 660 million tons of annual production capacity, the capacity utilization rate has been restored to more than 90%. Even with the annual capacity of 700 million tons, the capacity utilization rate has exceeded 85%. The capacity utilization rate of the steel industry has returned to normal levels, and excess capacity has begun to ease.
Although the overall situation of the steel industry in June was positive, there was a clear structural overhang in the steel industry. The main performance was high-end excess capacity and relatively low-end production capacity. Due to the tightening of the market over a period of time and the encouragement of industrial policies, China's high value-added steel products such as stainless steel, heavy plate, hot-rolled and cold-rolled sheet have expanded rapidly. In recent years, China has added about 50 million tons of crude steel annually, of which 90% of the corresponding varieties are plates. Taking cold-rolled sheet as an example, from 2001 to 2007, the production capacity of various types of cold-rolling mills (including cold-rolling mills and cold-rolled strip mills) in China increased from 13 million tons to 50 million tons, and by the end of 2008, it reached 75 million. Tons, far faster than the growth rate of all steel production capacity in China during the same period.
However, since the beginning of 2009, the market demand for plates and wire rods has been significantly different. Demand for building materials, especially rebar and wire rod products, has risen rapidly. The output of rails for construction steel, especially railroad construction, has reached a record high. Enterprises have already experienced phenomena of over-loading production, while hot-rolled coils, mid-plates and other sheet metal products have been marketed. There is a clear oversupply situation. As reflected in the production of enterprises, the large-scale iron and steel enterprises that transform into the main production plates are mostly cutting output. The small and medium-sized iron and steel enterprises mainly engaged in production of wire rods are accelerating the production of horsepower. Most of the construction steel manufacturers even have to shut down or have closed production capacity. All started again. The vast majority of the top 50 companies ranked in this year’s production increase are small and medium-sized private steel enterprises with a capacity of less than 5 million tons. Large companies such as Baosteel, Wuhan Iron and Steel and Anshan Iron & Steel have all restricted production. The proportion is roughly 20%. In addition, the structural overcapacity of China's steel industry is still reflected in the number of lagging production capacity with high energy consumption and large pollution. At the end of 2008, iron production capacity that did not meet industrial acceptance standards was about 160 million tons, and steel production capacity was about 190 million tons, a considerable part of which was blindly built in the past few years.
Judgment of demand and excess capacity in the steel industry in the next few years China's steel consumption has not yet reached the saturation point. From the experience of developed countries, when a country's per capita GDP reaches US$6,000, industrialization is basically completed, and the proportion of the tertiary industry exceeds 50%, steel consumption will reach a saturation point. The three basic conditions required for steel consumption to reach saturation point have not been achieved in China. Therefore, China's steel consumption will continue to grow in the future. But need to pay attention to the following questions:
First, the growth rate of steel demand will slow down. From the general rule of the change of steel consumption intensity, the level of per capita GDP between US$1,000 and US$2,000 in the early stage of industrialization shows that the intensity of steel consumption shows a rapid upward trend; in the middle and late stages of industrialization, the level of per capita GDP between US$2,000 and US$4,000, the intensity of steel consumption will remain at a relatively low level. High level; After per capita GDP exceeds 4,000 US dollars, the intensity of steel consumption will continue to decline. Although China is still in the middle stage of industrialization, in recent years, the amount of crude steel consumed per unit of GDP has been declining year by year. China's billion-dollar GDP consumption in 2003 was 1,906 tons, in 2006 it was 1,832 tons, in 2007 it was 1,761 tons, and in 2008 it was reduced to 1,506 tons. As the pressure on ore, water, energy and environmental protection in the development of the steel industry continues to increase and the country vigorously promotes the transformation of the growth mode, the intensity of steel consumption in China will continue to decrease in the future, and the growth rate of steel demand will also gradually decline.
Second, the steel industry will still face greater overcapacity pressure in the coming years. From the perspective of steel supply, Shougang Caofeidian Base, Baoshan Iron and Steel Zhanjiang Base, Wugang Fangchenggang Base, Yanbu Steel Bayuquan Base and large steel bases in Huanghua, Jingtang, Rizhao and Nansha will be completed and put into operation in the next few years. The steel production capacity will be There is a big increase. From the demand point of view, the current demand recovery is mainly driven by the country’s infrastructure investment, but the demand for this expansion based on fiscal investment is difficult to sustain. The national 4 trillion investment plan will be completed in 2010, infrastructure investment will be greatly reduced by then, and large-scale infrastructure construction in 2008-2010 will also form a huge crowding-out effect on future investments, making future infrastructure investment low. At normal levels. Therefore, the prosperity of the steel industry since May and June 2009 has a lot of particularities. As the steel production capacity continues to expand, the growth of steel demand slows down or even declines. In the future, the steel industry will still face greater overcapacity pressure.
Third, there may be new changes in the structural overcapacity of the steel industry. The tight supply of wire rods that has emerged since 2009 is mainly driven by the country’s large-scale infrastructure construction. As the future urbanization rate in China is likely to remain at a relatively stable level, the country’s large-scale infrastructure will follow this round. At the end of the investment, the demand for wire rods will be reduced and there will be huge pressures on overcapacity. On the other hand, the demand for high-end products such as plates and profiles will develop in a good direction. The major demand for plates and profiles is mainly in industries such as automobiles, home appliances, ships, and steel structures. These industries will have better development prospects in the coming years.
First of all, China's per capita GDP has reached the period of large-scale automobile entering the family, and the automobile industry will maintain rapid growth. Second, the proportion of steel structures in developed countries is more than 20%, while the proportion of steel structures in China is currently less than 10,000. In one part, the development potential is very huge. Third, automobiles, ships, containers, and household appliances are industries in which China has international competitiveness and the competitiveness continues to increase. With the recovery of the developed countries’ economies, the export of these products will further increase. This led to the growth of indirect steel exports.
Countermeasures to Solve the Contradictions between Supply and Demand in the Iron and Steel Industry in China First, we must maintain a moderate growth in steel production capacity. With the continued advancement of urbanization and the rapid growth of major steel-consuming industries such as machinery and equipment and automobiles, the apparent demand for steel in China will continue to grow. Therefore, the production capacity of the steel industry should maintain a modest increase to meet the needs of economic and social development. It is necessary to prevent the excessive growth of investment and the formation of new overcapacity, and avoid the situation of tight supply due to excessive restrictions on new investment. However, the country’s industrial policy should draw lessons from the structural overcapacity that has existed since the end of 2008, allowing greater room for investment decisions in the specific product structure.
Second, increase efforts to eliminate backward production capacity. Eliminating outdated production capacity is not only an important means of optimizing the structure of the steel industry, but also a major measure to curb excess production capacity. However, in the implementation process, although the central government puts forward specific targets for the steel industry's access standards and elimination of outdated production capacity, local governments often adopt alternatives to retain these backward production capacity due to local growth and taxation considerations. In the future, on the one hand, we must intensify the inspection of local governments to eliminate the implementation of backward production capacity. On the other hand, we must implement strict differential electricity prices and water price policies for backward production enterprises, making them economically unprofitable and forcing them to voluntarily withdraw. In addition, the elimination of outdated production capacity should be more based on environmental protection indicators and energy consumption, water consumption indicators as a standard. The current practice of using equipment scale as an admission standard often prompts companies to adopt simple measures to expand equipment size and production capacity. This not only does not reduce backward production capacity, but also leads to an increase in lagging production capacity.
Third, promote enterprises to improve their technological innovation capabilities. Although the overall equipment level of large-scale iron and steel enterprises in China is close to the advanced level in foreign countries, there is still a large gap between independent innovation capability, technological level, and quality control, which results in a high level of homogeneous competition among large-scale iron and steel enterprises' plate products. The steel industry has a structural overcapacity. On the other hand, China still needs to import about 7 million tons of key varieties of steel every year to meet domestic needs. Therefore, it is necessary to encourage and support large-scale steel companies to increase R&D investment, strengthen international cooperation and improve innovation capabilities, and constantly develop new products to achieve differentiated competition.
Fourth, continue to expand domestic and international demand. Although the excess production capacity in the steel industry at the end of 2008 has been greatly eased, there will be a large amount of investment in the next two years to create new production capacity, and market demand will still have great uncertainty. In order to maintain the balance of supply and demand in the steel industry, on the one hand, we must continue to implement the 4 trillion fixed assets investment plan and the ten major industrial restructuring and revitalization plans, and stimulate the growth of domestic steel demand through the recovery of the domestic economy. At the same time, steel procurement for key national investment projects will be tilted toward large steel companies to increase the capacity utilization rate of large-scale steel companies. On the other hand, the export situation of steel is still very serious. In the first half of 2009, the total steel export volume has dropped by 65.45%. Therefore, it is still necessary to maintain the current high export tax rebate rate and lower export tariffs to promote the recovery of steel exports.
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