Overcapacity: The “barrier lake” suspended on the steel industry

“Like a lake overhang that is overhanging steel companies, if it is not managed in a timely manner and accumulates to a certain extent, it will destroy the entire industry.” Turning to the overcapacity of steel, Li Hongbo, director of the sales center of Wuhan Iron and Steel Co., Ltd. is worried.
The data shows that the current national steel production capacity has reached 660 million tons, and 58 million tons of projects under construction will have a production capacity of more than 700 million tons. The total domestic steel demand this year is expected to be 510 million tons, which will form an excess capacity of about 200 million tons.
In the list of adjusted surplus production capacity of some industries announced by the National Development and Reform Commission and other departments, steel ranks first in the six major industries.
Not only was there a surplus of low-end products, but some of the high-quality steel production capacity also showed a trend of surplus. In November, steel prices did not continue to pick up because the economy stabilized. Recently, Baosteel decided to drastically reduce the price of steel products from the factory, and the total product decline rate was about RMB 400/t. Not long ago, Baosteel suspended the 10 million-ton-class steel project in Zhanjiang City, Guangdong Province, and Wuhan Iron & Steel also suspended the 10-million-ton steel project in Fangchenggang City, Guangxi. If Baosteel's decision on steel price reduction in November is based on the judgment that steel demand will not be boosted in the short term, then the two major steel giants have suspended the 10 million-ton-grade steel projects respectively. This is undoubtedly due to the overcapacity of steel production capacity that is difficult to reverse in the short term. judgment.
“Excessive steel production capacity includes both backward and low-end products that do not meet the requirements for energy conservation and environmental protection, as well as high-end products with high technological content and excellent quality, and in particular, the overage of certain types of cold-rolled steel and hot-rolled steel. Baosteel and Wuhan Iron and Steel have suspended The two projects are high value-added sheet projects,” a person in charge of the China Iron and Steel Association told the reporter.
Managing the backward production capacity of steel is not the last year or two. But in a few years, the effect was not satisfactory. In response, a person in charge of a small iron and steel company in Changzhi, Shanxi Province, said: “Saying that the product is 'lagging behind' is relative. With the improvement of the energy saving and environmental protection standards of the country, these small steel mills are constantly updating equipment and raising product levels. 'Backwardness' means that the speed of renewal and improvement cannot keep up with the speed of national standards upgrading. In the era when the economy relies mainly on investment, these 'backward' products still have a vast market."
It is understood that after the international financial crisis, despite the sudden contraction of steel demand, after the country introduced relevant measures to stimulate the economy, some infrastructure projects have increased the demand for middle and low-grade steels such as rebar, and the small steel enterprises benefited significantly from the large steel enterprises. . The task of eliminating the backward production capacity of small steel enterprises has become increasingly difficult under the influence of various factors.
The surplus of plates is different. The investment in sheet metal has obviously increased since 2004. At that time, strong demand led to overheated investment, and sheet metal became an indispensable product on the market. The government introduced regulatory measures to direct investment into the construction of scarce sheet materials. Nowadays, sheet metal has also become the main product of excess capacity, and it is mainly concentrated in large-scale steel enterprises. This is undoubtedly a difficult point in this adjustment.
In the face of severe excess capacity, Minister Li Yizhong of the Ministry of Industry and Information Technology (MIIT) called for: “We will not build new steel plants again within three years!” In October, relevant departments have successively introduced a series of policies and measures. So, can the problem of excess steel production capacity be effectively solved?
Instead of eliminating small ones, it is impossible to “cut it across the board” for small steel enterprises, and the key to eliminating backward production capacity is to improve the exit mechanism. “Now all are fighting costs and endurance, and steel production capacity has to rely on the 'forced market' to solve the problem. Professor Huang Taiyan of the School of Economics at Renmin University of China stated.
However, the power of the market does not seem to be strong. After the financial crisis broke out, many people predicted that there would be a large number of small steel mills going bankrupt. However, contrary to many people's expectations, these small businesses showed strong vitality.
“Do not simply link small steel enterprises with backward elimination. Small ones are not necessarily backward. For those companies that have little, but have characteristics and potential for development, they should not only eliminate them, but also increase support. Only those small companies that are lagging behind in technology, waste resources, destroy the environment, and have no prospects for development should be eliminated. In other words, restraining steel from overcapacity cannot be based on heroes in terms of size but on the merits and weaknesses, Huang Taiyan said.
Years of practice have also shown that although the surplus will ultimately depend on the market, the problem of overcapacity in the steel industry is very complicated. There are many social issues and people's livelihood issues. Simply relying on the market is almost impossible to achieve. The government must play a more important role in it.
Li Xiaobo, chairman of TISCO, also expressed the same view. He pointed out that the steel industry policies and adjustment and revitalization plans all require the elimination of outdated production capacity. Some local governments have even signed a guarantee, but the market has recovered slightly and these backward production capacity have been restored. If we cannot fundamentally weaken the impulse of local governments to protect backward steel enterprises, and effectively improve the withdrawal mechanism of backward steel enterprises, eliminating backwardness is an empty phrase.
A person in charge of the Yuncheng city government in Shanxi told the reporter: “Even some backward small steel mills, in some places, shoulder multiple tasks such as local taxation and employment, so it is easy to quit? If we can balance the national and local Benefits, guide local governments and enterprises to seek and develop new pillar industries, do a good job of 'blocking' work, but also do a good job of 'sparse' work, local small steel companies will 'abandoned' backward steel production capacity It is also willing to accept the merger and reorganization of large steel companies."
Industry insiders have also stated that the policies and measures introduced at present are mostly “blocking”, and hope that the government can introduce more measures around “sparse”.
Pay close attention to technological innovation and structural adjustment, and actively respond to the surplus, rely on strength to seize the opportunity "At the same time seeing excess production capacity to bring great challenges to the industry, we must also see the development of the steel industry is facing many positive." China Steel Association Director Cheng-Rong Wang believes that the national implementation of the policies for the replacement of automobiles, home appliances, and large-scale investments in infrastructure have injected strength into boosting steel demand. A series of policies such as the export tax rebate issued by the government on a continuous basis will also play a role in expanding steel exports and alleviating the excess of contradictions.
Overcapacity has ushered in a golden period for the restructuring of steel companies. Wang Chengrong thinks. In recent years, the pace of reorganization and merger of the steel industry has accelerated. Based on the restructuring of Shaogang and Guangzhou Steel to form Guangdong Steel Group, Baosteel Group and Hangzhou Iron and Steel Group signed a reorganization of the Ningbo Steel Agreement. Before this, Wuhan Iron & Steel reorganized Liugang to form Guangxi Iron and Steel Group, Tangshan Iron and Steel Group and Hebei Iron and Steel Group.
Although there is a surplus of some types of sheet metal, there is still a considerable portion of high value-added steel depending on imports. The latest statistics from the Customs show that in 2008, 15.43 million tons of steel were imported, and the import amount reached 23.4 billion US dollars. These imported steels are mainly concentrated in high value-added cold rolling, special thick plates, high-temperature alloy plates and other varieties.
“These all provide a broad space for structural adjustment of the steel industry.” Wang Chengrong said, “Some iron and steel companies are struggling to improve their internal strength, take independent innovation as an important measure to cope with the crisis, and seize the favorable opportunity for the country to launch the adjustment and revitalization of the steel industry. It will unswervingly promote structural adjustments and product upgrades and strive to enhance the company's core competitiveness."
Song Lanxiang, chairman of Shandong Laiwu Iron and Steel Group, told reporters that at the beginning of November, Laiwu Steel Group held a science and technology awards conference and awarded 4.5 million yuan to 180 results including six major achievements. It is understood that the high-end products newly developed by Laigang have opened up the market in a number of areas: H-shaped steel used in the European-standard nuclear power project has been listed in the market, becoming the first domestic production and supply company for cutting-edge H-shaped steel for nuclear power projects in China; Gangway channel steel breaks the monopoly status of foreign special-shaped steel, and has accounted for more than 80% of the market share in China; as the main supplier of rebar for the Beijing-Shanghai high-speed rail project, it will provide 550,000 tons of thread to the Beijing-Shanghai high-speed railway project. Steel products...
Wuhan Iron and Steel also used a real grid to adjust its structure. In 2009, the production capacity of Wuhan Iron and Steel Co., Ltd. was 14.5 million tons, but the actual market launch was 12 million tons, which was more than 20% lower than the actual production capacity. "What we need to do is to reduce the market launch of 'road goods' products, to produce as many high-tech and high-value-added products as possible, to create demand through innovation and to respond to the crisis with strength," Li Hongbo said.

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