The total profit of the iron and steel industry in November 2018 exceeded 280 billion yuan, an increase of 64% over the same period of last year.

The completion of the task of 30 million tons of iron and steel to remove excess capacity in 2018 means that the five-year task of eliminating excess capacity in the iron and steel industry has been completed ahead of schedule within three years.



On January 14, Yu Yong, president of China Iron and Steel Industry Association, said at the 2019 Board of Directors (Expanded) meeting of China Iron and Steel Association: "In 2018, the steel production capacity was further promoted, and the target of eliminating the excess capacity of 150 million tons in five years was fulfilled ahead of schedule. The market environment was improved significantly, and the benefits of enterprises were improved significantly."



At the same time, he provided a set of industry operation data: before November 2018, China Steel Association member steel enterprises realized sales revenue of 3.76 trillion yuan, an increase of 14.17%, profit and tax of 414.9 billion yuan, an increase of 50.14%, total profit of 280.2 billion yuan, an increase of 63.54%, sales profit margin of 7.45%, which has reached the average level of industrial industry.



In 2019, we should focus on preventing the resultant production of defused capacity.



Although the "big test" for steel production capacity has been completed ahead of schedule, the industry will still face many tests in the future. Driven by high steel prices and profits, large and small steel mills are eager to expand their production capacity, and steel production is also growing continuously. The results of production need to be maintained urgently.



According to Yu Yong, the production of pig iron, crude steel and steel (including duplicate materials) in China in the first November of last year was 708 million tons, 857 million tons and 1,013 million tons respectively, an increase of 2.44%, 6.73% and 8.30% over the same period of last year. Among them, the output growth rate of non-member enterprises is significantly higher than that of member enterprises.



He explained that the sustained growth of steel production not only fills in the market space released after the removal of "floor steel", but also contributes to the growth of domestic market demand and the rapid release of production capacity.



"Although 150 million tons of excess capacity have been eliminated in three years, the task of structural reform on the supply side is far from complete." He pointed out that from the industry situation, there are still problems in the capacity structure, the impulse to increase new capacity driven by interests still exists, the seemingly resurgence of "strip steel" still needs to be vigilant, and the pressure of excessive release of capacity of compliance enterprises still exists. The cost pressures caused by the rising price of raw materials and fuels and the rising cost of environmental protection operation are increasing.



Yu Yong said that in 2019, the steel industry should continue to deepen the structural reform of the supply side, focusing on preventing the resurgence of defused production capacity, strictly preventing the resurgence of "floor steel" dead ash, and strictly prohibiting new production capacity. In addition, the main direction of research should be shifted from total capacity adjustment to existing capacity structure optimization, layout adjustment and merger and reorganization.



On January 10, Miao Wei, Minister of Industry and Information Technology, said that in 2019, the government would support key provinces to reduce production capacity of iron and steel, strictly prohibit new projects such as steel and cement to expand production capacity, and support the accelerated development of new energy vehicles.



On January 14, the work report of Hebei Provincial Government pointed out that in 2018, the province overfulfilled the annual capacity-cutting tasks of six major industries and reduced the output of steel-making by 12.3 million tons. In 2019, Hebei Province will unswervingly resolve its excess capacity, promote the transformation from total capacity to structural capacity, reduce steel production capacity by 14 million tons in the year, and realize the withdrawal of Zhangjiakou and Langfang steel production capacity.



Luo Tiejun, inspector of the Raw Material Industry Department of the Ministry of Industry and Information Technology, said that in order to avoid falling into the "strange circle" of excess capacity again and again, we must adhere to the principle of market-oriented legalization and further promote the production of iron and steel. In the future, we should strictly prevent the resurgence of dead ash and defused production capacity of "strip steel" and prohibit any new production capacity in any form.



The steel market will continue to operate in a disadvantaged way



Liu Zhenjiang, Secretary-General and Secretary-General of the CPC Committee of the China Steel Association, said that 2018 was the most stable and effective year for the steel industry. Its superior production capacity was brought into full play, its production and demand were basically balanced, and its enterprise benefits were considerable.



According to the data released by China Steel Association, in November 2018, the total profit of member steel enterprises reached 280.2 billion yuan, an increase of 63.54% over the previous year. The industry asset-liability ratio has fallen by 3.39 percentage points to 65.74% over the previous two years, and more than half of steel enterprises have fallen below 60%.



According to the plan of China Steel Association, in 2019, the industry will be more actively promoted to de-leverage and mitigate capital risks. "It will take three to five years for the steel industry to reduce its asset-liability ratio to less than 60%. At present, there are still some enterprises whose asset-liability ratio is higher than 60%. We should make full use of the opportunity to improve efficiency and take various measures to de-leverage. Yu Yong said.



Up to now, a number of steel listed companies have issued performance forecasts for 2018. On the evening of January 11, Anyang Iron and Steel announced that its net profit in 2018 is expected to be 1.75 billion yuan to 1.92 billion yuan, an increase of 9.32% to 19.94%, and the profitability and competitiveness of its products have increased significantly. Chongqing Iron and Steel Co. had previously estimated net profit growth of more than 400% for the whole year of 2018; Shagang Co. Ltd. expected net profit of 1.128 billion yuan to 1.41 billion yuan in 2018, an increase of 60% - 100%.



Nevertheless, the basis for sustained profitability of steel enterprises is not solid. Especially in the first November of last year, the purchasing cost of scrap and energy increased sharply year-on-year. After November 2018, the price of steel declined sharply, and the benefit of steel enterprises declined significantly. Some iron and steel enterprises have been on the edge of break-even.



Li Xinchuang, president of the Institute of Planning and Research of Metallurgical Industry, said that the sustained decline in steel prices was mainly due to insufficient confidence in market expectations, increased downward pressure on economic growth, declining real estate investment growth and reduced downstream steel demand. However, steel prices and benefits will not decline significantly. He believes that in 2019, we still need to consolidate the achievements of steel production, establish a long-term mechanism to prevent excess capacity, and strictly prevent the rebound of production capacity and the resurgence of "floor steel".



Reporters from the Economic Observatory Network noted that since early January 2019, favorable factors such as the reduction of the central bank, the approval of several infrastructure projects, and the relatively smooth progress of Sino-US trade negotiations have contributed to this.