Reduced production prices fell to the upstream spread of the steel industry chain into the reverse adjustment period
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According to an authoritative source in the industry, the Chinese steel industry has entered the most difficult stage of a development cycle. Upstream cost pressure has been exhausted through the steel price hike. Now that it has entered the reverse adjustment period of the industrial chain, the end market demand has forced steel manufacturing, and steel production has forced the upstream resource industry. Xu Lejiang, chairman of Baosteel Group, has made it clear that it is necessary to enhance the sense of urgency and make full ideological preparations for the grim situation in the domestic steel market.
Intrude has formed
After domestic steel prices fell sharply for more than 10 consecutive weeks, the focus of the market turned to the coke industry as the upper reaches of the steel industry chain. This industry has also experienced a negative quarter-on-quarter growth for two consecutive months, and the manufacturers involved in the reduction of production in the near term have been involved in further expansion, and efforts to limit production have also been strengthened.
After the domestic coke price fell by 400 to 500 yuan in September, the decline continued in early October and the price of tonne fell sharply again by 300 to 400 yuan. Market analysts said that for coke, large and medium-sized steel mills generally have limited purchases, the production and production of small and medium-sized steel mills have stopped production, and there have been a lot of stop purchases. The market demand for coke has been significantly weakened. Even if the coking enterprises take measures to restrict production in large areas, it is still difficult to prevent market prices from falling further.
According to the summary of all aspects of information, there are increasing coking companies that limit production and reduce production in China. At present, the domestic coke industry has experienced a negative growth in output for the second consecutive month. Due to inventory and financial pressures, domestic coking companies have generally extended the coking time. A considerable part of the manufacturers have limited production limits of 20% to 40%, and some manufacturers have limited production. The amplitude has increased to about 50%. According to sources, the coke industry in Shanxi Province will limit production by about 50% in the industry from October onwards, and try to keep coke inventories at a reasonable level.
While reducing coke prices and cutting production, the price of iron ore, which is also the main raw material for the iron and steel industry, is also plummeting, and the port inventory remains high. The Indian spot import ore price has been significantly lower than the CIF price of long-term agreements between Brazil and Australia. This situation has not been seen for many years. Iron ore international ocean freight rates also dropped by more than 80% compared with the highs in June. All kinds of signs show that the trend of falling prices and production cuts has gradually spread to the upper reaches of the iron and steel industry, and the situation in which the industrial chain has been forced to reverse is being formed.
Cycle operation difficulties
Just as there are four seasons in a year, the steel industry is also a typical industry with periodic characteristics. A complete cycle of it can also be roughly divided into four phases. Judging from the current trend, the steel industry is experiencing difficulties in the cyclical operation, and the suddenness and rising characteristics of industry adjustment are stronger than ever.
Earlier this year, a relevant person in charge of the Baosteel Group once gave an analysis to the reporter. According to the cyclical characteristics of the steel industry, its cyclical operation can be broadly divided into four stages, namely the stage of “low steel price and low costâ€, the stage of “high steel price and low costâ€, and the phase of “high steel price and high cost†and “ "Low steel prices, high costs" stage. The biggest difficulties in cyclic operation are the transitional stages of “low steel prices, high costs†and “low steel prices and low costsâ€.
According to the analysis of relevant researchers, from the beginning of this year, the domestic steel industry has entered the high-cost stage very clearly, and is at a stage of high steel price and high cost risk accumulation. In particular, in the first half of this year, the prices of upstream raw materials such as iron ore and coke rose sharply and the industry cost was even higher. With the relative stability of cost support and demand, the iron and steel enterprises have fully transferred cost pressures to the downstream industries and maintained their profitability. At that time, steel prices continued to soar, and many steel prices hit a record high. The accumulation of risks among them is obvious to all and the market is constantly issuing warnings that “high altitudes won’t winâ€. By mid-July, steel prices suddenly turned down, deeper and deeper.
Everyone knows that steel prices will fall, but did not expect to come so fast, so much to come. Many market traders have similarly described the changes in the steel market as “a sudden and severe convective weather in the context of climate changeâ€. It was still sunny, and suddenly it was overcast, thundering, and stormy. The cyclical nature of the steel industry is still there, but the intensity of its adjustments and changes has increased in comparison with the past. The key reason is that the US subprime mortgage crisis triggered global financial turmoil, which led to the contraction of domestic steel industry terminal demand, making steel prices The support is obviously insufficient and gradually affects the price of upstream resources.
According to the judgment of some researchers, the current steel price has generally fallen to the level of the same period of last year. The current cycle period of the steel industry is the start of “high steel prices and high costs†and the start of “low steel prices and high costsâ€. The space has narrowed significantly. A considerable part of the steel mills have not made any money or even lost money. From the loosening trend of the price of upstream resources such as coke, some factors such as “low steel prices and low costs†have also quietly infiltrated. The next step depends on the rationality of the game's effectiveness and profit distribution of the "end demand-steel production-upstream resources" adverse adjustment, which will also determine the initial quality of the domestic steel industry into the next development cycle.
The awareness of the mainstream steel mills
Major domestic steel mills have significantly increased their awareness of urgency and taken proactive measures to cope with the industry's in-depth adjustment period. Xu Lejiang, chairman of Baosteel Group, said recently that the domestic steel market has undergone tremendous changes and Baosteel is facing severe challenges. “Issuing pressure can be an urgent issue for Baosteel.â€
He said that all aspects of the Baosteel Group's system must adapt to changes in the market, act quickly, tap potentials, save expenditures, increase awareness of hardships, and make adequate preparations for the grim situation in the future. Each link must produce targeted and effective measures to respond to market changes, formulate targets that can be quantified and benchmarked, reduce costs and increase efficiency, and focus on internal strength; meanwhile, in the relative differences in downstream industries, we must seek to meet market demand.
Xie Qihua, former chairman of Baosteel Group, believes that the major changes in the current steel market are different from the past, and Baosteel has more and stronger competitors. All employees must take urgent action to increase market sensitivity, make more efforts to conduct market surveys and analysis, and strive to seize opportunities to achieve new development while safely and steadily crossing the winter market. It is understood that Baosteel is further formulating its budget for the last three months of this year, strengthening the cooperation between the sales and production departments, and actually reducing the inventory.
Many industry insiders interviewed by reporters in the interview think that for the Chinese steel industry, adjustments are inevitable and not terrible. What's terrible is that the result of the adjustment is just a simple reincarnation. In the end, the contradiction remains and it solidifies on a new level. The core enterprises have the responsibility to take the initiative to respond and achieve industrial upgrading in the “industry winterâ€.
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