Steel Industry May See a Second Wave
2013-12-04
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Comprehensive report: Last year's "fire prevention, theft prevention, and steel trade prevention" is still fresh in memory. Bank lending restrictions directly caused a large number of steel trading companies to exit or go bankrupt, bringing about the first wave of bankruptcies in the steel industry. Now, due to low-efficiency and low-profit operations in the steel industry, some steel enterprises are continuously losing cash, and some even face capital chain ruptures. Mergers and reorganizations among steel enterprises will become voluntary corporate actions, and an increase in industry concentration will be inevitable.
Industry insiders say that against the backdrop of eliminating outdated production capacity, the steel industry will accelerate the pace of survival-of-the-fittest selection and mergers and reorganizations. The steel industry may see a second wave of bankruptcies.
According to China Metallurgical News, Longhai Iron and Steel Co., Ltd. of Hebei Iron and Steel Group has completely suspended production. It is reported that the company has five branch plants for ironmaking, steelmaking, steel rolling, oxygen production, and machine repair, with fixed assets of 3.8 billion yuan and more than 4,000 employees. The company currently has four ironmaking blast furnaces, including three 450m3 blast furnaces and one 1080m3 blast furnace, equipped with corresponding sintering, shaft furnace, and coal injection equipment; two 40-ton steelmaking converters, one 60-ton converter, and one 70-ton refining furnace; three high-speed wire rod production lines; one set each of 4500m3/h, 6000m3/h, 15000m3/h, and 20000m3/h oxygen production units; and one set of 15000kW gas power generation unit. It produces 3 million tons of pig iron, 3 million tons of steel billet, and 2.6 million tons of wire rod annually, with annual sales revenue exceeding 10 billion yuan. It is the largest private enterprise in Xingtai City.
In this regard, analysts said that the private steel enterprise Luoyang Weiye has also suspended production. At present, the overall operating conditions of private steel mills are poor. Fully integrated steel mills are basically operating at a loss, while billet rolling plants are still profitable.
The "Hebei Province Task Breakdown Plan for Reducing Coal Consumption and Cutting Steel and Other Production Capacity" published in September this year clearly proposed that by the end of 2015, the province would cut ironmaking capacity by 14.47 million tons and crude steel capacity by 15.86 million tons, and reduce coal consumption by 8.75 million tons; by the end of 2017, the province would cut a total of 66.72 million tons of ironmaking capacity and 67.26 million tons of crude steel capacity, and reduce coal consumption by 40.34 million tons.
"At present, domestic steel enterprises are generally adjusting their product mix, and high-value-added and high-tech products are also facing problems of excessive competition and low efficiency. Steel enterprises' sales models and strategies are converging, direct supply and self-operated sales efforts are increasing, and month-end settlement methods are generally adopted." Controlling output and eliminating capacity through coordination among steel mills is impossible. In addition to policy measures such as strengthening environmental protection measures and raising the operating costs of inefficient enterprises, ultimately it must rely on the market for adjustment.
At around 10 a.m. on November 24, the steelmaking blast furnaces of five steel enterprises, including Tangshan Xingye Industry and Trade Co., Ltd., involving a total capacity of 6.2 million tons, were demolished and will completely exit the steel industry. For Tangshan, China's steel heavyweight, such elimination is not the first time. Since the beginning of this year, the Tangshan municipal government has issued notices, and more than 300 seriously polluting enterprises and outdated equipment have been included in plans for shutdown and banning.
With environmental regulation exceeding expectations, more scattered, small, and low-capacity steel mills will be eliminated in the later period.
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