Entering 2024, what are the new drivers of China's economic development? What are the new opportunities and challenges facing the steel industry? Where is the new growth point of steel demand? How will the steel and raw fuel markets play out? From April 19 to 21, at the 20th Steel Industry Development Strategy Conference hosted by the Steel Home website, industry experts, scholars, steel production and trade logistics enterprises, raw fuel enterprises, financial research institutions and other fields from home and abroad conducted in-depth discussions on the above topics.

The picture shows the meeting site. (Steel home website for photo)

Jiang Wei, Deputy Party Secretary, Vice President and Secretary-General of China Iron and Steel Association; Li Xiaochao, Vice President of China Society of Economic Restructuring and former Deputy Director of National Bureau of Statistics; Bi Jiyao, former Vice President of the Chinese Academy of Macroeconomics, national expert of the New Century Millions of Talents Project, Doctor of Economics, second-level researcher; Steel home website founder, chairman Wu Wenwen has delivered a keynote speech. Chen Guangling, general manager of Tianjin Youfa Steel Pipe Group Co., LTD., Zhang Peixuan, senior Vice president of Ouye Yunshang Co., LTD., Chen Hai, deputy general manager of Guangxi Liuzhou Iron and Steel Group Co., LTD., and Yuan Yizong, founder and CEO of Shanghai Iron Man E-commerce Co., LTD., delivered speeches.

The theme of this meeting is "New Cycle, New growth Drivers and New opportunities". At the same time, the conference held the 12th steel raw material supply chain development Strategy conference, the "China Metallurgical Price Yearbook (2023)" book launch, the 27th Steel enterprise market Information Joint conference, the global steel pattern and opportunities conference and other activities.

Inventory reduction is the primary task of the current industry to ensure efficiency

In his keynote speech, Jiang Wei introduced that in recent years, China's steel industry has shown the following characteristics: First, since 2020, China's steel production has remained above 1 billion tons for four consecutive years; Since 2000, domestic apparent consumption declined for the first time for three consecutive years, and fell below the previous high for the first time. Second, the production capacity has increased significantly, the output has been released too quickly, and the inventory of steel enterprises has reached a new high in the same period. Third, the adjustment of product structure has accelerated significantly. Fourth, steel prices have fallen significantly, raw fuel prices have remained high, and the efficiency of steel enterprises has declined sharply.

Jiang Wei said that at present, China's steel industry presents a high output, high cost, high inventory, low demand, low price, low efficiency of the "three high and three low" characteristics, mainly because the supply side of the elastic release is too large, the upstream raw material end of the price to support the formation of steel prices.

"There is a clear correlation between steel company inventory levels and sales profit margins, and the higher the inventory, the lower the sales profit margin." Jiang Wei cited such a set of data, according to the correlation analysis of key member enterprise data of the Steel Association statistics from July 2022 to 2024, the output increases by 1%, and the inventory increases by about 0.43%; For every 1% increase in inventory, steel prices fall by about 0.47%; For every 1% increase in inventory, the benefit declines by about 0.54%.

"At present, the inventory of steel enterprises is at a historical high in the same period, and reducing inventory as soon as possible is the primary task of the industry to ensure efficiency." Jiang Wei stressed that China is still in the process of industrialization, and the maintenance of a high level of steel production will continue for some time.

Wu Wenwen believes that at this stage, the problems in China's steel industry are mainly low industrial concentration, large elasticity of supply and demand, serious structural supply imbalance, unreasonable industrial layout, especially energy saving and carbon reduction, "green steel" production and intelligent manufacturing need to be further improved. "I have put forward the" 135 "goal of China's steel industry layout, that is, 1 200 million tons of steel mills, 3 80 million tons to 100 million tons of steel mills, 5 more than 50 million tons of steel mills, now it seems that the industrial concentration is not enough."

"The rapid development of China's steel industry has provided strong support for the rapid advancement of industrialization, urbanization and major infrastructure construction." "The steel industry should not belittle itself. Without the rapid development of China's steel industry, there would be no rapid industrialization."

"Steel demand" opportunities in equipment renewal and consumer goods trade-in

In March this year, The State Council issued the "Action Plan to promote large-scale equipment renewal and replace old consumer goods with new ones", which boosted the steel market demand expectations and brought confidence to the industry.

Jiang Wei introduced that according to the large-scale equipment update deployed by the state, the focus is on key industries such as steel, nonferrous metals, petrochemical, chemical, building materials, electricity, machinery, aviation, shipping, textile, electronics, and vigorously promote the renewal of production equipment and technological transformation, and the annual new equipment update scale is about 300 billion yuan. In terms of replacing old consumer goods with new ones, it will also bring about an increase in demand for steel for automobiles and home appliances. It is estimated that large-scale equipment renewal can drive the total increase in high-end industrial steel consumption of about 8 million tons.

"At present, China's real estate industry has entered a deep adjustment period, the operation mode of local government land financing and debt development is actively or passively withdrawn, transportation infrastructure and urban municipal construction has also entered a perfect period, it is expected that China's construction industry steel consumption will enter the trend of decline channel." Wu Wenwen believes that with the large-scale equipment renewal and consumer goods to replace the old for new action, the steel consumption of the manufacturing industry still has room to rise, and the requirements for variety specifications will be more and more new, the quality requirements will be higher and higher.

Service level is more concerned in the current market competition

In order to cope with the current market situation, Jiang Wei proposed that the whole industry urgently needs to unify the thinking, especially the construction steel production enterprises, to adhere to the "three set three do not" business principle, strengthen self-discipline, reduce production intensity, eliminate vicious competition, and ensure that the inventory of steel enterprises in the second quarter returns to normal levels.

Jiang Wei introduced that since the end of March, the Steel Association has organized a series of activities such as calling on the industry to self-regulate production and reduce inventory, and jointly maintaining the steady and orderly development of the steel industry through the release of the "Recognize the situation and maintain concentration", as well as organizing expert analysis, entrepreneur speeches, association leadership reports, and commentator articles in the "China Metallurgical News". In the industry to promote unity of thought, the formation of consensus, has achieved phased results.

"By strengthening self-discipline and controlling the pace of production, the current focus on the inventory of steel mills 18.25 million tons, ten days down 0.94%, down 6.51% from the previous month, down 0.36% from the same ten days last year, down 1.27% from the year before." According to industry statistics, rebar prices have risen from 3,589 yuan/ton on April 1 to 3,729 yuan/ton on April 16, and steel futures prices have also increased significantly. However, steel inventories are still 18% higher than in the same period in 2021 and 2% higher than in the same period in 2020. He proposed that steel enterprises should still unify their thinking and further strengthen self-discipline to control production and reduce inventory.

Jiang Wei also proposed that at present, some industries are suffering from the pain of high receivables, there are so-called profit margins, but the cash flow is tight, and the operation is difficult to sustain, for this reason, he believes that steel enterprises should firmly do "three fixed three do not" in the downward cycle. The steel industry should continue to adhere to the "1231" development goals and the "232" key work promotion system. The steel industry and downstream industries should unite, participate more in and use the steel industry EPD (Environmental Product Declaration) platform, study China's low carbon emission steel standards, actively respond to challenges such as CBAM (EU carbon Border Regulation Mechanism) and low carbon trade barriers, and safeguard the green development and green trade rights of China's steel.

Wu suggested that the relevant ministries and commissions of the state and industry associations can learn from the relevant production restriction policies of the coal industry, iron and steel enterprises should organize production in strict accordance with the approved capacity, and the competent ministries should strictly assess the energy consumption, industrial water use, waste gas, solid waste and carbon emissions and other indicators in strict accordance with the approved energy consumption, to prevent the steel industry from falling into a "death spiral" due to excessive production.

Wu article further explained that the "death spiral" is the decline in steel prices, the decline in raw material prices, and the lack of cost support, resulting in steel prices continuing to fall and steel mills continuing to lose money.

In view of the development situation of the steel industry, Chen Guangling proposed that we must first grasp the "foothold" of the healthy development of the self-disciplined production industry. The current market is a market of shrinking demand, uncontrolled production will only make the market worse and worse, and finally everyone has no food. Secondly, it is necessary to grasp the important "driving force" of the development of new quality productivity. For steel enterprises in trouble, creating new quality productivity will be the core direction to get out of trouble in the future. Again, to write a good value jump this industry "big article". In the context of shrinking market demand, market competition is no longer limited to price, and end users pay more attention to comprehensive problem solving ability when selecting partners. "In other words, whoever can bring the best supply chain solution to the end user will have a competitive advantage." "He added.

Yuan Yizong introduced the significance of the industrial Internet to the high-quality development of the steel industry from the perspective of the operation of the steel e-commerce platform. "The industrial Internet is actually a service-oriented platform that effectively connects and serves the value chain, industrial chain and supply chain of traditional industries." He said that the update iteration of digital technology has accelerated the digitization process of many traditional industries. As an important part of digital industrialization, the digitization process of the iron and steel industry Internet is also accelerating.

"In the face of cyclical fluctuations in the industry, digital transformation has become the key to steel enterprises to enhance their core competitiveness." With the help of the e-commerce platform, steel enterprises can realize the digitalization of the whole business process such as production, sales and logistics, and accurately control the production rhythm through real-time monitoring of production data to avoid too much or too little production; Through intelligent production scheduling, quality traceability and other systems, to ensure stable product quality and meet high-end manufacturing needs; Through digital supply chain management, raw material procurement, product sales, logistics and distribution can be coordinated to reduce operational risks." Yuan Yizong believes that digitization not only improves the operational efficiency of steel enterprises, but also enhances the ability of enterprises to flexibly respond to the market quickly.

In addition, in the same period of the meeting, participants around the domestic and foreign macroeconomic situation, China's steel industry development strategy research, steel and raw fuel supply and demand pattern analysis and market trend forecast, the main downstream industry demand situation and outlook, as well as futures market, steel e-commerce operations and other topics for in-depth exchanges.