Exactly where difficulty has its roots inside the steel industry, how extended can it last?
In recent years, the end of your iron and steel industries of market, employed to consider mainly triggered by 3 important variables: one could be the ore prices, and second, shrinking market place, the third is overcapacity. Practical arguments on these troubles come up once more this year happen to be questioned.
--On imported iron ore rates. Is $ 133 in the beginning finish of September, down to $ 80, down 40%, and also the steel industry isn't out on the Woods by ore a substantially lowered cost.
--On the industry demand. 500 million tonnes of crude steel in January-August consumption, 1.72 million tons significantly less than final year only, 0.3%, steel consumption is only from "peak" into "fortress" that markets are usually not shrinking, even though steel benefit continues to deteriorate. Critique of "4 trillion" investments through 2009, when spending of 110 million tons of steel, a rise of 25.6%, but the advantages of steel and hence significantly enhanced in the finish of, when the sales margin of just 2.4%.
--overcapacity. In current years, almost no surplus in China's trade, but benefits differ widely. Automotive market capacity utilization of about 70% within the initial half of your year (joint venture 90%, domestic brands 58%), industry-wide sales are high, 9.32%; manufacturing capacity utilization 75% and sales margin was six.85% ?E ?E, these are heavily sector overcapacity inside the steel sector, but profit margins are much higher than steel.
Mess up the apparent cause for that is the steel industry steel prices continue to fall, as previously two years, around the basis of a cumulative decline of more than 1000 Yuan in January-August this year wire rod costs fell 497; steel fell by 531; plate fall 399; hot-rolled coil fell 403 million. Steel composite typical costs fell by more than 300 yuan, or 11% above.
Query is, why cannot adjust provide and demand balance with the market place price? Why upstream and downstream profits, only the steel value transmission mechanism failure, decline? Analysis of iron and steel industry enterprise conditions might be located within the steel industry features a substantial "price funnel", that is within the role of current institutions and mechanisms, some serious long-term loss-making enterprises and loss-making solution and marginal solution or marginal producers, regardless of crowding out the market place lose dollars or depend on subsidies, and undermined the relationship among supply and demand and drive down the value of steel, resulting in inefficiency and even losses.
according to enterprise statistics for an annual output of over 5 million tons of steel, heavy losses last year, January-August this year continued to loss-making enterprises has 7 total 86 million tons of steel created, annual volume of 130 million tonnes. Enormous dog products occupy industry, provide and demand and steel rates will inevitably have a main effect. Heavy losses companies to cut production, despite the fact that you will discover several different elements, but its root trigger is excessive government intervention in businesses and enterprises to adapt to the new below typical industry situations.
Steel market would be the basic way out should be to implement session decided, accelerate the reform from the partnership involving Government and industry and deepen the reform of State-owned enterprises, elimination of iron and steel industries to highlight the institutional mechanisms of disorder. It may be said that completion time of deepening reform, may be the date with the steel business is really out of your Woods. This can be a tough process. Steel sector may possibly be accompanied by deepening the reform approach out of its predicament, we have to be totally ready.
