Survival through Reform in Iron and Steel, Equipment Industry or Work Together “Going Out”

After ten years of barbaric growth with an average annual growth of more than 10%, the steel industry is facing the test of the era of meager profits. From high growth, high profit to low price and low profit, iron and steel enterprises are facing the test of life and death. At the 8th China International Iron and Steel Congress held recently, after a brainstorming about reform, innovation and cooperation, the transformation path of iron and steel industry to survive through reform has gradually become clear.
At the meeting, Vice Minister of Industry and Information Technology Su Bo said that the iron and steel industry must adapt to the new situation and accelerate strategic restructuring and transformation and upgrading. Next, the Ministry of Industry and Information Technology will focus on resolving overcapacity, promoting technological progress and structural optimization, promoting product upgrading and upgrading, and constantly improving the level of internationalization. It will establish a capacity early warning mechanism for the iron and steel industry, explore the possibility of joint export of iron and steel industry, equipment manufacturing and services, and support the strong ones. Iron and steel enterprises unite downstream equipment manufacturing enterprises to “go out”.
Su Bo said that after the reform and opening up, especially the rapid development of the past decade, China’s iron and steel industry has made remarkable achievements. At present, China has become the world’s largest producer and consumer of iron and steel.
Similar to the overall situation of the industry, although the iron and steel industry has entered the ranks of major countries, there are still some outstanding problems in the rapid development. In recent years, due to the continuous decline in the ex-factory price of industrial products and the rapid rise in the overall production cost, iron and steel enterprises have encountered great difficulties in production and operation. In the first quarter of this year, the large and medium-sized iron and steel enterprises, which are key statistics of the China Iron and Steel Industry Association, lost more than 2.3 billion yuan, with a cumulative loss of more than 45%.
Yu Yong, chairman of Hebei Iron and Steel Group, believes that the sustained decline in profits of iron and steel enterprises is apparently caused by the external factors of the national economic growth and the slowdown of steel demand growth, but in fact, the market problems are only the appearance, leading to the fundamental reasons for the difficulties of iron and steel enterprises. It’s also the enterprise itself.
“In the past, the market situation of sustained high profit and high growth has shielded the deep-seated problems accumulated in history. The long-term development mode supported by high debt, the production mode supported by high cost, the inefficient resource allocation mode and the marketing mode separated from the upgrading of users and product structure have accumulated in the whole industrial chain. High additional costs and hidden costs restrict the improvement of competitiveness. In other words, in the past decade, the iron and steel industry has been more and more in line with the international standards in terms of “productivity” such as technology and equipment, but the “production relations” fields such as management concept, business model and institutional mechanism have lagged behind.
However, with the accumulation and outbreak of these deep-seated contradictions, the domestic steel market price has dropped dramatically in the past two years, and the economic benefit of the industry has declined sharply. Last year, the steel sales settlement price of the member enterprises of China Steel Association has dropped by 1026 yuan per ton. Under the double extrusion of the continuous decline in steel price and the rising price of raw materials, the steel enterprises have been facing a sharp decline in the price of steel products. Production and operation are facing unprecedented difficulties.
Various signs show that, from the relative shortage 30 years ago to the serious surplus at present, if the iron and steel industry wants to really get rid of the present predicament, it must face the challenge from the inside, with an internationalized vision and market-oriented thinking, and with reform and innovation methods, stimulate endogenous motivation and accelerate transformation and upgrading.
Yu Yong believes that the window period for the comprehensive deepening of reform in iron and steel enterprises has opened up and entered a strategic transformation period in which reform is to survive. In order to deepen the reform in an all-round way, we should reduce the high additional cost and non-productive cost to the greatest extent, improve the cost control ability, at the same time, improve the efficiency of product creation and cultivate the advantage of channel differentiation.
According to statistics, the output of crude steel of 29 Steel Listed Companies in China accounts for 30% of the total output of crude steel, of which the total assets of state-owned and holding enterprises account for 58% of the total assets of listed companies.
Nevertheless, it is gratifying that under the market pressure mechanism, China’s iron and steel industry is undergoing some positive changes in promoting reform. For example, in order to develop mixed ownership, most iron and steel enterprises are developing towards socialized and public companies; in order to standardize corporate governance structure, improve enterprise decision-making and risk prevention mechanism, many enterprises have accelerated the pace of “three systems” reform.
Gong Sheng, President of Jiangsu Shagang Group, believes that the reform and innovation of iron and steel enterprises must focus on doing well and strengthening the main industry, realizing intensive production scale, diversified management categories, high-tech variety structure and maximizing economic benefits. At the same time, it is necessary to emancipate the mind, break through the mode, expand the field and form new production and management characteristics. And then realize the sustainable development of enterprises.
First, we should focus on resolving overcapacity. Serious excess capacity is the most prominent problem in the current iron and steel industry. Comprehensive measures will be taken to strictly control new capacity, speed up the elimination of backward capacity, strengthen the standardized management of the industry, establish an early warning mechanism for iron and steel industry capacity, and create a fair competitive market environment. The top priority is to strictly control new production capacity, strictly check the approval of new iron and steel projects, guide the local government to clean up the projects under construction, and strictly implement the principle of equal or reduced replacement for new projects. This year, 27 million tons of backward iron and steel capacity will be eliminated to ensure the completion of the 12th Five-Year Plan ahead of schedule; from 2013 to the end of 2017, more than 80 million tons of iron and steel capacity will be compressed, so that the utilization rate of iron and steel capacity will reach an appropriate level.
The second is to continue to promote technological progress and structural optimization, which is the core requirement of transformation and upgrading of the iron and steel industry. Give full play to the leading and supporting role of scientific and technological innovation, focus on improving innovation capability, speed up the improvement of technological innovation system, guide iron and steel enterprises to establish strategic alliances for industrial technological innovation, strengthen key technology tackling and common technology development, support enterprises to carry out the work of tapping potential for benchmarking, and focus on the promotion and application of intelligent smelting in iron and steel industry. New technologies of integration of steel technology and other technologies. At the same time, we will support the cross-regional mergers and reorganizations of superior enterprises, encourage powerful enterprises to carry out cross-border mergers and acquisitions, optimize the allocation of resources globally, and support the orderly transfer of iron and steel production capacity to the central and Western regions.
Third, we will comprehensively promote product upgrading and upgrading. In recent years, the Ministry of Industry and Information Technology, together with the Ministry of Housing and Construction, has vigorously promoted the application of high-strength steel bars and achieved remarkable social results. Next, it will continue to strengthen its cooperation with the Ministry of Housing and Construction, promote the application of high-strength steel bars above 400 MPa in an all-round way, eliminate 335 MPa hot-rolled steel bars, and accelerate the establishment of demonstration clusters for the production and application of high-performance electrical steel.
Fourth, we should constantly improve the level of internationalization. The transformation and upgrading of China’s iron and steel industry can not be separated from the background of globalization. We will study and solve the problem of restrictions on foreign investment access in the iron and steel industry, explore the management mode of implementing negative inventory, support domestic iron and steel enterprises to introduce foreign advanced technology, management concepts and intellectual resources, and rationally guide foreign investment to the central and Western regions. Establish and improve trade and investment platforms, support powerful iron and steel enterprises to set up research and development institutions, production bases and marketing networks abroad, encourage and guide qualified domestic enterprises to carry out overseas iron ore resources development in a planned and step-by-step manner, carry out integration of resources and value chains, and explore iron and steel industry and equipment manufacturing and services. The feasibility of joint export will support powerful iron and steel enterprises to unite downstream equipment manufacturing enterprises to “go out”.
Fourth, we should constantly improve the level of internationalization. The transformation and upgrading of China’s iron and steel industry can not be separated from the background of globalization. We will study and solve the problem of restrictions on foreign investment access in the iron and steel industry, explore the management mode of implementing negative inventory, support domestic iron and steel enterprises to introduce foreign advanced technology, management concepts and intellectual resources, and rationally guide foreign investment to the central and Western regions. Establish and improve trade and investment platforms, support powerful iron and steel enterprises to set up research and development institutions, production bases and marketing networks abroad, encourage and guide qualified domestic enterprises to carry out overseas iron ore resources development in a planned and step-by-step manner, carry out integration of resources and value chains, and explore iron and steel industry and equipment manufacturing and services. The feasibility of joint export will support powerful iron and steel enterprises to unite downstream equipment manufacturing enterprises to “go out”.