Many steel provinces have fallen into the production cycle: the more the output is reduced

On June 27th, a set of data released by the National Bureau of Statistics made it difficult for the market to have a new experience in de-capacity in the steel industry: ferrous metal smelting and rolling processing industries, including steel, total profit of 558.6 in the first five months of this year. 100 million yuan, an increase of 74.8%.
This can partly answer why the steel production in Hebei, Jiangsu and Shandong in the three major steel provinces is difficult.
In the 21st Century Business Herald, the National Bureau of Statistics found that the top steel output in the first five months of the year, the crude steel output in Hebei, Jiangsu and Shandong were 83.527 million tons, 45.909 million tons, and 29.196 million tons respectively. This data shows that crude steel production in Hebei, Jiangsu and Shandong increased by 0.3%, 2.19% and 5.47% respectively over the same period of the previous year, which was higher than the 83.878 million tons, 44.928 million tons and 27.683 million tons in the same period of last year.
This is inconsistent with the national demand for capacity. According to the requirements of the state, the “13th Five-Year” crude steel will reduce the production capacity of 1-150 million tons.
Why is the situation of “more and more” in the major steel provinces?

Three steel provinces increase production
Xu Shaoshi, director of the National Development and Reform Commission, recently revealed at the relevant Davos forum in Tianjin that the production capacity of the “13th Five-Year Plan” steel will be removed from 150 to 150 million tons, the coal production capacity will be removed by 500 million tons, and 500 million tons will be reduced. About half of the 500 million tons of restructuring and restructuring is also the capacity to be removed.
The capacity to remove coal this year is 280 million tons. The number of employees involved in resettlement is 700,000. The steel production capacity to be removed this year is 45 million tons, and the number of employees involved in resettlement is 180,000. Now, this work is progressing in an orderly manner.
Considering that the production of raw coal and crude steel in 2015 was 3.68 billion tons and 804 million tons respectively, the actual raw coal and crude steel output in 2016 should be 7.6% and 5.6% lower than that in 2015.
However, from the figures of the national and some provinces from January to May, the actual steel de-capacity effect has not reached the progress, and the raw coal de-production capacity is faster.
The 21st Century Business Report learned that the country's crude steel output in the first five months of this year was 329.9 million tons, down 1.4% year-on-year. In the same period, the output of raw coal was 1.344 billion tons, down 8.4% year-on-year.
Why is steel production speed not fast? From the situation of the three provinces of steel, you can see a glimpse.
In addition to crude steel production, if you look at steel output, Hebei's steel output in the first five months of this year will reach 10,693,100 tons, which is about 3.9% higher than the 10,291,800 tons in the first five months of 2015. The steel output in Jiangsu in the first five months was as high as 56,546,500. Tonne, compared with 55.07 million tons in the first five months of 2015, the output increased by about 2.8%; Shandong's steel output in the first five months of this year was 39,246,800 tons, compared with the steel output of 635.53 million tons in the first five months of 2015. 7.9%.
According to the national situation, the steel output in the first five months of this year was 458 million tons, an increase of 1% year-on-year. The output growth rate of the three major steel provinces also exceeded the national average.
According to the plan, Hebei plans to reduce 17.26 million tons of ironmaking and 14.22 million tons of steelmaking capacity this year. In addition, in 3-5 years, the province has withdrawn from 123 coal mines and withdrew production capacity of 51.03 million tons.
Jiangsu said that by 2020, it will withdraw and reduce its coal production capacity by 8 million tons, and then reduce the steel (crude steel) capacity by 17.5 million tons. In addition, during the “13th Five-Year Plan” period, Shandong is expected to reduce coal production capacity by 64.60 million tons and crude steel by 15 million tons.

Market regulation
Why is steel difficult to produce? The reason is that the current steel profitability is good.
In late March of this year, the profit of steel reached a level of 1,000 yuan per ton, which stimulated a large number of enterprises that stopped production last year to resume production.
At present, although the momentum of madness has stopped, it will not fall to the level of all losses in the short term. Take Tangshan, Hebei Province as an example. On June 27, the billet price was 1940 yuan per ton, an increase of 60 yuan over the previous day. The above prices ensure that some companies have a profit of 200 yuan per ton of billet. In other words, at this price, a steel mill with an annual output of 5 million tons has a profit of 1 billion yuan a year, and it is still a “printing machine”.
It is understood that the operating rate of blast furnaces in Tangshan area on June 29 was 88.4%.
Chen Kexin, chief analyst of the Lange Economic Research Center, pointed out that the central government is demanding capacity reduction, but the company will temporarily produce it because it is profitable. "The actual production is still maintaining an increasing trend, and the decline will be smaller than expected," he said.
Ma Zhongpu, an expert in the steel market, pointed out that when the backward production capacity was actually eliminated, some enterprises demolished the blast furnace, then built it, and then dismantled it as capacity. “The annual capacity of blast furnaces to resume production has reached nearly 100 million tons since last year, and most of the enterprises that have stopped production have resumed production.”
He believes that the core still depends on the market to regulate, and only if the company loses money and does not lose blood, the company will automatically reduce production. “At present, the overall steel demand has passed the saturation point. After the steel production speeds up, the market price will fall back. At that time, many loss-making enterprises need to be closed, especially the zombie enterprises.”

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