Gu Jianguo, Deputy Director of the China Iron & Steel Association (CISA) on China Commodities Forum & 2017 Mysteel Annual Meeting on December 18, delivered his speed on review of 2016 China steel industry and outlook in 2017.
At the beginning of 2016, few insiders believed bull market was possible, and the overwhelming majority bet on bearish trend for the whole year. Now the fact is, steel companies generally made money for 8 months in a row from March, and large and medium-sized steel mills with CISA membership earned a total profit of 28.666 billion yuan in the first ten months, a revulsion to the super loss of 38.53 billion yuan in the same period last year. Then what is the reason behind the twist?
He illustrated that in the first ten months, China’s fixed assets investment recorded at 48.44 trillion yuan, eyeing a year-on-year rise of 8.3%, falling back 1.9 percentage points from the same period last year, indicating moderate growth for steel demand domestically.
Only auto manufacturing sector showed sturdy growth, pushing up auto steel demand forcefully. Statistics showed that the output volume of autos in the first ten months this year posted at 20.887 million units, rising by 12.70% year-on-year, and the sales volume stood at 22.016 million units, increasing by 13.79% year-on-year.
Steel demand from overseas market also reported limited rise, as China’s steel export volume showed consecutive decline for 4 months since July. The accumulative export volume from January to October registered at 92.74 million tonnes, merely up by 0.7% year-on-year.
The bull market this year was attributed to China’s capacity cut move in terms of the macro analysis and steel mills’ efforts in cost reduction and efficiency enhancement internally, Mr. Gu underlined.
Although most steel makers managed to turn losses into gains this year, one fact should not be ignored – that is steel industrial sales profit margin only hit at 1.28%, much lower than the average level of old economy, the director added.
At the same time, domestic steel mills have not extracted from heavy debt problems, Mr. Gu warned on the meeting. He detailed that member steel makers’ long term liability added up to over 388 billion yuan by the end of October and the short term debt aggregated to nearly 1040 billion yuan over the same period.
Other than that, steel companies, especially state-owned enterprises will have to cope with problems like staff redundancy, product mix optimization and management system updating etc.
At the end of the directors’ address, he appealed steel companies to take active moves to cater to Beijing’s calling for capacity cut, and stepped up to deepen restructuring, strengthen innovation and at the same time solve high leverage problem in the coming several years.
Edited by www.mysteel.net