In response, he Wenbo, Secretary of the Party committee of CISA, said, due to the sharp rise in costs, the benefits of steel enterprises have declined.
In the first nine months of this year, the manufacturing cost of steel enterprises rose by 8% - 10%, according to the China Steel Association. Compared with the same period last year, the cost of imported iron ore raw materials increased significantly, up 31.7%. In addition, domestic iron concentrate increased by 21.5% and scrap increased by 8.8%. There are also rising coking coal prices, environmental protection and logistics costs.
On November 1, according to the statistics of the recent third quarter report of 2019 issued by the domestic steel listed companies, the Economic Observer found that most of the profits of the enterprises had a significant decline, some of which were as much as 70%. One of the common reasons was the rising cost. For example, in the first September, Anyang Iron and steel made a net profit of 378 million yuan, but the year-on-year decrease was 75.96%. Anyang Iron and Steel said that due to factors such as rising prices of raw materials such as iron ore and falling steel prices, the company predicted that its net profit for the whole year would fall sharply compared with the same period last year.
In addition, Baosteels net profit in the first three quarters was 8.874 billion yuan, down 43.65% year on year; Valins net profit was 3.394 billion yuan, down 42.37% year on year; Shougangs net profit was 1.236 billion yuan, down 42.25% year on year; Xingangs net profit was 2.65 billion yuan, down 33% year on year; Chongqings net profit was 720 million yuan, down 51% year on year; Liugangs net profit was 1.48 billion yuan, down 54.4% year on year; Shagangs net profit was 370 million yuan, the same as Its 62.7% lower than that, etc.
Hou Yuehua, general manager of Xinggang, said: now our profit per ton of steel is 4500 yuan less than before, because the price of iron ore is much higher than last year and the cost pressure is greatly increased.
However, Xinggangs products have their own uniqueness, and its main products are high quality special steel wire rod. According to Hou Yuehua, Xinggangs profit per ton of steel is more than 300 yuan. However, compared with last year, the profit per ton of steel for ordinary building materials products is very low, basically not making money or the profit drops sharply. He introduced.
Wang Ligang (pseudonym) is the deputy general manager of a large state-owned steel enterprise. His enterprise has an annual steel production capacity of more than 13 million tons. He told the Economic Observer: at present, the enterprise basically has no profit per ton of steel and has incurred losses. It is estimated that this trend will continue before the end of the year. So now the decline in profits is putting a lot of pressure on companies.
Long term pressure
In the next two months, steel supply pressure is likely to continue to rise.
According to Zeng Jiesheng, chief analyst of eurosmelt cloud business, PM2.5 and heavy pollution days index of Beijing Tianjin Hebei non heating season production limit plan this year are lower than the previous draft, and class A enterprises do not require production limit, and the production limit strength is lower than expected. In the fourth quarter, environmental protection production restriction will still play a phased impact, but the overall impact is small. He believes that the intensity of supply depends on the state of demand. Its hard for traders to be more active in this winter than last year, and the downward movement of Beicai to the South will put some pressure on the southern market.
Wang Guoqing, director of Lange Iron and Steel Research Center, said that since this year, steel production has increased significantly, which has put a strong supply pressure on the market, but the inventory growth is not obvious. Domestic steel demand is still strong this year. Demand and cost are the most important factors influencing the trend of steel price this year. Even in the case of a significant increase in production, the decline in steel prices is not significant. The average price of steel in the first three quarters calculated by Lange Iron and Steel Research Center is 4149 yuan / ton, down 3.5% year on year.
In the first three quarters of this year, Chinas steel price index (CSPI) composite index averaged 108.58 points, down 7.17 points or 6.2% year-on-year, according to CISA. However, it is worth noting that this years price fluctuation is not the previous big fluctuation, but a small fluctuation. Cost is a double-edged sword, which can support steel price and overdraw profit space. In the first three quarters of this year, the average price of iron ore imported by customs increased by 37% due to the dam break of Vale mine in Brazil and the hurricane in Australian port. Wang Guoqing told the economic observer that according to the price index of Proctors iron ore monitored by the Lange steel cloud business platform, the index reached 126.2 US dollars / ton at the beginning of July, up 94.2% from the same period last year and 73.4% from the beginning of the year.
According to her introduction, since the third quarter, with the impact of mine resumption and environmental protection production restriction, the price index of Platts iron ore has fallen to a certain extent. By the end of the third quarter, the price index of Platts iron ore on September 30 was 93.2, up 34.1% from the same period last year. The increase in cost is particularly significant for the reduction of profits of steel enterprises.
At present, the increasing downward pressure on the economy is also a relatively large impact on the steel market. In addition, CISA said that Chinas steel export environment will become more and more severe, and the long-term impact is far from being eliminated.
However, Zeng Jiesheng believes that although the downward pressure on the economy is still large, the measures to stabilize growth in the late third quarter have begun to produce results. In the short term, the economy has stabilized, real estate investment has a strong resilience, and investment will remain high. Under the stimulation of speeding up the issuance of local special bonds, it is expected that infrastructure investment will continue to pick up.
Recently, a new round of heavy pollution weather hit Beijing, Tianjin, Hebei and surrounding areas, and many cities issued heavy pollution weather warnings. From 8:00 on November 1, Hebei Province started the level II emergency response for heavy pollution weather in the region. Among them, according to the regulations of Tangshan City, if the performance of iron and steel industry is rated as grade C, sintering machine and pelletizing equipment will be shut down, for example, if the early warning time is more than 120 hours, the later period will be shut down by more than 50%; the blast furnace will be shut down by more than 50%.
According to the relevant person in charge of Hebei Provincial atmospheric office, during the emergency response period, enterprises and projects included in the positive list of ecological environment supervision should fully guarantee normal production, and encourage enterprises to reduce emissions independently without limiting production, stopping production, checking and disturbing under the circumstances of ensuring the effective operation of pollution prevention facilities and strictly implementing pollution prevention measures.
Since this year, we have invested billions in ultra-low emission transformation, but we are still in the process of transformation, Wang said. So this autumn and winter, the company was rated as grade C, with a 50% production limit. The limit is very large.
Experts from CISA believe that at present, enterprises that have reached the environmental protection standards in some regions still need to implement the policy of limiting production, and fail to give full play to the role of advantageous enterprises and advanced production capacity. And the burden of enterprise tax is still heavy. For example, because the power consumption of steel enterprises belongs to large industrial power consumption, the price including tax remains unchanged during the implementation process, and the reduction of value-added tax rate results in the rise of the price excluding tax.
How can I get the steel price?
Ma Li, chief analyst of Langer steel network, said that the overall economic situation this year is not ideal, and the overall economic growth in China continues to slow down. In the next two months, the environmental protection production limit may not be as expected. Once the inventory starts to increase, and the steel traders willingness to store in winter is relatively low, the steel price may bear relatively large downward pressure.
Zeng Jiesheng predicted that the steel market is still a consolidation trend before the Spring Festival, and it is difficult to see a big rise and fall. It is expected that in the short term, the governments macro-control policies will remain stable, and it is difficult to have a strong stimulus policy. However, the real estate investment has strong toughness. At present, the main strategy of large domestic real estate enterprises is to speed up the construction and capital turnover as much as possible, and the driving force of demand for screw steel is relatively strong. It is expected that real estate investment will remain at a high level in the next few months without a significant decline.
Zeng Jiesheng said: the overall impact of environmental protection and production restriction policy on supply is not significant, while the short process continues to be below the break even line, and its capacity release will be restricted. So the short-term supply-demand contradiction is not big, in the case of low inventory, the market has a small rebound in the short term basis.
Can the declining profit situation of steel enterprises be reversed? According to Wang Guoqing, the market demand in the fourth quarter gradually went into the off-season, superimposed with the release of new production capacity, and the industrys high supply pressure further emerged, so the steel market may have a significant downward trend, and the profit of steel enterprises may continue to weaken.
Hou Yuehua said: in the two months before the end of this year, our corporate efficiency should be a relatively stable trend. The market price is volatile, but the ups and downs will not be too big.