In the first half of 2011, the domestic iron and steel industry was relatively stable and there was no ups and downs in the development process. However, there were also some features that were worth thinking about.
First, the capacity utilization rate continues to be high. Since 2011, the average daily output of crude steel has been continuously updated. In the first half of the year, the average daily output of crude steel reached 1.94 million tons. In June, the daily output reached a record high of 1,997,600 tons, and the annual crude steel production was close to 730 million tons. Capacity utilization also continues to hit a new high.
Second, downstream demand has been blocked. In the iron and steel enterprises full-load production, high capacity utilization at the same time, the downstream demand has not improved. From the PMI indicator, except for the seasonal rise in March, the index fell in other months of the first half. In the PMI sub-indices, the decline in PMI raw material inventories is in stark contrast to the rising trend in PMI finished goods inventories. PMI and its sub-index show that companies are cautious about the future demand situation. As far as the downstream industry of the steel industry is concerned, due to various factors such as policies and oil prices, the growth rate of automobile production and sales has been declining. Plate demand has been inhibited; real estate has also accumulated a large amount of inventory in policy control, development investment and new housing starts. The area showed a year-on-year growth slowdown.
Third, the upward pressure on costs does not diminish. Iron ore is one of the realistic issues that China has to face for iron and steel enterprises in China. The huge amount of steel production in China, but because of various reasons led to the production of important raw materials controlled by people, profit margins have been repeatedly eroded. Following the recent short-term model of monthly pricing of iron ore prices, the three major international miners have successively raised the price of iron ore. How to effectively relieve the upstream cost pressure will become a problem that our country's steel companies must face and think.
Fourth, the industry’s microeconomic situation has not changed. According to the latest data from China Iron and Steel Association, the total profit of 80 large and medium-sized steel enterprises from January to May 2011 was 42.8 billion yuan, a year-on-year drop of 2%. The profit margin for product sales was 2.91%, down 0.67% year-on-year. National Development and Reform Commission data show that from January to May, the national steel industry realized a profit of 120.6 billion yuan, a year-on-year increase of 14.4%, and the growth rate dropped sharply. In the environment of high upstream costs and weak downstream demand, the micro-profits of the steel industry have still not shown signs of improvement.
The characteristics of these above-mentioned industry operations have always existed, but they also have new performances in the new situation, and they have also issued new challenges to the development of the industry. In the third quarter, affected by the rainy season and high-temperature weather in the south, construction projects decreased and steel demand declined. Under the pattern of supply and demand with high supply and weak demand, the probability of steel prices fluctuating and decreasing is increasing. At the same time, the basic orientation of the state’s macroeconomic regulation and control remains unchanged, and the general level of stabilizing prices continues to be the primary task of macroeconomic control. In the second half of the year, China will continue to implement a prudent monetary policy and maintain a reasonable growth in the total amount of social **. It is expected that the capital position of the company will remain tight. Therefore, how to maintain profitability in the off-season of the steel industry in the third quarter is a problem that each steel company needs to solve in the short term.
As far as the medium and long term are concerned, it is a common direction for all companies and the industry to work out gradually from the industry's meager profit predicament, enhance industry competitiveness, and ensure the sustainable and healthy development of the industry. Eliminating outdated production capacity and increasing industry concentration is a key measure to promote the healthy development of the industry. The policies and attitudes of the relevant departments have recently demonstrated the determination to speed up the restructuring of the steel industry. In view of the future development of the iron ore market in the upstream of the iron and steel industry, the establishment of a strategic security system for iron ore resources and increasing the exploration and development of iron ore resources in the western region is also a major focus of China's steel industry in the coming period.
First, the capacity utilization rate continues to be high. Since 2011, the average daily output of crude steel has been continuously updated. In the first half of the year, the average daily output of crude steel reached 1.94 million tons. In June, the daily output reached a record high of 1,997,600 tons, and the annual crude steel production was close to 730 million tons. Capacity utilization also continues to hit a new high.
Second, downstream demand has been blocked. In the iron and steel enterprises full-load production, high capacity utilization at the same time, the downstream demand has not improved. From the PMI indicator, except for the seasonal rise in March, the index fell in other months of the first half. In the PMI sub-indices, the decline in PMI raw material inventories is in stark contrast to the rising trend in PMI finished goods inventories. PMI and its sub-index show that companies are cautious about the future demand situation. As far as the downstream industry of the steel industry is concerned, due to various factors such as policies and oil prices, the growth rate of automobile production and sales has been declining. Plate demand has been inhibited; real estate has also accumulated a large amount of inventory in policy control, development investment and new housing starts. The area showed a year-on-year growth slowdown.
Third, the upward pressure on costs does not diminish. Iron ore is one of the realistic issues that China has to face for iron and steel enterprises in China. The huge amount of steel production in China, but because of various reasons led to the production of important raw materials controlled by people, profit margins have been repeatedly eroded. Following the recent short-term model of monthly pricing of iron ore prices, the three major international miners have successively raised the price of iron ore. How to effectively relieve the upstream cost pressure will become a problem that our country's steel companies must face and think.
Fourth, the industry’s microeconomic situation has not changed. According to the latest data from China Iron and Steel Association, the total profit of 80 large and medium-sized steel enterprises from January to May 2011 was 42.8 billion yuan, a year-on-year drop of 2%. The profit margin for product sales was 2.91%, down 0.67% year-on-year. National Development and Reform Commission data show that from January to May, the national steel industry realized a profit of 120.6 billion yuan, a year-on-year increase of 14.4%, and the growth rate dropped sharply. In the environment of high upstream costs and weak downstream demand, the micro-profits of the steel industry have still not shown signs of improvement.
The characteristics of these above-mentioned industry operations have always existed, but they also have new performances in the new situation, and they have also issued new challenges to the development of the industry. In the third quarter, affected by the rainy season and high-temperature weather in the south, construction projects decreased and steel demand declined. Under the pattern of supply and demand with high supply and weak demand, the probability of steel prices fluctuating and decreasing is increasing. At the same time, the basic orientation of the state’s macroeconomic regulation and control remains unchanged, and the general level of stabilizing prices continues to be the primary task of macroeconomic control. In the second half of the year, China will continue to implement a prudent monetary policy and maintain a reasonable growth in the total amount of social **. It is expected that the capital position of the company will remain tight. Therefore, how to maintain profitability in the off-season of the steel industry in the third quarter is a problem that each steel company needs to solve in the short term.
As far as the medium and long term are concerned, it is a common direction for all companies and the industry to work out gradually from the industry's meager profit predicament, enhance industry competitiveness, and ensure the sustainable and healthy development of the industry. Eliminating outdated production capacity and increasing industry concentration is a key measure to promote the healthy development of the industry. The policies and attitudes of the relevant departments have recently demonstrated the determination to speed up the restructuring of the steel industry. In view of the future development of the iron ore market in the upstream of the iron and steel industry, the establishment of a strategic security system for iron ore resources and increasing the exploration and development of iron ore resources in the western region is also a major focus of China's steel industry in the coming period.
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