On Januaray 8th and 9th, The Committee of Steel Structure Experts in China has hold the annual meeting in Wuhan, Hubei Province. More than 200 steel structure experts get together and discussion the current steel industry in China. They proposed to develop steel construction so as to defuse the current serious excess steel production capacity. The characteristic ofsteel construction is light, fast ,better and cheaper to use, the experts believes that structural steel is the most suitable for building industrial steel building construction.
During the meeting, the multi-site large-span grid structure is strongely suggested. Also, in order to facilitate the production of prefabrication, a six tetrahedral units of reticulated spherical shell is brough up. According to the latest reportes, eighty percent of steel building components can be processed in the factory, at the same time it is easy to dismantled. Moreover, some products and materials can be reused and recycled. Compared to the traditional concrete construction, steel construction can reduce 40% of weight, increase four times of construction efficiency, shortened 1/3 construction period, reduce 35% of carbon emissions, and also increase 5% of room rate. Therefore, steel structure is more popular in the developed countries.
Statistics showed that in the last five years, the amount of steel construction in China is 30 to 50 million tons which is accounting for 5% of steel production totally in Chinese Steel Industry. However, compared with other developed countries, it is very obvious that in China the steel construction application is still in a very low level. The steel construction proportion is over 45% in United State, 28% in Japan, 22% in Germany. Academicians in this meeting believe that developing steel construction can resolve the overcapacity in the Chinese Steel Industry, also it cvan promote the construction of industrialization, to achieve the transformation and upgrading of traditional industries.
Overcapacity in the Chinese Steel Industry still exist, but the reducing production of crude steel seems to be the first ray of dawn for steel industry restructuring in China. Last Week, the latest data announced by the Chinese Steel Association showed that in December 2015, the average daily production for crude steel is 1.5685 million tons which has a reducing rate of 0.62%. This is the first negative growth of crude steel production in China since 1981. According to the industry opinion, this first drop of crude steel in the last 34 years would be a positive signal in the Chinese Steel Industry which means in China the steel industry has towards to a capacity reducing period.
Based on the latest blast furnace steel plant survey, till December 2015, the last furnace capacity utilization rate is 74.03% with a reducing rate of 1.11%. The capacity utilization is 90.02% with a 0.58% reducing rate. According to the summarize from the analysts, the steel production reducing is a positive signal showed that the steel production restructuring time has come.
In January 5, the Chinese Academy of Sciences predicted that in 2016 the Chinese Steel Industry will continue to maintain in the downturn. The annual crude steel production in 2016 will be about 786 million with a reducing rate of 3.1%.
Data also showed that in 2015 the Chinese Steel consumption is about 668 million tons with a reducing rate 4.8%, which is the first decline in 1996. In the next 15 years, this consumption reducing will be continued, the Chinese steel demand is expected to decline to less than 500 million tons in the year of 2030.
In fact, the current steel industry in China has a serious excess capacity, the corporate has enormous pressure to survive, and part of enterprises have strong desire to quit. Information from the Galaxy Securities showed that due to the steel prices unsustainable, the funding chain has broken in some companies. It has become a new consensus in the Chinese Steel Industry that for those companies it is just a time problem to quit the market.
In 2015, the Chinese steel manufacturers faced double challenges. On the one hand the economic slowdown lead to decreased demand domestically and a historical low price in the market. On another hand the web internet and mobile internet had changed steel industry in China. Internet has a deep influence on the marketing, R&D, production, logistics and business management almost every aspects in steel industry. Nowadays, steel manufacturers have to adapt to the economic slowdown and also the changes of technology.
In order to face the double challenges, there are five comments brought up by our president:
1. Sense of Crisis. It is very necessary to be prepared for any emergency, such as economic slowdown, decreased market demand, decreasing market price ect.
2. Pay attention to the corporate management. Try to find a balance among profits, cash flow, future development. Only the profitable enterprises have the confidence to invest future development and professionals. Only the healthy and sufficient cash flow create the possibility to get through any economic slowdown or unstable market demand.
3. Improve the ability to innovate. The world is changing, technology changes the way to do business. Therefore, enterprises should innovate in various places, such as new products development, customer services innovation, new technologies applied in production ect. Innovation is the only way to maintain the prosperity of a enterprise, experiments will always lead the company pass through any challenges.
4. Optimize and enhance a unique business mode. Unique business model means the most suitable business type that competitors can not take away from you.
5. Fully embrace the Internet. Taking advantages of the new technolgoy to change the way we communicate.
"In the next 12 month, the Chinese steel market will be in a further deterioration situation due to the weak domestic demand in China."Moody's Investors Services Company said. Under the situation of economic slowdown in China, the investment development of real estate and infrastructure has slowdown, and also the steel manufacturing is still weakening. In addition, due to the decline rate of eliminate production capacity is slower than the rate of deceleration in demand, the profitability for Chinese steel manufacturers will be further weakened. The slowdown of domestic demand exacerbated the over capacity situation in Chinese Steel Market which lead to the Chinese steel pirice fell to the historic low.
Moody expect that in the next 12 months, Chinese domestic steel demand will decline 5%. Although the export growth can release part of pressure created by the falling domestic demand, the overall sales in the steel industry will continue to decline 3% to 4%. Due to the fall in raw material prices are no longer able to offset the steel price decline in the maket, according to the Chinese Iron and Steel Industry Association, in 2015 the profit of medium-sized steel companies has to face a loss in the previous 8 month. However, many companies keep struggling by halting production and selling other assets, which slowdown the process of reducing the production capacity in the market.
Overall, many small companies will be the first batches exit the steel market due to the financial pressure and limited resources. Moody's believes that in the next 1 to 2 years the production capacity will keep reducing and the restructuring process will keep accelerating. However, Baosteel Group Corporation, Shinestar Holdings Group and other leading companies will gain more market share due to their product strength and capacity expansion.
