Profit evaporates steel company "death" does not reduce production

On the evening of November 19, Beijing Jiuhua Villa. Many people in the iron and steel industry forum looked very dignified. Zhang Ji (a pseudonym) sat at the same table with several other steel traders. He lifted his glass and drunk a large glass of liquor.

He worked as a steel trader in Fangshan District, Beijing. He mainly sells building materials and supplies real estate developers in Fangshan District. In the past few years, due to the rapid development of the real estate industry in Fangshan District, his business was very hot. However, starting in September of this year, he felt back to the financial crisis of 2008 – the sudden disappearance of steel demand.

“There was a real estate developer who had started work on a commercial housing project in Fangshan. I asked for more than 2,000 tons of wire for cargo supply.” Zhang Ji told the “First Financial Daily”. When he asked the developer when he could give a definitive answer, the developer informed, “The situation is not good now. Let's talk about the situation after January next year.”

Not only Zhang Ji, almost the entire steel trade industry is experiencing a cold winter. The reporter recently learned from Tianjin, Henan, and Beijing that the downstream industries of the steel industry have experienced different degrees of decline. The shrinking of the real economy has led to the loss of steel prices.

Decline in demand

Demand for building materials from real estate declined, and some developers actively requested suspension of supply, and some steel traders were unwilling to supply.

A steel trader in Chengdu, who mainly deals with building materials, told the newspaper that the developer’s capital chain is very tight now. It belongs to on-demand procurement and will not be hoarded. Developers tend to require steel traders to advance funds first, but steel traders’ capital chain is also very Tension, coupled with the fact that it is not optimistic about the market, is more inclined to cash delivery, "If you do not give cash, it may be a single business, unless it is a special iron customers."

There are also traders who are trying to keep customers from losing money. An Anyang steel trader in Anyang, Henan Province, told the newspaper that the company is currently taking the construction site just for the sake of volume. Each month there is a fixed amount of agreement in the steel mills, and the sales volume needs to be guaranteed every month.

For this steel trader, it is not purely to lose money. "Now on the construction site, we are detained for one month. After September, we began to give us interest (the Anyang area is 2 points). There was also a deposit before, but no interest. At that time, there was no debenture price in the quotation." The above traders said.

According to him, the quotation from steel traders in the Anyang area for the construction site now includes two prices, the cash price and the debenture price. “In the past, only the cash price was reported because at that time, everyone’s funds were relatively abundant and they were all old customers, even if they were detained. For a while, the impact on steel traders will not be great."

A middle class from Tangshan Guofeng Iron and Steel Group told the newspaper that the current decline in real estate demand for building materials is not large. Real estate companies must now accelerate the speed of construction. To realize this, they hope to cap and sell as soon as possible, but railways, highways, and enterprises are new. Expansion of the building is more work stoppages.

According to statistics from the National Bureau of Statistics, in October, the national real estate investment decreased by 11.6% from the previous month, the area of ​​commercial housing sales fell by 26.9% from the previous month, and the area of ​​new housing starts fell by a significant 20.8%. For the construction of affordable housing, many steel traders in Tianjin told this newspaper: “We are unwilling to supply affordable housing because they have no money.”

Not only building materials but also the demand for sheet materials has declined significantly. Henan Zhongtian Iron & Steel Co., Ltd. is mainly engaged in sheet metal. The chairman of the company, Yao Hongchao, told the newspaper: “We have a customer of Datong, and I contracted them with 5 or 60 tons. First we gave us 30% of the money. After the goods came out, It hasn’t raised any money yet. It has pressed me more than 20 million yuan, and it has made us very passive. We sent several letters to them and said that we must pursue their liability for breach of contract.”

Yao Hongchao said that downstream demand is indeed declining. For example, high-speed rail projects, many projects cannot even pay workers, and have to stop.

Hou Zhiyu, a researcher at Lange Steel Information Research Center, told the newspaper that in October, the sales volume of steel products and total orders index had fallen for the second consecutive month, and the index was operating at a low level below 30%, both of which broke the lowest point of the year and participated in steel exchanges. In the 1152 companies surveyed by industry PMI, the number of companies with reduced sales and total orders increased from 50% in the previous month to 60%.

Lose money to expand

“This year can be said to be a year of hard work. In the first half of the year, we made a lot of hard-earned money. In late August, the profits of one year evaporated.” Wang Baoxiang, deputy general manager of Beixin Building Materials (000786), told us Newspaper.

Luo Tiejun, Deputy Director of the Department of Raw Materials Industry of the Ministry of Industry and Information Technology, told this newspaper that China’s iron and steel production industry has achieved profit margins of less than 3% for two consecutive years, that is to say, it is less than the current deposit rate, and the profit for the first 10 months of the year The rate has dropped to 2.91%. If you remove the business from Baotou Steel Rare Earths, the profit level may not even reach 2%.

Although in recent years there has been continuous complaints that most of the profits of the industry have been eroded by several international mining companies, it is strange that domestic steel companies are still expanding their production on a large scale. Wang Baoxiang's investigation found that although the backward production capacity has been eliminated in recent years, domestic iron and steel companies rarely reduce their production capacity. All of them are small blast furnaces with large blast furnaces. Overcapacity is inevitable.

“We have entered an era of surplus.” Hou Zhihao believes that the growth in steel supply capacity exceeds the growth rate of demand in 2011. At present, the adjustment of steel prices is the total outbreak of supply and demand conflicts throughout the year. Overcapacity and imbalance in supply and demand are the steel prices during the sales season. The root cause of Powei's decline.

According to statistics, from January to September of this year, the cumulative investment in fixed assets of the steel industry reached 371.7 billion yuan, an increase of 19.7% year-on-year, 15.5 percentage points higher than the growth rate of the previous year.

Why are steelmakers not making money and investing in production on a large scale? The steel industry, as a large local taxpayer and a large number of employees, is easily accessible from the banks. Many steel companies do not necessarily use the main steel industry investment after they have come from banks. It is to extend the tentacles of capital to other areas.

Yao Hongchao told the newspaper that as an iron and steel company, if the loss of production is 100 million yuan, it would have to lose 200 million yuan without producing all the stops. "Who dares to stop production easily?"