Xinhua Finance, Shanghai, July 30th (Reporter Wang Qiaoqi) On the one hand, a new round of overcapacity work has been accelerated, and on the other hand, the implementation measures for capacity replacement have been updated. The steel industry with improved operations in the first half of this year is ushering in a new round of policies. Baptism, how do steel companies respond to industry changes? Recently, the reporter interviewed a number of industry experts. They said that mergers and reorganizations will be a breakthrough point for the development of steel companies, and the concentration of the steel industry is expected to further increase.
A new round of “de-capacity” starts
On June 18, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the National Energy Administration and other departments jointly issued the “Notice on Doing a Good Job in Resolving Excess Capacity in Key Areas in 2020″, requiring in-depth advancement of supply-side structural reforms and comprehensive consolidation of the results of capacity reduction. The notice requires that for regions that have not yet completed the target task of reducing crude steel production capacity, it is necessary to continue to apply market-oriented and rule-of-law methods to ensure that the target task of “de-capacity” is fully completed by 2020.
At present, many places have announced arrangements and deployment of capacity reduction work in the steel industry. Taking Hebei Province as an example, the subordinate cities have begun to implement the “Hebei Province 2020 Utilizing Comprehensive Standards to Promote the Exit of Backward Production Capacity in accordance with laws and regulations” issued by the Office of the Leading Group for Eliminating Backward Production Capacity in Hebei Province. Among them, Tangshan City, which has the most densely distributed steel production capacity in China, eliminated 192 companies with outdated production capacity this time, all of which were intermediate frequency furnace equipment, and the elimination methods were “sealed up” or “removed.” Handan City plans to integrate the number of steel companies from 17 to about 8 by 2020; Anyang City requires that this year basically complete the reorganization and integration of steel companies, equipment production capacity replacement, and environmental protection upgrading and transformation. It is planned that the proportion of high-quality special steel will reach more than 30%. The number has been consolidated from 11 to 4.
Shanxi Province issued the “Iron and Steel Industry Transformation and Upgrading 2020 Action Plan”. Based on the 22 iron and steel industry upgrading and transformation projects in 2019, it plans to build an innovative ecology of Shanxi’s special metal materials industry cluster and the cultivation of 100 billion industries And the main direction to comprehensively enhance the independent innovation and technological leadership capabilities of the iron and steel industry in Shanxi Province.
According to industry insiders, in 2016, the state proposed the steel industry’s goal of dissolving over 150 million tons of excess capacity in the steel industry in five years. This goal was completed ahead of schedule in 2018, and the “ground steel” was completely eliminated. Nowadays, a new round of “de-capacity” has been launched. The main purpose is to “look back” to the steel industry’s de-capacity projects and consolidate and trim the work of the previous two years.
Ma Jinlong, chief analyst of the steel industry of Tianfeng Securities, said that the effect of the supply-side structural reform of the steel industry’s capacity reduction in the early stage was relatively obvious. The industry lost money from 2015 to 2016 and began to make profits. At the same time, the debt-to-asset ratio of the entire industry has increased from the previous year. More than 70% has dropped to about 50% of the current level. “In terms of magnitude, the reduction in production capacity this year is still a little bit behind the peak periods in 2017 and 2018, so the impact on the industry is not obvious.” Ma Jinlong said .
According to Wang Guoqing, in recent years, some enterprises in various regions have not shut down their replaced production capacity in time, and old production capacity has re-entered the market. This year, as the closing year of the 13th Five-Year Plan, is also a key industry such as steel and coal. In the closing year of “de-capacity”, a new round of de-capacity is a necessary measure to consolidate the results of previous work.
New regulations for capacity replacement will be introduced
In addition to speeding up “de-capacity”, the guiding methods for capacity replacement in the steel industry have also been “updated.” In order to prohibit new production capacity in the steel industry and promote layout optimization, structural adjustment, and transformation and upgrading, the Ministry of Industry and Information Technology issued the latest version of the “Implementation Measures for Capacity Replacement in the Iron and Steel Industry (Draft for Comment)” on July 24 (hereinafter referred to as the 2020 version of the Replacement Measures).
Compared with the 2017 revised draft, the 2020 version of the replacement measures draft has further improved the details of key areas and capacity replacement ratios. For example, the key areas for the implementation of the Measures are Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta, Fenwei Plain and other “2+26″ atmospheric channel cities, including 46 provinces and cities and demonstration areas. The replacement ratio in key areas is not less than 1.5:1, and the replacement ratio in other areas is not less than 1.25:1. Previously, the implementation areas of the Measures were mainly the Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Pearl River Delta. The replacement ratio was not less than 1.25:1, and other regions implemented reduced replacement.
In this regard, Ma Jinlong believes that due to the continuous improvement of production technology and the continuous improvement of enterprise production efficiency, the iron and steel industry also has the contradiction that the more production capacity, the more output.
“my country’s crude steel output has also repeatedly hit new highs. The revision of the production capacity replacement measures will increase and tighten various indicators, which can maintain the results of the supply-side structural reform, promote the cross-regional flow of production capacity, and improve the level of equipment and technology.” Jinlong said that from the perspective of the impact on the industry, it must be based on the implementation of each region, but at present, the steel industry must be stricter in capacity replacement to control output and capacity.
A few days ago, Lv Guixin, a first-level inspector of the Department of Raw Materials of the Ministry of Industry and Information Technology, said that with the continuous improvement of production technology and the continuous improvement of enterprise production efficiency, the iron and steel industry has already experienced the contradiction of reduced production capacity and increased output. “Under the general trend of industry reduction and development, there is a realistic need to further increase the ratio of capacity replacement.” Lu Guixin said that in the current important window period for industry mergers and reorganizations, the capacity replacement policy adopts a list-based management method to ensure excess capacity. Withdrawal and new production capacity provide a reference for orderly progress. At the same time, it can play a greater role in promoting the development of short-flow steelmaking processes and increasing industry concentration.
Steel enterprise mergers and acquisitions are accelerating
What kind of impact will the changes in policy have on steel companies? Insiders said that under the guidance of policies, the concentration of the steel industry is expected to further increase, and the merger and reorganization of steel enterprises is also accelerating.
At present, the mergers and acquisitions of A-share steel companies have been heated up. Sansteel Minguang announced on June 2 that it intends to acquire 100% of Luoyuan Minguang held by Sansteel Group with its own funds of 2.152 billion yuan. Sangang Minguang stated that the acquisition is conducive to the smooth implementation of the company’s capacity replacement plan and further promotes the company’s industrial transformation and upgrading and the realization of its coastal strategy. At the same time, Sangang Minguang will increase its annual steel output by approximately 1.9 million tons.
Shougang shares announced on June 13 that it would replace the 1.029 billion domestic shares of Beijing Auto with 51% of Shougang Steel Trade held by Shougang Group. After the completion of the transaction, the company controls Shougang Steel Trading, and Shougang’s shareholding ratio in Shougang Jingtang Iron and Steel United Co., Ltd. has risen to 80.82%. The company said that after the completion of the replacement, the construction of Shougang’s industrial chain will be further improved, which is conducive to the close coordination of production and sales, and the improvement of the integrated operation capability of production, sales and research.
In view of the impact of the new capacity replacement regulations on steel companies, the analysis said that the increase in the scope of key areas means that the area with a replacement ratio of 1.5:1 has become larger. The overall replacement scale is larger than in 2018, and the new capacity has decreased accordingly. For example, based on the original capacity of 2 million tons, the newly built capacity after the replacement of capacity in 2018 will be 1.6 million tons, and the newly built capacity will be 1.33 million tons after the capacity replacement in 2020, and the capacity will be reduced by 270,000 tons.
In addition, in response to the requirements of the 2020 version of the new regulations for companies that have completed substantive mergers and reorganizations, “key regions should be replaced at a ratio of not less than 1.25:1, and replacement ratios in other regions should not be less than 1.1:1”. Companies that have undergone capacity replacement or have completed may need to reassess and effectively replace them in accordance with the new standards.
Regarding the future direction of the industry, some experts believe that the future steel industry will be a model of “intelligent manufacturing + green development”. On the one hand, steel companies will become bigger and stronger through technological transformation, mergers and acquisitions, and increase the concentration of the steel industry; On the one hand, we must continue to make breakthroughs in ultra-low emission transformation and jointly build a green industrial chain.
Post time: Nov-16-2020