Why is the profit of China's steel industry still "thin as a knife" after being the global leader for more than 20 years?

　　(Economic Observer) Why is the profit of China's steel industry still "thin as a knife" after being the global leader for more than 20 years?

　　China News Service, Yancheng, October 15 (Reporter Pang Wuji) In 1996, China's crude steel output exceeded 100 million tons, ranking first in the world.

Since then, China's steel industry has been in the position of the global "biggest" for more than 20 years.

However, the analysis believes that China's steel industry still has a large gap with the world's first-class level in terms of the number of high-end products, industrial concentration, and material protection, and the industry's profit margin is extremely low.

　　According to statistics from the China Iron and Steel Association, from January to August this year, the key statistical steel companies achieved sales revenue of 2.9 trillion yuan (RMB, the same below), realized profits of 109.64 billion yuan, and the sales profit rate was only 3.79%, which was lower than that of most manufacturing industries. industry.

　　At the 2020 China Stainless Steel and Special Alloy New Materials Industry High-end Forum held on the 15th, Zhang Xiaogang, the former chairman of the International Organization for Standardization (ISO), said that in the past, driven by the rapid development of China’s economy and China, the world’s largest market, China’s steel industry With rapid growth, many companies have grown into regional, national and even world leaders in a short period of time.

However, the core capabilities of many companies do not match the size of the company.

　　Li Xinchuang, Secretary of the Party Committee and Chief Engineer of the Metallurgical Industry Planning and Research Institute, said frankly that in recent years, many steel companies' sales profits have been too small to cover bank interest.

　　Even special steels used in important areas of the national economy such as machinery, automobiles, military industry, and chemicals are also facing profit pressure.

Wang Huaishi, secretary-general of the China Special Steel Enterprises Association, said here that for a long time, the overall profit level of China's special steel industry has been lower than the national industrial average, with great pressure for survival, long-term deviation of price and value, and the export volume of special steel compared with China's major production countries The identities are also not very consistent.

　　The importance of the iron and steel industry in supporting economic and social development is beyond doubt.

But why is the profit of such a large industry so small?

　　Li Xinchuang pointed out that one of the most important reasons is the low concentration of the steel industry.

So far, the concentration of the top 10 companies is only about 36%, which is a big gap with other industries.

For example, in the upper iron ore industry of the steel industry, over 70% of the world's iron ore supply is monopolized by the four major mining giants, with a profit margin of over 36%.

　　Looking at the cement industry, which also has the problem of overcapacity, the production capacity concentration of the top ten domestic cement companies is 64%, and the profit margin is about 18%.

　　Li Xinchuang called for iron and steel companies to speed up joint reorganization, strengthen cooperation, and give play to the comparative advantages of each company, rather than simply fighting a "price war."

　　He suggested to promote industry mergers and reorganizations.

Encourage superior companies to use assets as a link to promote mergers and reorganizations across regions, form a number of large steel enterprise groups, increase industry concentration and market influence, and avoid vicious competition in the homogenization of high-end products.

　　In addition, the high price of upstream raw materials is also an important factor that erodes the profit margin of the steel industry.

Although China imports 65% of the world's iron ore each year, its pricing power is weak.

　　Since April this year, the price of iron ore has seen a significant increase in the market. So far, the price level is still at a high level, further squeezing the profits of steel companies.

Li Xinchuang pointed out that accelerating the increase in industry concentration will also help Chinese iron and steel companies gain greater pricing power in purchasing raw materials.

　　Zhang Xiaogang said that in the past 40 years, the rapid development of China's steel industry relied on a development path of introduction, digestion, absorption and re-innovation.

But nowadays, when China Steel is “running side by side” with its foreign counterparts in terms of technology and management, this road will not work.

He suggested that steel companies establish standardized thinking to promote technological innovation, management innovation and business model innovation.

The steel industry should take action to form a unified standard system by integrating the group standards of the steel industry, avoiding multiple standards and wasting resources.

At the same time, this will also give the company's downstream users a choice, thereby establishing a better image in the international market and making the "boss" more veritable.

(Finish)