Recently, the steel market has fluctuated and the steel price has continued to fall, which is closely related to the phenomenon of "limited production but not reduced production" in the steel industry. It is expected that this phenomenon will not be eliminated in the short term. Steel traders must pay attention to this phenomenon.

At the end of July and the beginning of August, why did steel prices fluctuate?

At the end of July and the beginning of August, the steel market saw another shock, and the steel price saw a wave of decline. At the end of July, the price of cold and hot rolled coil in Shanghai market fell by 170 yuan / ton, the price of medium and thick plate dropped by 120 yuan / ton to 150 yuan / ton, the price of screw steel dropped by 130 yuan / ton, the price of wire rod dropped by 80 yuan / ton, and the prices of main steel products were all in a downward channel of shock. In early August, steel prices continued to fall. From August 1 to August 6, the price of cold and hot rolled coil in Shanghai market dropped by 100 yuan / ton, the price of medium and thick plate dropped by 50 yuan / ton to 60 yuan / ton, the price of wire rod dropped by 80 yuan / ton, the price of screw steel dropped by 120 yuan / ton, the decline was still the same, there was no sign of rebound.

The reason for the sharp fluctuation of steel market and the rapid decline of steel price is that the current steel market is oversupply and insufficient demand, resulting in oversupply, which is also caused by the phenomenon of "limited production but not reduced production".

In recent years, the state has stepped up structural reform on the supply side of the iron and steel industry, eliminated backward production capacity and achieved certain results. The iron and steel industry has completed the target task of resolving over 150 million tons of excess capacity two years in advance, achieved phased results, completely eliminated the capacity of "strip steel", and the market environment is more fair and orderly. However, judging from the operation of the steel industry in the first half of 2019, there are some new situations and problems. In the first half of the year, China's crude steel output reached 492.17 million tons, a year-on-year increase of 9.9%, a year-on-year increase of 3.9 percentage points; steel output reached 586.9 million tons, a year-on-year increase of 11.4%, a year-on-year increase of 5.4 percentage points. At the same time, profits of steel enterprises are declining. Statistics show that in the first half of the year, the total profits of the member enterprises of the Steel Association decreased by 20.5% year on year, of which the profits of the main business decreased by 30.7% year on year; the sales profit margin reached 5.1%, down 2 percentage points year on year, lower than the average profit margin of the industrial enterprises above the national scale. In general, in the first half of the year, the steel industry showed the phenomenon of "limited production without reducing production, increasing production without increasing efficiency".

Several problems existing in the current iron and steel industry

First, the task of consolidating the achievements of capacity reduction is arduous. Ren Qingping said that with the release of the structural reform dividend on the supply side of the iron and steel industry, the supply and demand of the steel market has formed a phased balance, the steel price has risen, and the profits of the steel enterprises are fair. In this state, some iron and steel enterprises adhere to the idea of "relying on scale expansion, high-yield and overproduction", blindly expanding production capacity and increasing production. Some enterprises try to increase smelting capacity in the name of casting ferroalloy and comprehensive utilization of resources; some enterprises build special-shaped blast furnaces and converters in violation of the regulations of "approving small ones and building large ones"; some enterprises engage in "digital game" in capacity replacement in an attempt to increase steel production capacity in disguise; some "strip steel" production capacity even shows signs of resurgence; some steel enterprises even keep high production capacity For load production, the capacity utilization rate of some steel plants is as high as 150%; the output of some main steel producing areas is "rapid development", which leads to safety, environmental protection and quality risks. Since the beginning of this year, there have been frequent safety accidents in steel enterprises, which is obviously not conducive to the normal production and operation of steel plants.

According to statistics, according to the announced capacity replacement projects in the steel industry in recent years, the crude steel capacity of the proposed steel project is nearly 200 million tons. Under the condition that the intensity of demand for iron and steel in the national economy is declining, the situation of supply exceeding demand is aggravating. At present, the impulse of new production capacity and the impulse of resurgence of "Di Tiao steel" still exist. It is urgent to establish a long-term mechanism to prohibit new production capacity and prevent the resurgence of "Di Tiao steel". Relevant departments of the state should seriously deal with new capacity projects, strictly supervise capacity replacement projects throughout the process, crack down on illegal capacity, further tighten law enforcement standards, curb investment impulse, and finally solve the problem of steel overcapacity.

Second, it is urgent to find out who is increasing production behind the high growth of steel production. Statistics show that in the first half of the year, China's crude steel production increased by 9.9%. Among them, the crude steel output of member enterprises increased by 5.64% and that of non member enterprises by 24.08%. The output growth rate of non member enterprises is much higher than that of member enterprises, and the production increment of these enterprises accounts for 56.2% of the total increment. It is urgent to find out whether these production capacities comply with industrial policies and environmental protection policies.

Third, the current economic development is facing new risks and challenges. At present, China's economic development is facing new risks and challenges, and domestic economic downward pressure is increasing. The central government's statement on the judgment of the current economic situation has changed from "there are still many difficulties and problems in the economic operation, the overall tightening of the external economic environment, and the downward pressure on the domestic economy" to the current "China's economic development is facing new risks and challenges, and the downward pressure on the domestic economy is increasing". The central government is cautious about the current economic situation, understands the situation and enhances confidence. The key points in the second half of the year are to maintain the fixed strength, firm base and stable expectation.

Promoting the good development of steel market by multi linkage

Due to the blind increase of output in the steel industry, the supply of steel market increases rapidly, while the effective demand of downstream terminals does not increase, or even decrease, which leads to the contradiction of excess supply, and ultimately leads to the fluctuation of steel price, which is unfavorable to the operation of steel enterprises and steel trading enterprises.

Therefore, the steel trade enterprises should consciously maintain the stability of the steel market, and avoid blindly chasing up the price and artificial speculation. In order to pursue profits, they should hoard goods, or blindly kill the price and sell at a low price, which will aggravate the market shock. For this. Ren Qingping put forward several suggestions:

First, iron and steel enterprises should self-discipline and consciously abandon the idea of relying on scale expansion, high-yield and overproduction. Iron and steel enterprises should control the release of production capacity, adhere to production on demand, resolutely do not produce if the price is lower than the manufacturing cost, do not produce if there is no contract, and do not give goods if the customer does not give money, so as to alleviate the contradiction between supply and demand in the steel market and promote the smooth operation of the steel market.

Second, the relevant departments of the state should establish a long-term mechanism to prohibit new production capacity and prevent the resurgence of "strip steel". We should seriously deal with illegal new capacity projects, strictly supervise capacity replacement projects throughout the process, crack down on illegal capacity, further tighten law enforcement standards, and curb investment impulse. Relevant ministries and commissions of the State shall organize the supervision and inspection of the elimination of backward and excess capacity, maintain a high-pressure situation and prevent any form of illegal new capacity.

The third is to introduce the third-party authority to conduct in-depth and comprehensive investigation and Research on the supply and demand of steel market. Provide steel trading enterprises with forward-looking and early-warning steel market trend research report, especially remind market participants to have a full understanding of the potential risks caused by the sharp fluctuation of steel market and steel price, keep a clear mind, and timely adjust the business strategy and marketing mode according to the changes of the environment.