The significant decline in economic benefits is the most immediate issue facing the entire industry. The problem lies on the demand side and is the consequence of 'involution-style'恶性 competition. As long as 'involution-style'恶性 competition continues, the healthy and sustainable development of the industry as a whole cannot be discussed. On the date, the China Iron and Steel Association's Third Quarter Information Press Conference (referred to as the press conference) was held in Beijing. Jiang Wei, Deputy Secretary of the Party Committee, Vice President and Secretary-General of the Steel Association, called on enterprises to clearly recognize the particularity and severity of the current situation compared to previous downturn cycles, to face the adjustment of the steel development stage rationally, to implement in practice the requirements of the Party Central Committee to prevent 'involution-style'恶性 competition, to earnestly practice the "three fixed, three not" business principles, to jointly self-discipline, to strive to maintain market stability, to improve economic benefits, to reduce operational risks, and to truly achieve quality and effective development.

Deputy Secretary-General of the China Iron and Steel Association (CISA) and Director of the Market Research Department, Shi Hongwei, Deputy Secretary-General and Director of the Industry Operation Department, Chen Yuqian, Deputy Chief Engineer, Huang Dao, and Director of the Planning and Development Department, Wang Bin, attended the press conference and responded to concerns from media reporters from CCTV, Xinhua News Agency, People's Daily, Economic Daily, China Daily, Reuters, China Metallurgical News, World Metal Bulletin, and others on topics such as how to "break internal competition," new changes in steel demand, promoting joint restructuring and improving exit mechanisms, the steel industry entering the carbon market, the group standard for the "Evaluation Method of Low Carbon Emission Steel," and the establishment of the Electric Arc Furnace Steel Branch. The meeting was chaired by Su Changyong, Deputy Secretary-General of CISA and Director of the General Office and International Cooperation Department.

Previous quarter: The characteristics of the steel industry entering the "stock optimization" stage are becoming increasingly evident.

Jiang Wei introduced that since the beginning of this year, the steel industry has focused on deepening reforms, expanding demand, and optimizing structures, effectively meeting the higher demands for steel materials in the development of the national economy and the optimization of industrial structures, and steadily promoting the development of new forms of productive forces. However, at the same time, the characteristics of the steel industry entering a "stock optimization" stage have become increasingly evident, with the industry's operations persistently showing a "three highs and three lows" situation: high production, high costs, high exports, low demand, low prices, and low efficiency. This is specifically manifested in the following aspects.

Steel production has decreased year-on-year, with a greater drop in apparent consumption. According to data released by the National Bureau of Statistics, during the first three quarters, the country's cumulative crude steel production reached 875 million tons, a year-on-year decrease of 3.4%, with an average daily output of 3.14 million tons; pig iron production was 723 million tons, down 3.2% year-on-year; steel production was 1.128 billion tons, down 4.1% year-on-year; and the apparent consumption of crude steel, converted, was 739 million tons, down 4.2% year-on-year.

Second, steel exports increased year-on-year while imports decreased. According to customs data, during the first quarter, China's cumulative steel exports reached 100 million tons, an increase of 10.0% year-on-year; the export price was $1,000 per ton, a decrease of 10.0% year-on-year, but still 10.0% higher than the domestic steel price during the same period; the cumulative export value was $10 billion, a decrease of 10.0% year-on-year; the cumulative steel imports were 10 million tons, a decrease of 10.0% year-on-year; the import price was $1,000 per ton, a decrease of 10.0% year-on-year; the net crude steel exports, after conversion, were 10 million tons, an increase of 10.0% year-on-year.

The third point is the decrease in steel prices and the high operation of iron ore prices. According to monitoring by the China Iron and Steel Association, the average value of the China Steel Price Index for the first quarter was . points, a year-on-year decrease of .%. Among them, the average value of the long product index was . points, a year-on-year decrease of .%; the average value of the plate product index was . points, a year-on-year decrease of .%. In the first week of January, it fell to . points, the lowest level in recent years. For the first quarter, the average import price of iron ore in China was . dollars per ton, a year-on-year decrease of .%, a decrease significantly smaller than the decrease in steel prices.

The decline in revenue exceeded the decline in costs, resulting in a year-on-year decrease in industry efficiency. In the first three quarters, the cumulative operating income of key statistical steel enterprises was 3.66 trillion yuan, down 0.03% year-on-year; operating costs were 3.37 trillion yuan, down 0.02% year-on-year, with the revenue decline exceeding the cost decline by 0.01 percentage points; the total profit was 10.8 billion yuan, down 0.09% year-on-year; the average profit margin was 0.02%, down 0.01 percentage points year-on-year. As of the end of September, the asset-liability ratio of key statistical steel enterprises was 0.06%, up 0.01 percentage points year-on-year.

Five is to advance the ultra-low emission retrofit project and the extreme energy efficiency project, with continuous improvements in energy conservation and environmental protection indicators. As of the date, a total of 228 steel enterprises (including one pellet enterprise) have completed or partially completed the ultra-low emission retrofit and evaluation monitoring. Among them, 14家企业 have fully completed the ultra-low emission retrofit, involving crude steel capacity of about 452 million tons, with an investment of about 390 yuan per ton of steel for the ultra-low emission retrofit; 214家企业 have partially completed the ultra-low emission retrofit, involving crude steel capacity of about 557 million tons; the average environmental operating cost per ton of steel is about 230 yuan. The extreme energy efficiency project has received attention and active participation from enterprises. Currently, Zhanjiang Iron & Steel of Baosteel, Shougang Jingtang, Hebei Iron & Steel Shijiazhuang, Ningbo Iron & Steel, and Baoshan Base of Baosteel have conducted energy efficiency benchmarking demonstration publicity.

In the previous quarter, the water intake per ton of steel for key statistical steel enterprises decreased by .%, and the emissions of chemical oxygen demand, ammonia nitrogen, volatile phenol, total cyanide, suspended solids, and petroleum pollutants in discharged wastewater decreased by .%, .%, .%, .%, .%, and .%, respectively. The emissions of sulfur dioxide per ton of steel, particulate matter per ton of steel, and nitrogen oxides per ton of steel decreased by .%, .%, and .%, respectively. Despite a significant decrease in production, the total energy consumption of key statistical steel enterprises decreased by .%, the comprehensive energy consumption per ton of steel remained largely unchanged, and the comparable energy consumption per ton of steel decreased by .%.

Current Situation: The pressure on maintaining a dynamic balance between supply and demand has significantly increased. The importance of strengthening self-discipline has further become evident.

At the meeting, Jiang Wei elaborated on the current situation faced by the steel industry from various aspects:

One is the significant decline in demand, highlighting the importance of industry self-regulation. In the previous quarter, apparent consumption of crude steel decreased by .% year-over-year. In April and May, apparent consumption of crude steel decreased by .% and .%, respectively, marking two consecutive months of double-digit declines. The pressure on maintaining a dynamic balance between supply and demand has significantly increased, making it more difficult for enterprises to control production rhythms. The importance of strengthening self-regulation has become even more evident.

Second, the contradiction between supply and demand is prominent, and the decline in efficiency is unfavorable for high-quality development of the industry. This year, influenced by strong supply and insufficient effective demand, the contradiction between supply and demand in the steel market has intensified, leading to a significant decline in steel prices and pressure on corporate profits. The continuous decline in economic efficiency will inevitably affect enterprises' investment in research and development, product upgrading, and energy conservation and environmental protection, which is unfavorable for the high-quality development of the industry.

The third issue is that iron ore prices are prone to rise but difficult to fall, and high costs are eroding the normal profit margins of the industry. In the previous quarter, the average import price of iron ore in China decreased by .%, while the average value of the steel price index decreased by .%, with the steel price decline significantly greater than the ore price decline. Overall, steel prices have remained low and are prone to fall rather than rise, while iron ore prices are relatively high and also prone to rise but difficult to fall. The high cost of major raw materials has further squeezed the profit margins of steel enterprises. In the first half of this year, the sales profit margin of key statistical steel enterprises was only .%, while the sales profit margin of the four major international mining companies ranged from .% to .%, indicating a severe imbalance in the distribution of benefits across the industrial chain.

Four is the rise of international trade protectionism, and the situation for steel exports is becoming increasingly severe. China's steel exports have remained at a high level, drawing attention from the international market. The number of trade remedy original cases against China has significantly increased, currently reaching , with an expected total for the year exceeding , surpassing the total of trade remedy original cases from the previous year. Canada, which has a small volume and low market share of Chinese steel exports, has disregarded WTO rules and is considering imposing an additional % tariff on Chinese steel. There are clear signs of the rise of international trade protectionism targeting Chinese steel products, with various forms of trade barriers being rapidly constructed. The risks and challenges facing steel exports are accumulating.

Looking ahead, Jiang Wei conducted further analysis from both the demand and supply sides.

From the perspective of demand, according to the short-term demand forecast released by the World Steel Association, it is expected that China's steel demand will decrease by .% year-on-year in the year and by .% year-on-year in the year.

The overall demand for steel consumption is showing a downward trend, but there are reductions with increases and improvements in quality. Jiang Wei pointed out that demand for different varieties will continue to diverge. Among them, the demand for construction steel is decreasing but is expected to improve marginally, while the manufacturing sector has become the main driver of steel demand, especially with the accelerated development of new energy, high-end equipment manufacturing, and the photovoltaic industry, which will significantly boost the demand for corresponding steel varieties. The focus of steel demand structure is gradually shifting towards the manufacturing sector. The demand for steel in the manufacturing and construction sectors accounted for % and % respectively last year, and it is expected that this year they will each account for "half of the market," with the possibility of further increase in steel demand for manufacturing.

From the perspective of supply, the state continues to implement policies to control crude steel production, creating conditions for a slowdown in the pace of steel production.

However, it is important to note that with the rapid recovery of steel prices at the end of the month, some enterprises have become overly optimistic, increasing production and intensifying efforts, leading to a significant rise in steel production and inventory since the month. This has caused steel prices to quickly shift from rising to falling. Jiang Wei pointed out that in early October, the daily crude steel output of key statistical steel enterprises increased by 1.5% month-on-month, and steel inventory rose by 3.6% month-on-month. Correspondingly, steel prices have fallen for two consecutive weeks. Research shows that the higher the production and inventory, the lower the price and efficiency.

Currently, the new dynamic equilibrium foundation in the steel market has not yet been established. The impulse to increase production at the slightest improvement in the market will only exacerbate the supply-demand contradiction, ultimately suppressing prices and plunging back into the predicament of "producing more, losing more; losing more, producing more." Jiang Wei emphasized that in the current market situation, there are still many enterprises that maintain a clear mind about the market, thinking ahead and making the correct judgment that the industry's fundamentals have not undergone a qualitative change. Judging from the data, there is still room for steel enterprises to further reduce inventory through self-discipline. It is necessary to maintain strategic determination, adhere to self-discipline, and take practical and effective actions to jointly safeguard the stable operation of the industry.

Key Tasks: Preventing "Involution-style" Malicious Competition to Achieve Quality and Profitable Development

Currently, steel enterprises have reached a consensus on the industry entering a development stage of "reducing quantity and optimizing stock," fully recognizing the severity of the "three highs and three lows" operational trends, and highly agreeing on the necessity of strengthening industry self-discipline to prevent "inward-turning"恶性 competition. Jiang Wei stated that in the next stage, the steel industry will continue to advance the key tasks determined at the sixth session of the eighth council (expanded) meeting of the China Iron and Steel Association, striving to achieve the annual work objectives of "stable operation, risk prevention, quality improvement, structural optimization, transformation promotion, and benefit enhancement."

One is to strengthen self-discipline and prevent "involution-style"恶性 competition. In order to actively implement the requirements of the Political Bureau of the CPC Central Committee and create a benign competitive environment, the Steel Association organized a symposium on strengthening industry self-discipline. It was proposed that enterprises should clearly recognize the particularity and severity of the current situation compared to previous downturn cycles, rationally face the adjustment of the steel development stage, and implement the requirements of the Party Central Committee to prevent "involution-style"恶性 competition with practical actions. They should earnestly practice the "three fixes and three nots" business principles, collectively self-discipline, strive to maintain market stability, improve economic efficiency, reduce operational risks, and truly achieve quality and profitable development.

Second, accelerate research and advance capacity governance and joint reorganization. Joint reorganization and capacity governance are two fundamental measures for optimizing the operational order and improving the development environment of the steel industry. They complement and enhance each other, guiding the survival of the fittest and directing a balance between supply and demand. Currently, both joint reorganization and the exit channels for outdated capacity require policy support. On one hand, the Ministry of Industry and Information Technology has suspended the public display and announcement of new steel capacity replacement projects, blocking the entry of new capacity; on the other hand, it is necessary to quickly establish an existing capacity exit mechanism, creating conditions to guide the exit of outdated capacity and promote the shift of steel production towards advantageous capacity. At the same time, it is essential to unwaveringly advance joint reorganization, resolutely preventing the revival of a large amount of ineffective or "zombie" capacity during the reorganization process. This task is challenging and requires joint efforts from the government, enterprises, and the industry. The China Iron and Steel Association has already started to accelerate relevant research, conduct special investigations, and propose a package of policy recommendations to promote joint reorganization and improve exit mechanisms.

The third is to implement the export principle of "encouraging high-end, restricting low-end, and cracking down on illegal activities." Maintaining a focus on meeting domestic demand has always been the fundamental positioning of China's steel industry, and appropriately exporting high-end steel products is an essential path for China's steel industry to maintain international competitiveness. The implementation of export tax rebates for high-end steel products will not lead to a significant increase in exports but will effectively curb the export of low-end products. Steel enterprises have strong demands for securing export tax rebates for high-end steel products, intensifying efforts to combat illegal exports, and selectively and organizedly responding to international trade frictions.

The association is actively communicating, making efforts to coordinate, and conducting defense against trade remedy investigations, striving for national policy support. In the previous phase, the national rectification of export order has achieved notable results, with significant improvement in the industry's export order, but it has recently shown signs of resurgence, which is unfavorable for the survival of the fittest in the market. At the same time, enterprises should recognize that under the current global political and economic situation, the phenomenon of "increased quantity but decreased price" in steel exports is unsustainable. The export work must adhere to the principle of "encouraging high-end, restricting low-end, and cracking down on illegal activities" to achieve the goal of standardized, orderly, and stable exports as soon as possible," Jiang Wei pointed out.

Four is to continuously advance ultra-low emission transformation, extreme energy efficiency, and green and low-carbon development. According to the goal of completing the ultra-low emission transformation of key regional steel enterprises by the end of the year, and striving for over % of the national production capacity to complete the transformation, continuous efforts are being made to promote the evaluation, monitoring, and public disclosure of ultra-low emission transformation. The steel extreme energy efficiency project continues to carry out the three-year action plan for energy efficiency benchmarking, with currently 71 enterprises having passed the energy efficiency benchmarking review and acceptance of the extreme energy efficiency project and officially announced. A large number of steel association member enterprises have further improved the overall energy efficiency level of the industry through this work, resulting in a considerable amount of energy conservation and carbon reduction. "The Steel Association's group standard 'Evaluation Method for Low Carbon Emission Steel' has been officially released, and the first batch of 45 Chinese low carbon emission steel products has also been officially announced. This is another important milestone in China's steel industry's low-carbon transformation, laying a good foundation for green trade. The Steel Association is organizing the formulation of supporting working methods, and related work to promote green and low-carbon transformation will be carried out in an orderly manner in the future," Jiang Wei introduced.

"China remains the world's largest steel market with an annual consumption of over 100 million tons, and the overall asset situation of the steel industry remains in good condition. As long as enterprises have a rational judgment, realistic choices, and proactive responses to the current situation, and effectively strengthen self-discipline to prevent 'involution-style'恶性competition, China's steel industry will continue to demonstrate strong resilience and potential." Jiang Wei concluded.

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Author Xu Keke

编辑 | 李昕芮
审核 | 张垚
策划 | 陈晓莉