Since the beginning of this year, the overall operation of China's economy has been stable, continuing the trend of recovery and improvement. At the same time, the uncertainties brought by changes in the external environment have increased, coupled with insufficient domestic effective demand, leading to a rise in risks and hidden dangers in key areas, mainly manifested in the continuous decline in consumption growth, the slowdown in fixed asset investment growth, and the further expansion of the decline in key real estate market indicators.

From the perspective of the steel industry, as the year begins, China's steel industry is characterized by high supply, high exports, high costs, low prices, low efficiency, and low demand—a situation of "three highs and three lows." Steel prices have generally fluctuated and declined, with the loss-making rate of enterprises continuing to expand, and operations facing significant pressure. Against this backdrop, how to grasp the development trends of the steel market in the year and accelerate the steel industry's exit from the downward cycle? At the 2023 Steel Industry Chain Development Situation Conference held on January 10-11, market experts engaged in in-depth discussions around these topics.

Supply-demand imbalance leads to a "poor sense of the market" in the steel industry this year. "After years of overcoming difficulties and hard work, China's steel industry has achieved a historic leap in scale from small to large, technological level from low to high, competitiveness from weak to strong, and continuous improvement in green and low-carbon development." Tang Zujun, member of the Party Committee and vice president of the China Iron and Steel Association, affirmed, mainly manifested in the vast industrial scale, complete product categories, advanced equipment technology, sound industrial system, and leading green development in the world. In response to the current situation faced by the industry, he believes that one should neither be too pessimistic nor too optimistic, but rather view the development of the industry objectively.

Wu Wenzhang, founder and chairman of Gangzhi.com, introduced that entering the year, the world's economic growth momentum is weak, with major economies showing differentiation, and European and American countries entering a rate-cutting cycle. Domestically, China's economic downward pressure has increased, and the steel market is generally showing a weak balance in operation. "The operation of steel production and steel trade circulation enterprises is extremely difficult," he frankly stated.

"Currently, China's economy is at a critical stage of structural adjustment. In the coming years to years, most enterprises in the steel industry may remain in a long-term state of thin profit margins, or even widespread losses, with weak competitive enterprises facing the risk of being eliminated," admitted Zhu Ruirong, President of Nanjing Iron and Steel Co., Ltd.

"Looking back on the performance of the steel market since the beginning of this year, 'heart-stopping' is the most accurate description," explained Xu Guangyou, Deputy General Manager of Tianjin Youfa Steel Pipe Group. He pointed out that since the beginning of the year, China's steel market has been in a continuous downtrend, oscillating between downward fluctuations and occasional rebounds, and what is even more distressing is the decline in demand.

Xia Shiqing, Chief Market Analyst of the Market Management Department of Magang (Group) Holdings Co., Ltd., stated, "The recent series of policies introduced by the state to stimulate economic growth have played a decisive role in restoring economic vitality across the society and enhancing expectations. These policies have also had a certain带动作用 on steel consumption, but in the face of the enormous crude steel production capacity, the demand stimulated by these short-term measures is unlikely to form a long-term driving force for growth." He believes that market pressures will gradually increase from this month onward, and by the fourth quarter, the contradiction between supply and demand in the steel market may further intensify.

From the previous quarter, key data such as new construction area, completion area, and housing sales area in China's real estate sector have all continued to decline year-on-year. This is a significant factor contributing to the "unfavorable conditions" in China's steel pipe industry and the entire steel industry. Zhang Hongshun, Chairman and President of Zhengda Pipe Group, shared his insights on the state of the steel industry since the beginning of the year.

Zhang Hongshun, taking steel pipes as an example, introduced that since the beginning of this year, although the manufacturing sector has grown relatively steadily, the growth rates in the automotive and household appliance industries have slowed down, limiting the pull on steel pipe demand. In terms of exports, although steel pipe exports have maintained an upward trend, due to the recent rise in international trade protectionism, many countries have imposed sanctions on China's steel pipe exports, leading to significant uncertainties in future steel pipe exports.

Currently, although the steel industry still faces oversupply, it is not the same oversupply as in the past. In previous years, influenced by the real estate market, the consumption of construction steel decreased by millions of tons, while the consumption of plate steel increased by hundreds of millions of tons. Last year alone, exports increased by several million tons. Overall, although apparent demand is decreasing, the decline is not significant. Han Weidong, Senior Advisor of Tianjin Youfa Steel Pipe Group Co., Ltd., stated, "However, this year is different. Demand has experienced a cliff-like decline, and there is also an oversupply issue with plate steel."

Adapting to change and accelerating transformation are key to the steel industry's breakthrough. "If China's crude steel production can be controlled below 1 billion tons annually, the overall balance of supply and demand in the domestic market is expected to be maintained." Wu Wenzhang predicts that in 2023, China's crude steel consumption will reach around 1 billion tons, slightly lower or roughly the same as in 2022; China's steel exports and imports will reach approximately 100 million tons and 1 billion tons, respectively.

Wu Wenzhang reminded that from this year to the beginning of next year, professionals in the steel industry chain should pay close attention to the macroeconomic policy orientation of the Central Economic Work Conference, the effects of stabilizing the real estate market policies, the economic and trade relations between China and the United States, as well as between China and the European Union, international geopolitical conflicts, financial markets, and changes in the global commodity markets.

As a member of the industrial chain, to secure a more stable development space, in addition to stabilizing the basic foundation, one must actively forge the hard power for transformation and upgrading, and find their own structural growth opportunities in the game of the stock market. Xu Guangyou proposed that China's steel industry is in a period of accelerated evolution from scale economy to quality and efficiency-oriented development, and it is also a critical turning point for the steel industry to transition from being large to being strong. Only by accelerating transformation and building a new engine for green and low-carbon development can steel enterprises hope to break through in the complex and severe market.

"As we enter the quarter, the steel pipe industry in our country may see a certain expected improvement." Zhang Hongshun believes that on one hand, with the gradual implementation of macro-favorable policies, the real estate market is expected to stabilize and recover, infrastructure investment growth is likely to pick up, and the transformation and upgrading of the manufacturing industry, as well as new projects such as underground pipe corridors, municipal pipeline renovations, and new construction, are expected to drive an increase in steel pipe demand.

Zhang Hongshun expressed, "I am full of expectations for the economic performance and industry development trends of the year." He emphasized that steel enterprises should closely monitor the economic situation and policy changes both domestically and internationally, promptly adjust their production and business strategies, strengthen technological innovation, management innovation, and model innovation to adapt to market changes and achieve sustainable development.