On March 29th, during the 5th China Iron and Steel Planning Forum in 2014, industry experts engaged in a vibrant debate about the challenges and future direction of the steel sector. The discussion highlighted concerns over the industry’s performance, with one key point being that the first quarter of 2014 could mark the worst results since 2000.
Liu Zhenjiang, secretary of the Party Committee of the China Iron and Steel Association, noted that the association's price index had dropped to 95 points, the lowest level in two decades. He also pointed out that major steel companies in China suffered a cumulative loss of 2.8 billion yuan in the first two months of 2014. According to Liu, while market demand was declining, the drop in production was not as steep, indicating a mismatch between supply and demand.
Li Xinchuang, president of the Metallurgical Industry Planning and Research Institute, emphasized that the domestic steel industry is facing three major issues: overcapacity, operational challenges, and the need for structural upgrades. He stressed that overcapacity remains the core problem, and without addressing it, the industry will continue to face difficulties.
The industry is also experiencing a growing divide, with top companies dominating profits while smaller firms struggle. Data from the institute showed that the top ten steel enterprises accounted for just 22% of total production but captured nearly 97.7% of the profits. Meanwhile, these same companies were responsible for 96.7% of the losses, highlighting a stark imbalance in the sector.
Li suggested that the traditional scale of the steel industry is no longer sustainable. To move forward, the focus should be on structural adjustments, innovation in business models, and improved management practices. He predicted that the peak of mergers and acquisitions in the Chinese steel industry has yet to come, and that the next decade would witness significant consolidation, reshaping the industry landscape.
Wang Xiaoqi, vice president of the China Iron and Steel Association, added that the rise of financial products and e-commerce in the steel sector would greatly impact pricing and marketing strategies. Traditional pricing methods, he said, must evolve to keep up with changing market dynamics.
In another development, the Tianjin United Metallurgical Commodities Trading Center launched operations, with its largest shareholder, Tianjin Rongcheng Group, becoming the second metallurgical company to obtain a "Payment Business License" from the People's Bank of China. Experts believe that integrating third-party payment systems with the steel industry represents a growing trend. By leveraging vertical industry content and offering specialized financial services, the sector can better meet its evolving needs and drive long-term growth.
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