Low-profit operating steel companies under high-volume production Rio Tinto's “non-steel” industry

Crude steel production has accounted for nearly half of global production, and sales profit margins are still not as good as bank deposits. The state-owned majority of Chinese steel companies have been suffering from low-efficiency operations while their scale has continued to grow.

“In the first half of this year, the profits of key enterprises in the industry were more than 50 billion yuan, and just because of the iron ore price increase factor, they paid an additional 104 billion yuan.” At an internal industry conference recently held, the deputy secretary-general of the China Iron and Steel Association Chi Jingdong The comparison of figures shows the suffering of high-priced raw materials for steel companies.

The key enterprises referred to by Chi Jingdong are mainly large and medium-sized iron and steel enterprises that have been included in the statistics of the China Iron and Steel Association and are mainly state-owned steel mills. In the first half of this year, the profit margin of these enterprises was only 3.14%, which was a decrease of 0.40 again. percentage point.

Upstream: cost is controlled by people

In 2010, the sum of profits earned by Chinese steel companies was not yet a lot of profit for the giants of mines. This embarrassment is still continuing this year.

In the first half of this year, the iron and steel production enterprises of the China Iron and Steel Association recorded a profit of RMB 56.274 billion. Among them, the profits of a Baosteel Group accounted for nearly 20% of the profits of major steel and steel production companies, while most of the companies are still at low profit or even losing money. status.

Ore is the largest production cost for iron and steel companies. As the world’s largest buyer of iron ore, Chinese steel companies rely on imports of more than 60% of the ore, which is also an important reason why Chinese steel companies suffer from low profitability.

Since the pricing mechanism of iron ore has changed from annual pricing to quarterly pricing based on the spot index, it gradually moves closer to the spot market. After the state-owned iron and steel enterprises that have obtained more long-term coal mines, the ore procurement costs are relatively high. Small and medium-sized private enterprises that import ore in the spot market have also gradually reduced their advantages.

An industry insider of the steel industry pointed out to the reporter of the “First Financial Daily” that since the beginning of this year, some private steel companies in the Tangshan region have higher profit margins than large and medium-sized steel companies in the China Steel Association, because they have little historical burden. The management of operations is also flexible, and the cost of raw materials between enterprises is gradually approaching. In this way, the advantages of large iron and steel enterprises relative to small private steel companies may depend more on the development of high-end products.

For the downstream: product technology is inferior to people

In recent years, major steel companies headed by Baosteel have also been accelerating research and development of high-end products. For example, high-strength automotive steel plates developed and produced by Baosteel and Anshan Iron and Steel Co., Ltd. meet the needs of automobile production. In 2010, the demand for auto plates, which increased production by more than 5 million vehicles from the previous year, was basically provided by the domestic market.

However, compared with some foreign steel giants, there is still a gap between the competitiveness and profitability of domestic steel products, which can be seen in the price difference between China's steel products import and export.

According to statistics released by the China Iron and Steel Association, in the first half of this year, the average price of China's steel exports was 1023.23 US dollars / ton, while the average price of imported steel in the first half of the year reached 136.6.61 US dollars / ton.

The price of imported steel is higher than the price of exported steel, which means that some high value-added steels still rely on imports from international steel companies. The domestic steel companies that have taken absolute advantage in global steel production are still unable to do so today. In the same way, get the right to speak on the selling price of the product.

It is precisely because of this that some steel mills have begun to choose to divert some of their energy to the more profitable non-steel industries in order to solve the current profitability problems. After all, compared with the accumulation of technology and innovation, intervention in some deep processing, related finance, and emerging industries may yield faster results.