Steel profits continue to fall

On the supply side, in the first three quarters of this year, production capacity of the steel industry was released rapidly. The output of structural steel pipe, crude steel and steel were 612 million tons, 748 million tons and 909 million tons respectively, up 6.3%, 8.4% and 10.6% year-on-year.On the demand side, the global economic slowdown and trade friction have limited steel exports. Although the domestic economy is facing downward pressure, fixed asset investment has maintained steady growth, investment in real estate development is still growing at a high rate, and investment in infrastructure has picked up slightly, supporting steady growth in steel consumption. The overall supply and demand situation of the steel market is relatively loose and the price of steel fluctuated downward. The average price of steel in the first three quarters of the year calculated by Lange steel research center was 4,149 yuan/ton, down 3.5% year on year.

The decline in steel prices has affected the improvement of sales revenue of steel enterprises. The business announcement of the first three quarters released by liuzhou iron and steel company shows that in the first three quarters of this year, the total output of the company’s steel products such as rectangular hollow section was 5.815,900 tons, up 5.29% year on year, and the sales volume increased 3.34% year on year. Higher iron ore prices have increased steelmakers’ production costs, and steel prices have fallen somewhat from a year earlier, leading to lower profitability.
Due to high production capacity, steel profitability significantly reduced, further increased business pressure. As overall situation is not good, steel pipe suppliers are tapping the potential to cut costs and hedge against changes in the external environment. Baosteel said in the third quarter report that the company timely grasp of market changes, dynamic adjustment of production rhythm, increase cost reduction efforts, in-depth promotion of multi-base management model construction, vigorously carry out organizational reform, performance model optimization and other work. Its financial report shows that in the first three quarters, sales expenses, administrative expenses, financial expenses have been reduced, but the gross margin fell 4.8 percentage points year on year, resulting in a substantial decline in net profit.

China’s steel output has entered the peak platform period, which is a good period for enterprises to adjust and transform. According to the development of the first three quarters of this year, iron and steel enterprises are accelerating the upgrading and transformation. While continuing to do a better and stronger main industry and improve the concentration of the industrial chain, they are also actively developing related and non-related diversified businesses. Yongxing special steel implemented the development strategy of “enterprise transformation and main industry upgrading”. At the end of August, the company adjusted the structure of steel products like mild steel tube, appropriately increased the proportion of rod products, and increased the sales of high value-added products in the fields of electric power equipment manufacturing and transportation equipment manufacturing.