The uncontrolled increase in prices of imported iron ore has caused more and more domestic steel companies to stop importing iron ore.
On April 26, Xu Lejiang, chairman of Baosteel Group, told this reporter that the domestic small blast furnace has stopped using imported mines because high-priced imported mines have hit the bottom line of corporate profits.
The reporter learned from the China Iron and Steel Association (hereinafter referred to as China Steel Association) that as steel companies' profits continue to be compressed, more and more companies will choose to stop importing iron ore.
Xu Lejiang told this reporter that since the beginning of this year, the profits of Chinese steel companies have continued to be squeezed by high-priced imported mines. At present, the extremely uneven industrial profit distribution pattern of miners and steel enterprises is contrary to the law and is not sustainable.
Xu Lejiang said that in the first quarter of this year, the profit rate of key steel companies was only about 3%, and a considerable number of steel enterprises fell into a loss-making quagmire.
Since the beginning of this year, small and medium-sized steel enterprises have stopped purchasing. Although the price of steel has picked up, the increase in iron ore prices far exceeds the increase in steel prices, which has further reduced the profitability of domestic steel companies.
Statistics from the National Development and Reform Commission show that in the first quarter of this year, steel prices rose by about 17% and iron ore prices rose by 40%.
A staff member responsible for imported mines at Wu'an Iron and Steel Company in Hebei told this reporter that starting in March, the company had reduced its import volume and switched to using its inventory.
The source said that if the price of iron ore continues to rise, the amount of suspension of purchases will increase, because "production still loses money compared to the stoppage of production."
Xu Lejiang told this reporter that at present, the purchase of imported ore is mainly aimed at the small blast furnace of the steel plant, but the large blast furnace still continues to purchase, so the amount of stop purchasing is not large.
The suspension of purchases of imported mines has led to a decrease in domestic port inventories. According to the "Xinhua China Iron Ore Price Index," some domestic small and medium-sized steel mills have stopped purchasing high-grade foreign resources, and domestic inventory is at a relatively low level.
Iron ore prices have also been affected to some extent. The reporter learned from Rizhao Port that the domestic iron ore price of 63.5% was slightly lower, and wait-and-see mood was strong.
In fact, many government officials and steel company executives have called for the industry to stop the purchase of imported mines to resist the price hike of miners.
Deng Qilin, general manager of Wuhan Iron and Steel Group, once told this reporter that the best way to resist price increases is to join the national steel companies for a period of time without importing iron ore, and the price will naturally drop.
In theory, China accounts for half of the world's iron ore demand. It is self-evident that the collective suspension of purchases will hurt the miners. Take Australia as an example, iron ore has become Australia’s largest export commodity and is also the core of China-Australia commercial cooperation. China’s demand has also contributed to a substantial increase in Australia’s trade volume.
However, market participants believe that the peak season for steel demand is approaching and steel companies may re-purchase import mines. At that time, iron ore prices will be re-raised.
Increased risk in the industrial chain In the market situation in short supply, the transfer of industrial profits to suppliers is an objective phenomenon, but experience in the development of market economy proves that this shift is not endless.
In the past ten years, the global steel industry chain has been mainly engaged in a thrilling game about the main supply and demand of iron ore. Iron ore has a professional and unpopular metal variety and has become a hot commodity.
Over the past ten years, the price of global steel products has risen 2.3 times, and China's imported iron ore CIF has risen at least 7 times. In 2010, the profits of China's iron and steel enterprises in the industry were less than 3%, and even lower than the profits of bank deposits in that year; the total profit was less than any of BHP Billiton, Rio Tinto, and Vale.
The imbalance in the distribution of industrial profits continues to increase this year and is also highly concerned by the government.
Luo Bingsheng, executive vice president of the China Iron and Steel Association, said that the squeeze on the profits of the industry has reached a point beyond tolerance. Steel companies and miners are dependent on each other. One party will die and the other will die.
Xu Lejiang told this reporter that the risk of the industrial chain has accumulated to the extent of release. In addition to the almost total deprivation of demand side profits, the investment risk of iron ore upstream is also increasing.
Capital has a natural profit-driven nature. In recent years, under the attraction of high investment in iron ore investment, domestic iron and steel companies and non-steel enterprises have invested large-scale iron ore under the banner of ensuring the security of resource supply, and a large number of mining companies have emerged in a short time.
Xu Lejiang believes that blindly investing in iron ore resources will bring new risks because iron ore will not be consumed like oil and will continue to be stored on the earth. After the end of China's industrialization, the demand for iron ore will be greater. Partially transferred to scrap.
However, the miners do not seem to worry as much as the steel companies. Russell Scrimshaw, executive director of Australian iron ore producer FMG, believes that China’s demand for iron ore is bright.
David Flanagan, chief executive of Australia’s fourth-largest iron ore supplier Atlas, believes that there are currently many iron ore projects that have been postponed to production, and that the surplus of iron ore will be postponed. The current market scenario is very good.
The debate over steel companies investing in iron ore In the context of iron ore price hikes almost equal to the bottom line of steel companies, domestic steel companies have started large-scale investment in mining and acquired a sufficient share of overseas interests. The important task of life.
Xu Lejiang put forward a different perspective. He believes that the large-scale investment of iron and steel enterprises in upstream resources, some companies even proposed to 100% to achieve the purpose of controlling resources, which is "reverse economic development practices", its essence is At present, the current status of the industry chain is dissatisfied with one kind of "overkill."
In recent years, Baosteel’s brother company, Wuhan Iron & Steel, has been increasing its resource self-sufficiency rate by investing in upstream industries. In this regard, Deng Ganglin, general manager of Wuhan Iron & Steel, once bluntly stated that Wuhan Iron & Steel’s doing so was “forced by the minersâ€.
“I always believe that the main purpose of iron and steel enterprises participating in the upstream raw material investment is to strengthen the ties with the upstream companies and form a fixed industrial chain system. The secondary purpose is to obtain investment returns and balance raw material price risks,†said Xu Lejiang.
However, Xu Lejiang favors that iron and steel enterprises can make appropriate investment in upstream industries through capital bonds, which can increase the trust relationship between enterprises.
Xu Lejiang even proposed a proposal that is extremely difficult to implement for mining companies to share Chinese steel companies in order to achieve a two-way capital bond between mines and steel companies. The reason why this proposal is difficult to achieve is because the domestic government has not yet liberalized its investment in the Chinese steel industry. Not long ago, at the SASAC's symposium, officials of the state-owned assets system discussed the conflict between steel enterprises and miners, and they still opposed the participation of miners in major domestic steel companies.
On April 26, Xu Lejiang, chairman of Baosteel Group, told this reporter that the domestic small blast furnace has stopped using imported mines because high-priced imported mines have hit the bottom line of corporate profits.
The reporter learned from the China Iron and Steel Association (hereinafter referred to as China Steel Association) that as steel companies' profits continue to be compressed, more and more companies will choose to stop importing iron ore.
Xu Lejiang told this reporter that since the beginning of this year, the profits of Chinese steel companies have continued to be squeezed by high-priced imported mines. At present, the extremely uneven industrial profit distribution pattern of miners and steel enterprises is contrary to the law and is not sustainable.
Xu Lejiang said that in the first quarter of this year, the profit rate of key steel companies was only about 3%, and a considerable number of steel enterprises fell into a loss-making quagmire.
Since the beginning of this year, small and medium-sized steel enterprises have stopped purchasing. Although the price of steel has picked up, the increase in iron ore prices far exceeds the increase in steel prices, which has further reduced the profitability of domestic steel companies.
Statistics from the National Development and Reform Commission show that in the first quarter of this year, steel prices rose by about 17% and iron ore prices rose by 40%.
A staff member responsible for imported mines at Wu'an Iron and Steel Company in Hebei told this reporter that starting in March, the company had reduced its import volume and switched to using its inventory.
The source said that if the price of iron ore continues to rise, the amount of suspension of purchases will increase, because "production still loses money compared to the stoppage of production."
Xu Lejiang told this reporter that at present, the purchase of imported ore is mainly aimed at the small blast furnace of the steel plant, but the large blast furnace still continues to purchase, so the amount of stop purchasing is not large.
The suspension of purchases of imported mines has led to a decrease in domestic port inventories. According to the "Xinhua China Iron Ore Price Index," some domestic small and medium-sized steel mills have stopped purchasing high-grade foreign resources, and domestic inventory is at a relatively low level.
Iron ore prices have also been affected to some extent. The reporter learned from Rizhao Port that the domestic iron ore price of 63.5% was slightly lower, and wait-and-see mood was strong.
In fact, many government officials and steel company executives have called for the industry to stop the purchase of imported mines to resist the price hike of miners.
Deng Qilin, general manager of Wuhan Iron and Steel Group, once told this reporter that the best way to resist price increases is to join the national steel companies for a period of time without importing iron ore, and the price will naturally drop.
In theory, China accounts for half of the world's iron ore demand. It is self-evident that the collective suspension of purchases will hurt the miners. Take Australia as an example, iron ore has become Australia’s largest export commodity and is also the core of China-Australia commercial cooperation. China’s demand has also contributed to a substantial increase in Australia’s trade volume.
However, market participants believe that the peak season for steel demand is approaching and steel companies may re-purchase import mines. At that time, iron ore prices will be re-raised.
Increased risk in the industrial chain In the market situation in short supply, the transfer of industrial profits to suppliers is an objective phenomenon, but experience in the development of market economy proves that this shift is not endless.
In the past ten years, the global steel industry chain has been mainly engaged in a thrilling game about the main supply and demand of iron ore. Iron ore has a professional and unpopular metal variety and has become a hot commodity.
Over the past ten years, the price of global steel products has risen 2.3 times, and China's imported iron ore CIF has risen at least 7 times. In 2010, the profits of China's iron and steel enterprises in the industry were less than 3%, and even lower than the profits of bank deposits in that year; the total profit was less than any of BHP Billiton, Rio Tinto, and Vale.
The imbalance in the distribution of industrial profits continues to increase this year and is also highly concerned by the government.
Luo Bingsheng, executive vice president of the China Iron and Steel Association, said that the squeeze on the profits of the industry has reached a point beyond tolerance. Steel companies and miners are dependent on each other. One party will die and the other will die.
Xu Lejiang told this reporter that the risk of the industrial chain has accumulated to the extent of release. In addition to the almost total deprivation of demand side profits, the investment risk of iron ore upstream is also increasing.
Capital has a natural profit-driven nature. In recent years, under the attraction of high investment in iron ore investment, domestic iron and steel companies and non-steel enterprises have invested large-scale iron ore under the banner of ensuring the security of resource supply, and a large number of mining companies have emerged in a short time.
Xu Lejiang believes that blindly investing in iron ore resources will bring new risks because iron ore will not be consumed like oil and will continue to be stored on the earth. After the end of China's industrialization, the demand for iron ore will be greater. Partially transferred to scrap.
However, the miners do not seem to worry as much as the steel companies. Russell Scrimshaw, executive director of Australian iron ore producer FMG, believes that China’s demand for iron ore is bright.
David Flanagan, chief executive of Australia’s fourth-largest iron ore supplier Atlas, believes that there are currently many iron ore projects that have been postponed to production, and that the surplus of iron ore will be postponed. The current market scenario is very good.
The debate over steel companies investing in iron ore In the context of iron ore price hikes almost equal to the bottom line of steel companies, domestic steel companies have started large-scale investment in mining and acquired a sufficient share of overseas interests. The important task of life.
Xu Lejiang put forward a different perspective. He believes that the large-scale investment of iron and steel enterprises in upstream resources, some companies even proposed to 100% to achieve the purpose of controlling resources, which is "reverse economic development practices", its essence is At present, the current status of the industry chain is dissatisfied with one kind of "overkill."
In recent years, Baosteel’s brother company, Wuhan Iron & Steel, has been increasing its resource self-sufficiency rate by investing in upstream industries. In this regard, Deng Ganglin, general manager of Wuhan Iron & Steel, once bluntly stated that Wuhan Iron & Steel’s doing so was “forced by the minersâ€.
“I always believe that the main purpose of iron and steel enterprises participating in the upstream raw material investment is to strengthen the ties with the upstream companies and form a fixed industrial chain system. The secondary purpose is to obtain investment returns and balance raw material price risks,†said Xu Lejiang.
However, Xu Lejiang favors that iron and steel enterprises can make appropriate investment in upstream industries through capital bonds, which can increase the trust relationship between enterprises.
Xu Lejiang even proposed a proposal that is extremely difficult to implement for mining companies to share Chinese steel companies in order to achieve a two-way capital bond between mines and steel companies. The reason why this proposal is difficult to achieve is because the domestic government has not yet liberalized its investment in the Chinese steel industry. Not long ago, at the SASAC's symposium, officials of the state-owned assets system discussed the conflict between steel enterprises and miners, and they still opposed the participation of miners in major domestic steel companies.
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