Crude steel production increased by 9.9% in the first quarter.

China's crude steel output from January to March reached 231 million tons, up 9.9% year-on-year, according to data released by the National Bureau of Statistics on April 17, and reached a new high in the next quarter. At the same time as the output of crude steel reached a new high in the first quarter compared with the same period of last year, domestic steel enterprises are reporting worries in succession. According to Pengmei News, up to now, Anshan Iron and Steel Co., one of the Central Iron and steel enterprises, Hualing Iron and Steel Co., Hunan Province, Liugang Co., Shaoguan Iron and Steel Co., Ltd. and Taiyuan Iron and Steel Stainless Steel Co., Ltd. have issued performance forecasts for the first quarter of 2019, and the net profits of listed shareholders have declined, except Hualing Iron and Steel Co., Ltd., which has declined 25.68% - 32.20%. It dropped by about 70%.

In the first quarter of the past year, the price of steel products was much lower than that of the same period last year. At the same time, the price of bulk raw fuel, coal and ore rose sharply, the cost of products was at a high stage, and the profits of steel enterprises were shrinking rapidly. It is worth noting that such a situation may not be temporary. During the 15th Symposium on the Development Strategy of Iron and Steel Industry and Production and Demand of Iron and Steel Products held recently by the industry information website "Steel House" United Youfa Steel Pipe Group and Ma Steel Co., Ltd., Wu Wen, chairman and general manager of "Steel House" said in an interview with Peng Mei News that "a new round of overcapacity in China's iron and steel industry is coming."

Wu said that with the previous round of production capacity including "floor steel" removed, a new batch of production capacity is coming in. Specifically, the capacity increase can be divided into several parts: "adjusting the local production capacity caused by industrial adjustment, such as internal capacity adjustment to the coast; the second is relocation and reconstruction, if the new capacity is strictly controlled according to state regulations, this part should not be increased, but it is often enlarged by local governments and enterprises in the actual operation process; the third is"land strip steel", which is the"land strip steel". Some enterprises may have declared the capacity of EAF steelmaking before. At that time, the production of', now strip steel'has been cleaned up, but some of them have been converted into conforming EAF steelmaking. Based on the above factors, Wu argues that "this will lead to a new round of steel production capacity. According to our current statistics, in the next two to three years, the additional steel-making capacity will reach more than 200 million tons, which will lead to a new round of overcapacity." 

Xu Xiangchun, senior analyst of "My Iron and Steel Network", said in an interview with Peng Mei News, "After the completion of the target task of reducing excess capacity, starting this year, some capacity replacement projects began to put into operation. At the same time, enterprises with difficult operations in the past few years have resumed production through restructuring. As a result, capacity began to expand. More noteworthy is that some irregular production capacity has been built and put into operation in various names, including demolition of small and large construction enterprises, replacement of new projects in the name of production capacity, resurgence of "floor steel" and resumption of production of already withdrawn production capacity, and so on. Xiao/p>Xu Xiangchun believes that the risk of excess steel production capacity in China is beginning to increase again. "Crude steel production grew by 9.9% in the first quarter, indicating that this risk is beginning to emerge."

"Once the industry improves, steel profits will be considerable, temptation will be hard to resist, and supervision will be more difficult." Xu Xiangchun said. It is worth noting that there is no authoritative data to show how much the capacity has increased, but the ambition of steel enterprises has been fully reflected in the output. In 2015, China's iron and steel industry entered a "freezing period" and the whole industry fell into a loss. In 2016, China began to take the lead in the supply-side structural reform, and the "capacity-free" policy was launched.

However, while capacity is gradually removed, China's crude steel production increased by 1.2%, 5.7% and 6.6% from 2016 to 2018, respectively. It is worth mentioning that according to the previous announcement of the National Bureau of Statistics, the crude steel output in 2017 was 832 million tons. According to this calculation, the output in 2018 should increase by 11.5% year on year, nearly five percentage points behind the announcement of 6.6%. On this basis, the State Bureau of Statistics has adjusted the crude steel output in 2017, increasing by about 40 million tons. 

Wu article also pointed out that "the future can only be adjusted by internal enterprises through mergers and acquisitions, but this time will surely come after a new round of overcapacity has caused harm to enterprises."

Wu also emphasized that "the production capacity of our equipment is advanced and world-class, and the environmental protection requirements are also up to the standard, so that we can not eliminate backwardness in the future as we did in the previous round of production capacity." Wu Wen worries that this is "catastrophic" for China's iron and steel industry and domestic market.

In addition, on April 9, the China Iron and Steel Industry Association held a seminar on the economic operation of some iron and steel enterprises in Beijing in the first quarter. Liu Zhenjiang, Secretary-General and secretary-general of the Party Committee of China Iron and Steel Industry Association, pointed out that driven by interests, the impulse of resurgence of "floor steel", disguised growth of production capacity and excessive release of compliance capacity is indeed great. If capacity cannot be controlled, even if steel demand increases, it will be flooded by new capacity. In terms of production, the first quarter is the traditional off-season of steel demand, but crude steel production has a tendency to grow too fast.