There is a risk of high capacity expansion in China steel production innovation

"April's output is still relatively high, and the risk of expansion of iron and steel production capacity still exists, which deserves a high degree of vigilance throughout the industry." Qu Xiuli, vice president of China Iron and Steel Industry Association, sounded the alarm again at a press conference on the "overheating" of the industry.

Following last year's record high steel production, China's steel production reached a new record in the first quarter. Many industry experts said that high growth is difficult to sustain, and the benefits of iron and steel enterprises throughout the year will not exceed last year.

In the gathering places of iron and steel enterprises such as Zhangjiagang and Jiangyin in Jiangsu Province, reporters saw that in the traditional sales season of April, there were endless large trucks loaded with threaded steel, steel rings and other products on the expressway. "After March, the price has recovered, and the market has shown a booming trend of both production and marketing. The increase of enterprises'production mainly comes from market quotation and optimism. Wang Guoqing, director of Langer Iron and Steel Research Center, said.

According to the statistics of the National Bureau of Statistics, in the first quarter, China's crude steel output was 231 million tons, an increase of 9.9% compared with the same period last year, while the steel output was 269 million tons, an increase of 10.8% compared with the same period last year.

"Influenced by steady growth and strong infrastructure, steel market volume and price have risen sharply since April, the speed of inventory removal is relatively fast, which reflects that demand pull is more significant, and market confidence has increased." Wang Guoqing said.

"The output growth rate of small and medium-sized steel mills is much higher than that of large-scale member steel mills." Qu Xiuli said that small and medium-sized steel mills mainly produce construction steel, with cost advantages.

Despite the support of demand, many experts still believe that the current steel production growth is too fast, which brings great pressure on the balance of supply and demand and the stable operation of the industry.

"As the market situation continues to improve, driven by high profits, some regions and enterprises have a strong willingness to invest in the steel industry, and the impulse of capacity expansion is obvious." Lu Guixin, inspector of Raw Materials Department of Ministry of Industry and Information Technology, said. According to Qu Xiuli, the output of metal smelting equipment has maintained a high growth rate of more than 20% since last year, while the investment in fixed assets of ferrous metallurgy and calendering industry increased for the first time last year, with a growth rate of 30.6% in the first quarter of this year.

< p> "This shows that there are many items above, especially EAF steels." Qu Xiuli said that if steel production continues to grow substantially, it is bound to overdraft the market demand in the latter period, "good days" are difficult to sustain.

According to the statistics of China Steel Association, in the first quarter, the profits of large iron and steel enterprises fell by 30.2% year on year, and the profit margin of sales dropped by 2.39 percentage points.

Iron ore prices have risen sharply, and the profit margin of steel mills has been squeezed constantly. In the first quarter, the price of imported iron ore rose from more than $60 to more than $90 per ton, and soared to a five-year high in April.

In recent days, the first quarter results of several listed iron and steel enterprises have declined sharply. The net profit of Maanshan Iron and Steel Co. decreased 94.09% in the first quarter and 76.41% in stainless steel of Taiyuan Iron and Steel Co.

Wang Guoqing said that the operating environment of the industry is still complex and changeable. It is expected that the profits of iron and steel enterprises will return in 2019, and the overall profits are weaker than last year. The data of

show that the crude steel production in China has been increasing rapidly since April. Many experts warned that with the continuous release of follow-up compliance capacity and the continuous improvement of capacity utilization rate, the current fragile balance between supply and demand is likely to be broken again.

"The urgent task is to establish a long-term mechanism to prevent overcapacity." Li Xinchuang, president of the Institute of Planning and Research of Metallurgical Industry, believes that the recovery of the iron and steel industry is a structural supply upgrading brought about by the pressure of reducing production capacity and environmental protection, while in the past it was mostly driven by fixed investment and consumption growth.

"If we do not use the current good momentum to adjust the structure, then the steel industry will probably fall into a dilemma again as before. Not only will the previous efforts to improve production capacity be abandoned, but the difficulty of future readjustment will also be greater." Li Xinchuang said. Experts said that in the critical period from scale benefit to quality benefit, steel output should also enter the peak and small fluctuation zone from the period of high-speed growth. Iron and steel enterprises should keep rational and orderly advancement, and should not ignore risks and blindly expand production to catch up with high levels.