Baosteel Chairman: Steel is only slightly overcapacity

Recently, the newly appointed president of the China Iron and Steel Association and Xu Lejiang, chairman of Baosteel Group, proposed on a public occasion that the steel industry is now in a state of mild surplus, and the outside world should not demonize the issue of overcapacity in the steel industry.

At the Fourth Session of the Standing Committee of China Iron and Steel Industry Association (Expanding) meeting held on August 3rd, Xu Lejiang publicly stated that “overcapacity is a universal issue faced by the Chinese manufacturing industry, including steel. The steel industry is particularly typical. And is considered to be the current culprit in the industry in trouble. I personally feel it is necessary to clarify some of the understanding and views, do not demonize the steel industry overcapacity problem."

"Now is only a slight overcapacity"

According to Xu Lejiang, if the capacity utilization rate is divided, China’s steel industry is large and has a large amount of room for manoeuvre. Therefore, if the capacity utilization rate of the Chinese steel industry reaches 80%, it should be considered that the capacity is fully utilized.

Xu Lejiang said that if this is the standard, there will be no excess steel capacity in China before 2006. Until now, the Chinese steel industry has only had a slight overcapacity. "I think between 75% and 80%. The capacity utilization rate is a slight overcapacity, between 70%-75% is a moderate excess capacity, and less than 70% is a serious overcapacity."

Regarding whether or not to demonize the problem of overcapacity in the iron and steel industry, experts in the steel industry who have asked for anonymity also said that Xu Lejiang's position has some truth. There is now an over-exaggeration of the excess capacity in the steel industry. However, for the analysis of the relationship between capacity utilization and overcapacity, the expert said that the current steel industry capacity utilization is between 70% and 75%, so it can be determined that the excess capacity is between mild and moderate.

Analysts pointed out that the key to calculating capacity utilization is to choose what kind of production capacity base, and now there are several versions in the industry. If it is calculated according to the 976 million tons of steelmaking capacity reported to the Ministry of Industry and Information Technology last year, it is indeed around 70%.

"The serious surplus will arrive in the thirteenth five-year period."

Xu Lejiang proposed that the era of severe overcapacity in China Steel is expected to come during the “13th Five-Year Plan” period. He believes that China's current steel demand despite a significant decline in growth, but there has been no negative growth, the peak production has not yet arrived, "But I estimate that this inflection point and peak not far, is expected during the "13th Five-Year" period." Xu Lejiang referred to The peak is also the extreme state of the utilization rate below 60%.

For these views, the industry also has different views. The above anonymous experts believe that it should be the end of the 13th Five-Year Plan period, that is, around 2020, but the judgment that the capacity utilization rate is lower than 60% is "relatively pessimistic." Analysts said that in the future, the turning point of the steel industry will come even in the 12th five-year period. Since the second half of 2011, the steel industry has undergone a fundamental shift in both product prices and profit figures. The industry entered the adjustment period.

“What can't be confirmed now is that the length and depth of this adjustment period are mainly due to the fact that the market is forced by the market, and secondly, government policies, such as the introduction of more stringent environmental protection policies, are all variables,” the analyst said. .

"Overcapacity is a sign of industry maturity"

Xu Lejiang believes that it is necessary to abandon the tendency of demonizing and to see the positive significance of the overcapacity reality: First, overcapacity is a sign that the industry is moving towards maturity; moderate overcapacity is conducive to full competition in the industry; and excess output cannot be equated with overcapacity. . "There is no doubt about the overall overcapacity of China's steel industry, but we can't think that all the varieties of China's steel industry are overcapacity, which confuses the different concepts of overcapacity and overcapacity, and can easily mislead the government's macroeconomic control policy," said Xu Lejiang. .

Xu Lejiang suggested that the problem of overcapacity should be resolved by liberalizing the administrative examination and approval limits for steel industry access, establishing and improving the trading platform for the withdrawal of steel capital, and encouraging market-oriented reduction in mergers and acquisitions and restructuring.

The above-mentioned anonymous steel industry experts pointed out that there is no better way to solve the problem of overcapacity, and that it is impossible to achieve industrial transformation through administrative intervention. However, the hands of the government are always unreliable. In fact, they should still rely on the market. Mechanism to solve, but this will inevitably lead to some companies appear bankruptcy, intrusion, etc. At this time, enterprises and local governments and who are reluctant to bear this pain, so governance excess capacity has become more of a good wish.