Chinese steel industry enterprises have entered the era of low profit

A few days ago, Weng Xingang, deputy head of the Beijing University of Materials Science and Technology, expressed his opinions on the growth and future of steel trading companies.

Weng Xingang: I am responsible for scientific research at the school. The business school organizing this forum this time is also very meaningful for the material college. Steel is an important means of production, and it is an important material. The Institute of Materials also regards the research of production materials and commodities as one of the main directions of our scientific research. Before this meeting with President Liu to discuss this matter, I said that we should continue the study of the steel trade enterprise problem. There are many industry leaders today, there are also some corporate CEOs, there are many Alumni, so I also expressed my design welcome this time. As far as I know, our business school has a good relationship with Lange Steel and Steel Source. These companies also give us strong support. Here I also hope that our industry leaders, our entrepreneurs, and our alumni will be able to continue as always. To support the scientific research work of the School of Materials, we are also willing to do our best to be able to do something that we can do for the development of the company. In the first two days, President Wei told me to talk about it. Recently, he was also commissioned by some companies to do some project planning, and he had some new understanding of the issue of steel trade. I would like to talk about personal understanding of the characteristics and development trends of the steel trade and logistics industry.

Because there are many students attending the meeting today, my graduate student sometimes asks me some basic concepts. So I would like to talk about a few basic concepts first. Second is the status quo of the steel industry chain. The third is the development trend. .

The first is the steel industry chain and the steel supply chain. Some students asked me if the two are different. There is no big difference, but there are some subtleties. The most upstream of the steel industry chain is exploration and mining, including ore transportation. If you import ore and sea transport from abroad, intermediate links include iron and steel making, steel making, and steel manufacturing companies. Middle and lower reaches are steel trading companies, processing and distribution companies, etc. Downstream are steel companies, including automobiles, electrical appliances, shipbuilding, construction, etc., as well as other companies that provide energy, equipment, and information and other products and services. The steel industry chain involves The industry is very large.

The essence of the industry chain is the relationship between enterprises in different industries. The essence of this industry connection is the relationship between supply and demand among enterprises in various industries. From this perspective, the steel industry chain and steel logistics chain can be regarded as a concept. Sometimes we translate the supply chain into a supply chain, but when we use the steel supply chain, it seems that we can start from a specific product. From production to user terminal issues, or just talking about the relationship between the program and the raw material supplier, it may be slightly smaller.

From the perspective of circulation, it can be divided into commercial flows and logistics. Steel trading companies are specialized in the trade and circulation of steel products, and are referred to as steel trade enterprises. After the reform and opening up, especially since the 1990s, steel products have entered the market completely as commodities, and various types of steel trading companies have flourished. The exact data is difficult to grasp, but there are no less than 100,000 families. Steel logistics companies refer to logistics providers that specialize in the provision of iron and steel raw materials and product transportation and warehousing services. Of course, this is only a conceptual division. In reality, for some professional logistics companies, transportation and storage of steel products may only be part of a logistics business. Steel may be only a part of his business but only part of his target product.

Broadly speaking, iron and steel logistics companies also include logistics service providers, steel logistics park operators, and steel logistics service agents that provide iron and steel companies with raw material and spare parts support services. If we come back to understand the intent of logistics, logistics is a supply guarantee service. Is procurement not a business of a logistics company? Strategic procurement may not belong to the category of logistics, and tactical procurement belongs to the category of logistics. Now a new trend is the combination of logistics and trade. From the perspective of circulation, the relationship between logistics and trade is originally a problem in two aspects. For a long time, trade is the main aspect of the circulation problem, or Is the main contradiction, logistics is in a subordinate position. Take the former China Central Reserve Bank, President Lee had previously been marginalized in storage and transportation, but now storage and transportation have come to the front. For example, with steel, with the changes in the supply and demand environment of the steel market, in the past we were a shortage of environment. In the past we had to apply for indicators. We wear three-foot caps and I have to apply a little more. With the changes in the supply and demand environment and the increase in the efficiency of the trading system, the past purchases have skyrocketed. Now that we have an e-commerce system, our trading activities are completed at the click of a mouse, and logistics gradually rises to the status of being in circulation, even to the dominant position.

In reality, we will find that the circulation pattern of mutual penetration of logistics and trade begins to appear, and even integrates elements of financial services and elements of information services. Some companies that call themselves iron and steel logistics companies also do steel trade at the same time, while those engaged in steel trade also take logistics as part of their overall service. In addition, in the field of steel, the steel e-commerce platform providers and steel information service providers have emerged in recent years. In addition to traditional spot trading, there are various new methods such as the mid-to-long-term peace agreement.

Just as the agricultural product wholesale market is also called the logistics park in Southeast Asia, the designation of the logistics park is sometimes associated with pursuing fashion and obtaining policy support. In fact, logistics parks and wholesale markets that are actually commodity circulation areas rather than cargo transportation areas are essentially There is not much difference. Looking at the wholesale function in the past, it was called the market. From the perspective of the function of material distribution, the past was called the park. However, the park seems to be more complete in terms of function, and the connection of related service providers is closer and the space scale is bigger. This is the first question, talking about a few simple concepts.

Second, I would like to talk about the current status of the steel industry chain. First, from the production level, steel production continues to increase. In the last ten years, the annual average growth rate of investment in fixed assets in the Chinese steel industry has reached more than 30%. In 2010, crude steel production reached 626 million tons, which is crude statistics. Many statistics did not come in and may exceed 626 million tons. Small corner mills do not have statistics. This is an increase of 77.4% over 2005, with an average annual increase of 15.5%. This growth is still continuing.

The second characteristic is that iron and steel enterprises have entered the era of low profit. The increase in raw materials and energy prices, lack of effective demand, and slower growth in steel prices have led to a decline in profit margins. The dependence on ore intake has soared from about 24% in 1995 to more than 63%. The rise in iron ore prices has pushed up the price of steel in China. This year, the steel industry has seen high-cost, high-price, low-efficiency devices. Some steel companies have seen negative growth in their profits. Last month I went to a steel plant not far from Beijing. In 2004, he had only one blast furnace. His annual production capacity was one million tons. This year it reached eight million tons. In just seven or eight years, he turned over. Three times, from one million tons to eight million tons, the NDRC has now ordered the death order. New production capacity is not allowed to eliminate backward production capacity, but it is not good to do it. After investing in some enterprises, they faced a bad market and had a very heavy burden. According to a report from the China Iron and Steel Industry Association, the average price of imported iron ore in China in the first four months of this year was US$157.6/ton, a year-on-year increase of 57%. This efficiency increase has become an important task for iron and steel business management. A significant part of the cost reduction is the cost of excavating logistics. Iron and steel companies have begun to attach importance to marketing activities and diversified operations, through vertical integration, ie extending the industrial chain to control the upstream raw material market and the downstream The distribution market, through horizontal integration, realizes horizontal integration among enterprises and diversification. On the basis of the main steel industry, we will expand our business scope and enter steel equipment manufacturing, steel logistics, and finance.

From the aspect of consumption, the downstream industries of the steel industry chain are affected by the overall slowdown in economic growth. The demand for steel products has been relatively declining. Although our prices are high, our costs are high, and our profit margin is small, although our ore demand is very large. It is because of our large demand that people are “kidnapped”. If you leave my ore, your business will suffer and the regional economy will suffer.

From the socio-economic perspective, steel companies must also continue to develop and develop harmoniously. Constrained by the resources and environment, our steel industry must adjust its structure and transfer methods. We must curb the uncontrolled expansion of production capacity and must resolutely eliminate backward production capacity.

From the perspective of circulation, especially for the development of our steel trading companies, we face new challenges in this environment. On the whole, we must explore new development paths. We must improve the added value of our services. We must carefully ponder and ponder, what money our steel trading companies earn in the end, why we can make money, we must increase the added value of our services, use information and modern logistics. Services, promote the transformation and upgrading of traditional service models. As far as the entire industry is concerned, the integration between our industry and the steel manufacturing industry is a problem that needs to be solved in future development. It's not that integration is the integration of others. It's also important to be able to be integrated. We have the concept of supply chain, good supply chain, decide whether each node in the supply chain is a good enterprise, and you want to be a competitive supply. If you chain a node, you are not competitive and cannot be integrated.

The third one I would like to talk about the characteristics and development trends of the steel industry chain. The iron and steel logistics industry is to meet the demand of modern steel logistics services for the steel manufacturing industry and the steel industry, as well as steel demand enterprises. In the context of the flourishing development of the modern logistics industry, the steel industry chain serves as the service object, and the information technology as the link. . Its main features are summarized as follows: First, it is different from traditional transportation and warehousing. Steel logistics has a close relationship with steel production and circulation. It is an organic part of the steel industry chain. Steel trade logistics operations The object—steel raw materials and steel products are not simply used to complete space movement of goods, but as inventory or materials, managed and controlled in the supply chain logistics channel. The steel logistics system is a supply guarantee service for the steel industry chain. The system, the steel logistics industry, is responsible for the operation of this supply security service system. Just like the West-East Gas Pipeline, the material that flows in the system is natural gas. Because this system allows our users to get the gas I need in the quantity needed when they need it. When it is not needed, he can store it. What's more important is that he can provide me with natural gas in the quantity that I need when I need it. We need to build a logistics system, so in a sense logistics is a system.

The second is the integration of steel logistics and steel trade, and the formation of a steel supply security service system for customers by means of trade plus logistics. The modern steel trade is supported by modern logistics services. Modern steel logistics relies on modern steel trade. The relationship between steel logistics and steel trade has changed from the past affiliation to the side-by-side relationship. Concretely to the level of individual enterprises, steel trading companies provide logistics services with the city. Iron and steel logistics companies will also be extended to the field of trade, the characteristics of the integration of the two is even more obvious. In the past, we often talked about a business combination. There are two concepts. One is that business and logistics are done according to different channels. Another concept is business integration. Business separation refers to the tactical separation of business, so trade and logistics The integration also reflects business integration.

The fourth is that modern information technology has been widely used in the steel logistics industry, through information systems and e-commerce platforms to integrate demand and service factors, expand the market space for steel trade and logistics, and improve operational efficiency.

With the globalization of raw materials procurement and steel sales, the steel trade and logistics are showing an international trend.

The sixth is that large iron and steel enterprises are involved in the steel logistics industry in the form of logistics subsidiaries. Logistics subsidiaries become an important form of the steel logistics industry. The logistics subsidiaries form a better solution to the relationship between serving the enterprise and serving the society and becoming the logistics of the enterprise. An effective way to organically integrate society, self logistics and social logistics.

The above characteristics of the iron and steel logistics industry determine that the role of steel logistics in the steel industry chain has changed from an auxiliary function or a post-processing function to an important functional stage that has an important impact on steel production, circulation, and consumption. From a certain perspective The efficiency of the iron and steel logistics system determines the efficiency of the entire industry chain. The modern iron and steel trade logistics industry armed with informationization will play an increasingly active role in the global economic integration of steel industry operations.