70 billion private capital flooding into the steel industry or exacerbating overcapacity

On April 28, the data released by China Steel Association showed that the national fixed assets investment of the steel industry in the first quarter was 89.3 billion yuan, down 3.34% year-on-year, of which private fixed assets investment was 71.6 billion yuan, up 6.65% year-on-year, accounting for 80.18%.

Many insiders believe that the continuous entry of private capital will undoubtedly exacerbate the overcapacity situation in the steel industry and will also intensify the reshuffle of the steel market.

Xu Yongbo, chief analyst of the Treasure Island steel industry, told the reporter of the Daily Economic News that the private capital entered the market when the steel industry encountered a rare cold, and it was estimated that there were some opportunities in the brutal competition.

Private investment accounts for more than 80%

On April 28, China Steel Association released the “reports” of the steel industry in the first quarter: domestic steel prices fell, profits fell, production continued to increase, and private investment continued to “high fever”.

In the first quarter, the national fixed assets investment of the steel industry was 89.3 billion yuan, down 3.34% year-on-year, of which private fixed assets investment was 71.6 billion yuan, up 6.65% year-on-year; private investment in steel industry accounted for 80.18% of total investment.

In this regard, the China Steel Association insiders said that the funds are mainly concentrated in private steel mills, the regions with faster investment growth are concentrated in Jiangsu, Liaoning and northwestern China.

It is worth noting that, previously reported by the media, Xinjiang, located in the northwest, has been really worried about the over-capacity of overcapacity due to the investment in steel companies in recent years. According to the statistics of the “Steel House” website, if the new steel projects in Xinjiang are put into operation from 2010 to 2011, the production capacity will exceed 20 million tons. Data from Jinshi Futures shows that the current price of steel in Xinjiang has fallen to a low of 3,100 yuan / ton, close to the bottom line of 3,000 yuan / ton in 2006.

In this regard, Zhuo Chuang Information Steel analyst Liu Xinwei said that some of the steel projects in Xinjiang have been difficult to ride, and for investment companies, in order to avoid the loss of money, they have to continue to invest.

Regarding the whereabouts of private capital, the aforementioned China Steel Association revealed that the current increase in fixed asset investment is more in the expansion of projects and the commissioning of new projects.

Many insiders believe that the private sector's fixed investment in steel will undoubtedly increase the status quo of steel overcapacity. According to the China Steel Association, China's crude steel output in the first quarter was about 203 million tons, up 2.37% year-on-year; steel (including recycled materials) output was 261 million tons, up 5.3% year-on-year.

Exploratory entry of private capital

The continued involvement of private capital has brought about the growth of fixed investment in the whole industry. At the same time, the steel industry in the first quarter of this year has fallen into the most difficult season in the new century.

According to the latest data of China Steel Association, the steel industry's key statistical steel enterprises realized sales income of 868.887 billion yuan, down 0.79% year-on-year; realized profit of -23.29 billion yuan, a year-on-year decrease of 5.604 billion yuan, from profit to loss.

Zhang Changfu, vice president of China Steel Association, said that the current steel consumption is in the off-season, but steel production is still growing, stocks are rising sharply, and the situation of oversupply in the steel market is even more severe, causing steel prices to continue to fall and the industry to suffer serious losses.

In the view of Liu Qiuping, a senior researcher at Guotai Junan Futures [microblogging], at this time, the continuous entry of private capital will undoubtedly increase the overcapacity situation and will also intensify the reshuffle of the steel market. Liu Qiuping told reporters that even if private investment rises, the overall investment growth rate is still declining. "Private investment is also a tentative approach."

Xu Yongbo, chief analyst of the Treasure Island steel industry, said that when the steel industry entered the market in the face of a rare cold, it is estimated that there are some opportunities in the brutal competition.

It is worth noting that in the fixed assets investment of the steel industry in the first quarter, the investment in fixed assets of the ferrous metal mining and dressing industry was 18.3 billion yuan, a year-on-year increase of 17.1%, of which private fixed assets investment was 15.3 billion yuan, a year-on-year increase of 25.3%.

In this regard, Wang Guoqing said that private steel mills are changing their previous strategy of purchasing raw materials, and some private capital is gradually investing in upstream raw materials such as iron ore to ensure the low cost and stable supply of raw materials.

According to the latest data from the National Bureau of Statistics, in the first quarter of this year, the ferrous metal mining and mining industry above designated size achieved a revenue of 196.77 billion yuan, a year-on-year increase of 3.8%; the total profit reached 16.76 billion yuan, a year-on-year increase of 5.1%.

However, in Liu Qiuping's view, even if private capital is partially involved, the ferrous metal smelting and rolling processing industry will not be able to avoid the fate of investment decline. According to data released by China Steel Association, in the first quarter of this year, the national fixed assets investment in ferrous metal smelting and rolling processing industry was 71 billion yuan, down 7.5% year-on-year, and the growth rate was 13.9% in the same period last year.

Liu Qiuping said that the overall slowdown in investment indicates that the willingness of steel mills to expand reproduction is weakened, while the attractiveness of the steel industry to funds is also weakening. Even private investment is more cautious.

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