Steel company profit structure to be improved

The profitability of steel companies is further increasing. China National Iron and Steel Association (hereinafter referred to as "China Steel Association") Party Committee and Deputy Chairman Liu Zhenjiang said on November 16 that the steel industry was slightly better than last year, and large-scale steel enterprises have turned losses from January to September.

Liu Zhenjiang disclosed the above information at the "9th Bohai Iron and Steel Market Forum." He predicted that the steel industry will not lose money this year, but the profit structure may not be beautiful.

Steel companies are expected to make full-year profit:

A week ago, an article was published on the website of the China Iron and Steel Association, and similar views with Liu Zhenjiang were also published.

The article predicts that the profits of the steel industry this year will be better than last year, and may exceed 10 times last year, and will further increase to 21 billion yuan next year, about 12 times the previous year's 1.58 billion yuan.

This is in line with the previous media reports that “selling a ton of steel does not earn a popsicle”.

It is understood that the average price of steel this year is lower than last year, a year-on-year decrease of 9.6%, which is the lowest value in the past five years. Liu Zhenjiang said in the above forum that the current steel price is the level of 20 years ago. "But the cost of production is five to six times that of 20 years ago." Liu said that this "scissors difference" is deadly for steel companies.

In such a severe form, the CISA has frequently released news that the profitability of steel enterprises is better than last year. Liu Zhenjiang explained that there are two reasons for this: One is that the big losers last year have seen a greater reduction in losses this year; the other is that coal has cut prices, which has reduced the production costs of steel companies.

"Daily Economic News" reporter learned that many companies are building direct sales channels to increase profitability. Huang Tao, president of Zhengzhou City Federation of Industry and Commerce Steel Traders, told the newspaper at the end of October that many steel companies have established their own marketing channels and have not passed steel traders.

"Shougang said that their direct sales ratio this year will reach 70%." Senior expert Han Weidong said that traders with ** as the theme in the market have already withdrawn.

The profit structure is not beautiful:

Liu Zhenjiang expects that the steel industry will not lose money this year, but also warned that the profit composition may not be very beautiful.

This point can also be seen from the three quarterly reports of listed steel companies. In the first three quarters, nearly 70% of steel companies realized profits, but from the perspective of the main business, the improvement was not obvious.

The same is true for the main businesses of most unlisted steel companies. In the above forum, Song Yong, chairman of Tianjin Haotian Iron and Steel Group, stated clearly that their main business is "negative profit."

According to the announcement of a listed steel company, it can be found that some steel enterprises have obtained performance improvements by obtaining government subsidies, selling assets, or extending depreciation time.

For example, Linggang (600,231) received subsidies of 350 million yuan from the Finance Bureau of Chaoyang City, Liaoning Province in June this year; Masteel (600808) sold some non-steel assets to major shareholders and obtained a gain of 3.843 billion yuan; Shougang Group ( 000959) The depreciation period for mechanical equipment and metallurgical equipment was extended from 2014 and 2015 to 2019.

Liu Zhenjiang suggested that the development mode of the steel industry must change to the direction of development of quality and efficiency, otherwise it is still difficult to escape "the market is getting better - steel output is rising - the price of imported ore is increasing - steel prices are decreasing - inventory is increasing - steel prices are down" Industry inertia.