With China's economic development entering the new normal, the development environment of the steel industry has undergone profound changes. In 2015, China's steel consumption and production both entered the peak arc top area and showed a downward trend, the main steel industry from the small profit operation into the overall loss, the industry development into the "severe winter" period. At the same time, the central government's proposal to promote supply-side structural reforms and the State Council's fiscal, taxation and financial policies to resolve excess steel production capacity also provide a historical opportunity for the steel industry to completely get rid of the predicament.

1. Steel Industry Operation in 2015

(I) production and consumption declined. In 2015, the country's crude steel output was 0.804 billion tons, down 2.3 percent year-on-year, the first decline in nearly 30 years. The apparent consumption of domestic crude steel was 0.7 billion tons, down 5.4 percent from the same period last year, falling for two consecutive years, an increase of 1.4 percentage points. The output of steel (including duplicate materials) was 1.12 billion tons, up 0.6 percent from the same period last year, down 3.9 percentage points. China's crude steel production accounts for 49.54 per cent of the world's total.

(II) steel prices continued to fall. China's steel prices have been falling for 4 consecutive years, the decline increased in 2015. The composite steel price index fell from 81.91 points at the beginning of the year to 56.37 points, down 25.54 points, or 31.1 percent. From the variety point of view, the decline in the plate is greater than the long wood, in which the plate price index from 83.99 to 56.79 points, a decrease of 32.4, the long wood price index from 81.38 to 56.92 points, a decrease of 30.1.

(III) economic benefits have declined significantly. 2015 steel industry-wide losses. Key statistics show that the sales revenue of iron and steel enterprises reached 2889 billion yuan, down 19.05 from the same period of last year. Profit and tax -1.3 billion yuan, profit -64.5 billion yuan, from profit to loss. The loss area was 50.5 per cent, up 33.67 percentage points year-on-year. It has been in a loss state since July, and the loss has gradually expanded.

(IV) steel exports continued to grow. In 2015, my country exported 112.4 million tons of steel, a year-on-year increase of 19.9 percent; imported 12.78 million tons of steel, a decrease of 11.4 percent; equivalent to a net export of 103.38 million tons of crude steel, a year-on-year increase of 25.6 percent, accounting for 12.8 percent of my country's total crude steel output. The continuous growth of exports has triggered an increase in international trade frictions. In 2015, there were as many as 37 anti-dumping and countervailing cases against my steel products.

(V) investment in fixed assets continued to decline. In 2015, fixed asset investment in China's steel industry was 562.3 billion billion yuan, down 12.8 percent from the same period last year. Among them, the investment in ferrous metal smelting and rolling industry was 425.7 billion yuan, down 11%; the investment in ferrous metal mining and dressing industry was 136.6 billion yuan, down 17.8. Investment in the steel industry as a whole has entered a state of contraction.

Prominent Problems in the Development of Iron and Steel Industry in 2.

In 2015, under the complicated international and domestic situation, the problems and contradictions accumulated in the rapid development of the iron and steel industry for many years became more and more prominent, the production and operation of enterprises were difficult, the financial situation continued to deteriorate, and the disorderly competition in the market continued to intensify.

(I) overcapacity intensifies vicious competition among enterprises

In recent years, the utilization rate of iron and steel production capacity in China has continued to decline, and has now dropped to about 70%, far below the reasonable level. In particular, in 2015, enterprises generally suffered losses. In order to maintain cash flow and market share, some enterprises engaged in excessive low-price competition, even dumping below the cost price, resulting in serious vicious competition.

Poor exit channels for (II) companies have led to a significant increase in zombie companies.

In 2015, the average debt ratio of the key large and medium-sized enterprises in the statistics of the association exceeded 70%. Some companies are insolvent and are in a state of production suspension and semi-stop production. However, due to the huge assets, large number of employees, and wide range of social influence, it is difficult to dispose of corporate assets and debt, and it is difficult to shut down at one time. Bank loans maintain production and eventually become a zombie company, occupying a lot of social resources and dragging down the transformation and upgrading of the entire industry.

(III) fair market competition environment to be further improved

The self-discipline of enterprises needs to be further improved. Some enterprises do not issue invoices for purchases and sales in production and operation, evade taxes and evades taxes; some enterprises counterfeit high-quality enterprise products, produce and sell without a license, and compete for the market at low prices; some enterprises have insufficient investment in environmental protection facilities, and environmental protection secretly drains, disrupting market order.

(IV) iron and steel enterprises financing problem is still prominent

Since November 2015, the central bank has continuously lowered interest rates, but because steel is clearly for the overcapacity industry, the vast majority of enterprises are still expensive financing, loan renewal difficulties, credit scale compression, interest rate increases and loan withdrawal and other issues prominent, a few enterprises due to loan restrictions, loan withdrawal has appeared to stop production phenomenon. The RMB began to depreciate in August, and exchange losses further increased the financial pressure of enterprises.

Falling iron ore prices in (V) exacerbate operational difficulties for domestic mining enterprises

The CIF price of imported iron ore fell sharply in 2015 and remained at around US $40/ton after October, far below the production cost of domestic mines. Domestic iron ore is at a disadvantage in the cost competition with imported iron ore, and most mining enterprises have suffered losses and some have stopped production. The advantages of joint ventures in owned mines gradually disappear and even become a burden on business operations.

Development Prospect of 3. Iron and Steel Industry in 2016

In 2016, the international and domestic situation became more complex and changeable. From an international perspective, the recovery of the US economy is slow, the European economy is uncertain, and the Asian economic outlook is still unclear. At the same time, affected by the decline in world demand, the increase in US dollar interest rates and the sharp drop in oil prices, it is difficult for international bulk raw material prices to improve. From a domestic perspective, the economy maintains medium-to-high-speed growth, and the macro-economy pays more attention to supply-side reforms under the condition of appropriately expanding demand. By resolving overcapacity, the structure of the steel industry itself will be optimized.

(I) to resolve overcapacity will promote the exit of zombie enterprises

As a key area to resolve overcapacity and promote supply-side structural reform, the iron and steel industry will focus on a series of policies and measures in 2016, which can effectively speed up the exit of zombie enterprises from the market, boost the market clearance, and free up more market space for the future development of the industry.

(II) enterprises still have greater operating pressure

Resolving excess capacity is a long-term task, which cannot be achieved overnight. In the short term, the market will still oversupply. Under the background of increasing downward pressure on the economy and slowing downstream demand, it is difficult for steel prices to rebound significantly; the decline in raw materials such as iron ore has weakened, and prices are basically close to the bottom; after the implementation of the new Environmental Protection Law, corporate environmental protection costs will generally increase; Corporate financing costs are difficult to effectively reduce in the short term, and the depreciation of the renminbi and the risk of bad debts will also increase corporate financial costs.

(III) steel exports more difficult

my country's steel exports have grown rapidly in the past two years. The country's cancellation of the boron-containing steel export tax rebate will inhibit the export of low value-added steel products to a certain extent, but it still has a cost advantage compared with developed countries. Domestic companies will still actively seek exports. It is expected that in 2016 my country's total steel exports will remain at a relatively high level. However, due to the pressure of trade friction and the decline in the prices of international bulk raw materials, export resistance is greater.

4. the key work of industry reform in 2016

In 2016, the iron and steel industry should implement the spirit of the Central Economic work Conference, strive to promote supply-side structural reform, and solidly complete the arrangements and requirements of the "opinions of the State Council on resolving excess capacity in the Iron and Steel Industry to achieve Development out of difficulties. While resolving overcapacity, we will also pay attention to the optimization and upgrading of the industrial structure. Through the formulation and release of the "Thirteenth Five-Year Development Plan for the Iron and Steel Industry", we will do a good job in standardizing enterprise dynamic management, intelligent manufacturing pilot demonstrations, and steel structure construction promotion and application. Work to lead the steel industry to improve its comprehensive competitiveness.

(Source: Ministry of Industry and Information Technology)

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