Discussion on the Restructuring Pattern and Path of China's Steel Industry

China Steel may present the overall pattern of 145N

At the beginning of the "14th Five-Year Plan" period, the joint reorganization of China's steel industry showed new characteristics. On January 28, 2021, the Shaanxi Iron and Steel Group and other 6 units and 9 steel production enterprises in the Shaanxi, Jinan, Sichuan and Gansu Forum areas registered and established Northwest United Iron and Steel Co., Ltd., with a total production capacity of more than 60 million tons. China's steel industry during the 14th Five-Year Plan The curtain of regional reorganization opened. On February 1, China Baowu took the trusteeship of Kunshan Iron and Steel. After achieving the goal of “100 million tons of Baowu”, it took actual actions to move towards the goal of “200 million tons”; on February 10, Jianlong Group officially took charge of Xing Steel and Jianlong The group's production capacity has increased to approximately 40 million tons. In accordance with the principles of corporate entities, government guidance, and market-oriented operation, China’s steel industry is actively carrying out cross-regional and cross-ownership mergers and reorganizations, as well as regional and strategic major mergers and reorganizations, and accelerate the improvement by taking advantage of the current favorable important window period for mergers and acquisitions. Industry concentration will continue to improve the effective supply capacity and overall competitiveness of the steel industry.

1. Joint reorganization is imperative

(1) Joint reorganization is the only way under the background of full peak

The author made the “Three Comprehensives” in the article “China Steel Will Usher in the Critical Decade of Three Comprehensives” in the World Metal Herald on January 12, 2021. That is, in the next ten years, China’s iron and steel industry It will usher in the full peak of steel consumption, pollutants and carbon emissions, fully build a strong steel country and lead the world steel in an all-round way. Under the constraints of the carbon peak target, the National Industry and Information Technology Work Conference on December 28, 2020 clearly requested that crude steel output be resolutely reduced to ensure a year-on-year decline in crude steel output. The main manifestations of full peaking are as follows: First, carbon peaking and carbon neutrality will force the steel industry to reduce and adjust and upgrade; second, the steady economic growth drives the upgrade of steel consumption and gradually peaks; third, the apparent consumption of crude steel per capita The level shows that my country's steel consumption peak is approaching. At the end of 2020, the “Guiding Opinions on Promoting the High-Quality Development of the Iron and Steel Industry (Draft for Comment)” issued by the Ministry of Industry and Information Technology proposed that the steel industry should strive to achieve the first peak of carbon by 2025. On the whole, the total energy consumption and intensity are both controlled. , Under the pressure of carbon trading costs, it is imperative to reduce, adjust and upgrade the steel industry.

Through research and analysis of the steel development history of major steel-producing countries in the world, it can be seen that since the 1970s, major steel-producing countries such as the United States, Japan, Germany, France, the United Kingdom, and Russia have experienced steel production and consumption after their crude steel output peaked. Shrinking to varying degrees, through mergers and reorganizations to increase industry concentration, improve resource control and market voice, reduce costs, and enhance market competitiveness is one of the main ways to adjust and optimize the steel industry's structure. At present, the top five steel companies in the European Union, the United States, Japan, Russia, and South Korea account for more than 50% of the country's crude steel output. Therefore, joint reorganization is the only way for my country's steel industry to reach its peak.

(2) Joint reorganization is a realistic choice to enhance market competitiveness

In recent years, my country's crude steel output has continued to grow rapidly. While meeting the construction needs of various aspects of the rapid growth of the national economy, it is also facing problems such as rising labor costs, resource security, and disorderly competition in the market. The super-large steel enterprise group headed by China Baowu has achieved cross-regional and full-industry chain layout through horizontal and vertical joint reorganization, fully releasing the scale effect, tapping the potential to increase the stock, using joint efforts to increase, and reshaping the development of the industry with a high market share New pattern. At the same time, large steel companies have strong financial strength, vigorously promote smart manufacturing, implement networked factory layout and integrated management and control, and significantly reduce labor costs, which will inevitably further squeeze the market space of regional steel companies and small and medium-sized steel companies. Therefore, it has become a realistic choice for steel companies within the same sales radius to hold groups for warmth to defend their inherent market territory, enhance their right to speak, and improve their survivability.

(3) Joint reorganization is an effective way to deepen supply-side reforms

During the "13th Five-Year Plan" period, the supply-side structural reform of the steel industry has achieved remarkable results. Through the resolution of over 150 million tons of excess capacity and clearing of more than 100 million tons of ground strip steel, the supply-side reform of the total production capacity has been realized. The industry as a whole turned losses, corporate operating efficiency improved, and market operating order continued to improve. However, while eliminating a large number of outdated steel production capacity, some upgraded equipment production lines are still mainly producing ordinary steel, which deviates from the direction of the structural adjustment of the steel industry, and does not conform to the original intention of the supply-side structural reform of the steel industry.

Entering the "14th Five-Year Plan", China's iron and steel industry will adhere to the new development concept, take the promotion of high-quality development as the theme, and deepen the supply-side structural reforms as the main line, and better integrate into the domestic large cycle as the main body and the domestic and international dual cycles to promote each other To accelerate the construction of a modern steel industry system, promote the overall improvement of the quality and efficiency of the steel industry, and lay a solid foundation for building a strong steel country in an all-round way, the steel industry needs to change from quantitative to qualitative change, significantly enhance its competitiveness, and significantly improve its ability to resist risks. With the transformation of my country’s economic development mode and the upgrading of industrial structure, the deepening of supply-side structural reforms emphasizes the rationalization, refinement, and optimization of factor allocation, while joint reorganization can quickly and effectively achieve factor sharing, optimization and layout within the region and between enterprises. Redistribute. For example, joint reorganization can adjust production layout on a larger scale, reduce production costs, strengthen core technology, optimize product structure, and extend industrial chain. It is one of the effective ways to quickly advance the optimal allocation of factors.

(4) Joint reorganization helps demand-side management to release market potential

At the end of 2020, the Central Economic Work Conference put forward a focus on demand-side management, which reflects the inherent requirements of the new development pattern for economic work-not only the deepening of supply-side structural reforms, but also the need for effective demand-side management to respond to it. Under the new development pattern, with the domestic cycle as the main body, it is necessary to give more play to the role of domestic demand. To maintain a smooth domestic cycle, it is necessary to achieve a higher level of dynamic balance between supply and demand. With the steel industry reaching its peak, it is not only facing pressure to reduce volume, but also to solve structural problems. The strategic basis of demand-side management is to expand domestic demand. The joint reorganization of steel enterprises can help reduce homogeneous competition, ineffectiveness, and low cost. End supply, gather strength to develop new demand, achieve product structure upgrade, increase product added value and overall benefits, and help demand-side management release market potential, which is mainly reflected in the extension of the steel industry and the integration of industry and city.

(5) Joint reorganization will accelerate the green and low-carbon transformation of the steel industry

During the "14th Five-Year Plan" period, the steel industry will face the "relative constraint" of carbon emission intensity to the "absolute constraint" of total carbon emissions. At the same time, it may also face more international challenges from the "carbon economy" and accelerate the low-carbon transition. It is imperative. On the one hand, it will accelerate the improvement of production processes, update production equipment and use low-carbon energy in the steel industry, and quickly realize the low-carbon transformation of the steel industry and energy structure; on the other hand, it will encourage steel companies to actively innovate, abandon high-carbon emission products and businesses, and develop in-depth research and development. Decarbonization, zero-carbon technology. In the tide of low-carbon transformation, the establishment of large-scale enterprise groups through joint reorganization will help gather efforts to develop low-carbon processes, fundamentally realize low-carbon transformation, and further enhance market competitiveness. However, it is difficult for small and medium-sized enterprises with high energy consumption and low efficiency to independently develop and apply low-carbon technologies, and it is even more difficult for individual entities to achieve carbon neutrality, or they will be eliminated in the industry's low-carbon transformation. Therefore, the joint reorganization will speed up the low-carbon transformation of China's steel industry, move towards high-quality development as a whole, and help China build a strong steel nation in an all-round way.

2. Pre-judgment of China's steel restructuring pattern

The "Recommendations of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five-Year Plan for National Economic and Social Development and Long-Term Goals for 2035" clearly pointed out that during the "14th Five-Year Plan" period, my country's development is still in a period of important strategic opportunities, but it faces challenges. The domestic and international environment is undergoing profound and complex changes. The development of the new era and new stage must implement the new development concept, must be high-quality development, must focus on deepening supply-side structural reforms, adhere to quality first, benefit first, and effectively transform the development mode , To promote quality change, efficiency change, and power change, and build a new development pattern with domestic and international cycles as the main body and mutual promotion of domestic and international double cycles.

Under the new situation, China's steel industry must form a group of large-scale steel enterprise groups with international competitiveness, regional appeal and brand influence during the "14th Five-Year Plan" period to promote the high-quality development of China's steel industry. The "Guiding Opinions on Promoting the High-Quality Development of the Iron and Steel Industry (Draft for Comment)" issued by the Ministry of Industry and Information Technology clearly stated that by 2025, the industrial layout will be more reasonable and the development level of industrial agglomeration will be significantly improved. Build several world super-large steel enterprise groups and professional first-class enterprises, and strive to achieve 40% industrial concentration of the top 5 steel enterprises and 60% of the top 10 steel enterprises. It is foreseeable that, as a pilot state-owned capital investment company for the reform of state-owned enterprises, China Baowu will continue to play a leading role in the consolidation and reorganization of China’s steel industry. The consolidation and reorganization of regional steel enterprises has also begun. At the same time, central enterprises, local state-owned enterprises and The mixed-ownership reorganization of private enterprises is underway.

According to the current overall layout of China’s iron and steel industry and the development trend in the next ten years, and with reference to and borrowing from the experience of structural adjustment and joint reorganization of the iron and steel industry abroad, during the "14th Five-Year Plan" period, China Baowu will continue to promote joint and reorganization, with a scale of 200 million tons. , Regional reorganization, cross-regional and cross-ownership reorganization will be accelerated; in terms of regional reorganization for group heating, the Northwest has taken the lead. The Northeast, Beibu Gulf, Yangtze River Delta and Bohai Rim regions all have regional reorganization. Characteristics, the scale of restructuring can reach about 80 million tons; in addition, the large-scale iron and steel enterprise groups mainly including Hegang Group, Shagang Group, Jianlong Group and Shougang Group have scales of more than 30 million tons. Long Iron & Steel + Xintian Steel Group) has a production capacity of about 30 million tons, and both have a strong cross-regional and cross-ownership restructuring layout. Therefore, at the end of the "14th Five-Year Plan" period, with the scale of China Baowu reaching 200 million tons, the smooth progress of regional reorganization, and the active restructuring of large iron and steel enterprise groups, it is a high probability event for the Chinese steel industry to complete the CR5 target of 40%. , Lay a solid foundation for building a strong steel country in an all-round way and leading the world in steel.

With the further advancement of the joint reorganization, by the end of the "15th Five-Year Plan", it is expected that the country will form an overall industrial restructuring pattern of 145N, namely: 1 China Baowu (with a scale of about 200 million tons) + 4 regional groups (with a scale of about 200 million tons) Around 80 million tons) + 5 large iron and steel enterprise groups (40-80 million tons in scale) + N "specialized, special, new and excellent" enterprises, with an industry concentration (CR10) of more than 70%.

(1) 1 Chinese Baowu, reflecting the national strategy

During the "14th Five-Year Plan" period, China Baowu's main goal is to reach a new level of high-quality development. Adhere to high-tech strengthening and achieve technology leadership; implement the joint reorganization of the "over 100 million ton Baowu" scale-leading project to reshape the industry development pattern with a high market share, and the production capacity is expected to reach 200 million tons. As a central enterprise, China Baowu is a pilot state-owned capital investment company for the reform of state-owned enterprises. It is more a reflection of the national strategy, and China Steel leads the world's steel business card.

(2) 4 regional steel enterprise groups

Four regional steel enterprise groups, each with a production capacity of about 80 million tons.

(1) Northwest China: Northwest United Iron and Steel Co., Ltd. (hereinafter referred to as the Northwest United Iron and Steel Co., Ltd.) initiated and established at the end of January 2021 by the six units of Shaanxi Iron and Steel Group, Shanxi Jianlong, Shanxi Jinnan Iron and Steel, Shanxi Jincheng Iron and Steel, Shanxi Gaoyi Iron and Steel, and Shanxi Jianbang "Northwest Union Steel"), including 9 steel production enterprises, with a steel production capacity of more than 60 million tons. From the perspective of product structure, the six companies mainly use steel bars, wire rods, bars and other construction steel products, with a relatively high degree of product homogeneity. Therefore, the establishment of Northwest Union Steel is mainly to improve product quality, increase operating efficiency, form market and technology synergy, reduce ineffective and low-end supply, promote product structure transformation and upgrade, and increase product added value.

The corporate structure of Northwest Union Steel is more like the "good of Qin and Jin". There are also steel companies such as Baotou Steel and Jiuquan Iron and Steel in the northwest region. The name Northwest Union Steel reflects a longer-term regional development strategy. The establishment of Northwest Union Steel is in line with the general trend of western iron and steel companies to improve product quality and increase operating efficiency. It is the need to reduce ineffective and low-end supply, realize green and low-carbon development, and is the need for product structure transformation and upgrading and product added value. It is even more necessary for the high-quality development of western steel. Facing the basic reality of the prominent contradiction between the supply and demand of the steel industry in the region, Northwest United Steel will make positive contributions to building a green development ecosystem for the steel industry in western my country and realizing the domestic and international dual-cycle development strategy.

(2) Northeast China: Mainly involving Anshan Iron and Steel Group, Benxi Iron and Steel Group, Yingkou Medium Plate, Lingyuan Iron and Steel, etc., with a total production capacity of more than 60 million tons. The reorganization of Anshan Iron and Steel and Benxi Iron and Steel has a long history. During the "14th Five-Year Plan" period, the revitalization of the Northeast is still a national strategy, but Anshan Iron and Steel and Benxi Iron and Steel will face more severe market competition than the "12th Five-Year" period. First, competition in the regional market will become more intense. Private steel companies represented by Jianlong Group (including Jilin Xinda, etc.) have established their presence in the Northeast. The cost advantages of low- and mid-range products are obvious. The high-end products will face Shougang Tonggang, Northeast Special Steel and steel company clusters in the Bohai Rim region. Second, in terms of international competition, with the advancement of the “Belt and Road” initiative and the RCEP agreement coming into effect and gradually landing, steel companies in the Northeast region will also face competition from mid-to-high-end products from Japan and South Korea, and mid-to-low-end products from Southeast Asia and Russia. . Therefore, the regional reorganization of steel enterprises in the Northeast is a realistic choice under the fierce market competition, and early action may take the lead.

(3) Beibu Gulf region: mainly involved in Fangchenggang, Beihai, Qinzhou, Liuzhou, Wuzhou, Yulin and other regions. The main enterprises include Liugang, Shenglong Metallurgy, Beigang New Materials, Wuzhou Yongda and other steel enterprises and steel projects under construction. Facing the Beibu Gulf Economic Circle, the Guangdong-Hong Kong-Macao Greater Bay Area and Southeast Asian markets. As China’s Baowu has already deployed in Guangdong and Yunnan, the Beibu Gulf region’s steel capacity replacement projects have been put into operation one after another, coupled with the impact of zero tariffs on imported steel products from Southeast Asia, the steel market in the Beibu Gulf region will compete in the mid-to-late "14th Five-Year Plan" period. Intensified further, regional soft alliances and reorganizations are the general trend.

(4) The Yangtze River Delta: Mainly involved in Yonggang, Zhongtian, Nangang, Dinxin, Lianxin, etc. In addition to serving the Yangtze River Delta urban agglomeration, the products are also radiated to inland areas and Southeast Asia due to the convenience of shipping. However, the region also has problems such as product homogeneity and rising labor costs. In addition, China's Baowu has a relatively sufficient layout in the region. Therefore, there may be regional restructuring in the later period of the "14th Five-Year Plan".

In addition, the Bohai Rim area also has relevant conditions. The major companies involved are Jinxi Iron and Steel, Rizhao Iron and Steel, Xinhua United Metallurgy, Ruifeng, Tianzhu, Jiujiang Wire, Hebei Xinda, Donghai Special Steel, Donghai Iron and Steel, Ganglu, Qinhuangdao Hongxing Etc., there are many private steel companies in the region, and the low-end products are homogenized. It is one of the regions with very fierce steel competition in the country. Although there have been loose joint reorganizations in recent years, the progress of substantive integration has been slow. At the same time, the environmental capacity of the Bohai Rim region is limited. Under the constraint of carbon peaks, the pressure of low-carbon transformation is relatively high. Through joint reorganization, the combination of market and technology is an effective way to quickly respond to challenges. It is expected that the regional reorganization of iron and steel enterprises in the Bohai Rim region will make progress in the middle and late period of the "14th Five-Year Plan".

On the whole, during the "14th Five-Year Plan" period, market competition pressure and green and low-carbon transformation are common challenges faced by regional steel companies.

There is the possibility of regional joint reorganization. Promoting regional joint reorganization with an open mind and innovative thinking can "turn enemies into friends" and respond to the increasingly fierce market competition and the challenges of green and low-carbon transformation. Of course, regional reorganization cannot be accomplished overnight. It will experience a process from looseness to compactness to substantial reorganization.

(3) 5 large cross-regional and cross-ownership enterprise groups

Five large-scale steel enterprise groups across regions and ownerships, each with a production capacity of 40-80 million tons (of course, it is not ruled out that another large-scale enterprise group of 100 million tons will appear. For example, Jianlong put forward that "to achieve Jianlong Group Steel in the next 5 years" The target of 100 million tons in the sector").

Judging from the current production capacity of iron and steel enterprises, the crude steel output of Hegang Group and Shagang Group exceeds 40 million tons, and that of Jianlong Group and Shougang Group is 30-40 million tons, both of which have cross-regional and cross-ownership characteristics. Among them, Hegang Group is more regional in China, but it has a higher degree of internationalization; Shagang Group has entered the field of special steel in recent years, paying more attention to specialization; Jianlong Group is a typical cross-regional and cross-ownership expansion, while taking into account both horizontal and vertical And the layout and internationalization of the whole industry chain. In addition, the Delong Iron and Steel Company (Delong Steel + Xintian Steel Group) has a production capacity of about 30 million tons, which has the potential to become a large-scale enterprise group; if Hunan Valin Group further implements its out-of-province layout, it can also be used by large-scale steel companies. Occupy a place in the group.

(4) N "specialized, special, new and excellent" enterprises

N "specialized, special, new and excellent" enterprises mainly refer to a number of small and medium-sized enterprise groups characterized by specialization, refinement, characteristic, innovation and strong market competitiveness, with emphasis on specialized production and refined services , High market share, high value-added products, high technological innovation capabilities and better cost control capabilities. Such as CITIC Special Steel Group, Qingshan Group and other compound enterprise groups; Shiheng Special Steel, Fangda Special Steel, Jiyuan Steel, Longteng Special Steel, Yongxing Special Steel and other specialized production enterprises. The scale of the enterprise is small, but the product market is occupied. Higher rates and strong profitability; there are also seamless pipes, stainless steel, special steel and related enterprises of industrial chain extension, which are more focused on the refinement, specialization and innovation of services. N "specialized, special, new and excellent" enterprises are a useful supplement to the above-mentioned 1+4+5 large-scale steel group market.

3. Conclusion and suggestions

Joint reorganization, especially regional joint reorganization, is an inevitable requirement for the steel industry to accelerate its adaptation to the new development stage, implement new development concepts, and build a new development pattern. It will also bring corresponding changes and influences on the future development of the steel industry. However, joint reorganization is not a "Language match". What China's steel industry needs more is a substantial joint reorganization that is beneficial to both parties to the reorganization and can achieve complementary advantages, rather than a formal joint reorganization for the unilateral pursuit of industrial concentration. The joint reorganization must be subject to the industry situation, market conditions, and corporate development strategies. The fundamental purpose is to promote structural transformation and upgrading, improve market voice, corporate competitiveness and profitability, and lay a solid foundation for building a strong steel country in an all-round way and leading the world in steel.

For local governments at all levels, it is recommended to actively encourage and guide iron and steel enterprises to carry out substantive joint reorganization, complement each other's advantages, reduce costs, enhance the right to speak, strengthen resource protection capabilities, grasp market initiative, and improve risk resistance. At the same time, we must avoid blindly pursuing industrial concentration and scale effects, and sacrificing or devouring some "specialized, new and excellent" enterprises.

For iron and steel enterprises, it is recommended to accurately grasp the relevant policy requirements and industry development trends, and actively participate in the tide of joint reorganization and mixed reform on the premise of doing a good job of strategic research, so as to enhance their competitiveness while expanding their living space. At the same time, we must also pay attention to vertical extension and continue to move towards the middle and high end of the value chain.

(Author: Metallurgical Industry Information Standards Institute Party committee secretary, President Zhang Longjiang) Source: World Metal Bulletin