Guangzhou Steel News: current predicament facing the Chinese steel industry analysis

Guangzhou Steel News: current predicament facing the Chinese steel industry analysis

1, the economic downward pressure transmitted to the steel industry and the steel industry

Currently released in June 2015, HSBC China manufacturing PMI (purchasing managers index) the final value of 49.4, lower than expected 49.6 mall, slightly higher than the 5 month-end value of 49.2, but the value for four consecutive months below 50 Wing dry line. June output index rose slightly, new orders and new export orders index back above 50; but manufacturers continue downsizing, resulting in the employment index fell to 46.6, the lowest since February 2009 level. In addition, all of the industrial producer price index in May (PPI) representing a decrease of 4.6%, lower 39 consecutive months, metallurgical industry PPI has continuously decreased 43 months.

2015 1--5 year, China produced 459.97 million tons of steel, an increase of 2.2% over the previous year growth rate down 3.87%, of which 11.48 million tons of seamless steel pipe output value, representing a decrease of 6.5% over the previous year growth rate down 9.97%. June steel prices showed accelerated down trend, closing on June 26, the steel composite price index 67.66, which is 68.24 flats, longs to 67.71, seamless steel only 65.60.

In May, the total above-scale industrial company profit 520.71 billion yuan, an increase of 0.6%, two percentage points higher than the growth rate slowed in April, the first five months of this year, total industrial companies to reduce profit by 0.8% year on year, a decline over the previous four months narrowed 0.5 percentage points, of which ferrous metal smelting and rolling processing industry, representing a decrease of 11.5% of total profit. 2015 first quarter, China Steel Association statistics, 101 steel company lost 987 million yuan, with a year-on-year comparison of reduced losses and 70.39%, of which the main business profit was -110.53 million, up by loss of 45.04%, which indicates that China's steel The company main business profitability is further reduced. Although tons of iron ore prices lower costs associated with reducing the rate of about 500 to 550 yuan / ton, but the price of steel to reduce the rate of about 700 yuan / ton. Steel high-end merchandise mall due to less capacity, the homogenization of competition even more intense. In this climate, the steel industry too, where steel industry experienced an unprecedented difficult. Guangzhou Steel

2, the steel industry increased decomposition: seamless pipe output value of high growth and significantly reduced

By 2014, China produced a total of 88.98 million tons steel, an increase of 5.44%, of which 31.37 million tons of seamless steel tubes, an increase of 0.19%, welded steel output 57.61 million tons, an increase of 8.54 percent, seamless steel output has reached a peak plateau region.

Since 2015, China's steel output of China's steel output value higher than the rate of increase, but the seamless steel pipe and welded steel poles apparent decomposition, seamless steel pipe output year on year reduce, and welded steel pipe output sharply contrarian increase.

May 2015 Chinese steel output of 8.07 million tons, an increase of 6.99%, including 2.38 million tons of seamless steel pipe output, down 9.9%, welded steel pipe output 5.68 million tons, an increase of 16.1%; January-May Chinese steel output 36.56 million tons, an increase of 9.04 percent last year, compared with a year earlier, the growth rate increased by 3.49 percentage points, of which the output value of 11.48 million tons of seamless steel tubes, the growth rate decreased to -6.5%, pipe the output value of 25.08 million tons, the output value increase speed was 18.0%. There are 22 categories of steel varieties in nine varieties reduce output, seamless steel output fell after heavy rail and light rail, ranked third; welded steel pipe output growth of 18.2 percent after the special plate, placing him first II. Year-on-year, Chinese steel output growth was 5.55 percent, 3.47 percent output growth seamless, welded steel pipe output growth of 8.83%, although output growth was also higher than the welded steel pipe seamless steel pipe, but not a difference large, both change the situation there is a clear value decomposition trend this year, both the decomposition value reached 24.5%. Wherein the seamless steel pipe output was more substantial drop, which is the first time in the new century.

The above analysis, this year China seamless steel pipe output may be lower than the previous year's level, estimated annual output value is about 29 million tons of seamless steel tubes.

3, multiple pressures facing the steel industry

Chinese seamless steel pipe and medium-sized companies more based on oil, gas, power, coal, gas cylinders and other energy industries with the production of steel-based companies, including state-owned companies dominate seamless.

3.1 adverse effects of seamless oil and gas company's malls upheaval

Large seamless steel pipe company its leading commodities mostly OCTG and oil and gas pipelines, etc., which could have been a high technical content and high added value goods advantage, but because of the drastic changes in the situation in the mall so that these companies reeled.

Since the second half of FY 2014, the oil and gas mall mutation, international crude oil prices fell to the lowest Mall $ 46.83 / bbl, with the original $ 107.68 / barrel comparative drop of 56.15%, based not only on the export of oil, accounting for domestic GDP80% - 90% of Russia, Venezuela and other countries Rui Neila is a heavy impact on the Chinese oil industry has also had a negative impact. 2014 China's crude oil exploration and development reduction, crude oil output of 210.1 million tons, an increase of 0.6 percent, the growth rate down 1.1 percentage points; imported 308.38 million tons of crude oil, an increase of 9.5 percent, more than twice the growth rate of the previous year; make Chinese dependence on foreign oil by 60%, compared with 57% in 2013 increased by about 3 percentage points; 2014 China's natural gas output of 123.41 billion cubic meters, an increase of 6.9%, down 2.2 percentage points. According to the pipe branch expects 2014 domestic OCTG consumption reduced by 15-20%. 2015 OCTG consumption may be further reduced, such as Daqing oil field in 2015 cut crude oil output of 1.5 million tons, will reduce the amount of oil well pipes. In the production of primary commodities OCTG seamless large state-owned companies, both inside and outside the mall due to the sharp decline in demand, order rarely, underemployment, poor company is not only effective, but also a threat to the survival of the company in question. China nearly 1--2 years to reasons known petroleum systems, oil and gas pipeline project delayed construction, oil exploration and mining naturally lag, which is the unskilled factors make OCTG mall lower demand. This of course is a temporary factor, however, in the long run, recoverable reserves of domestic Daqing Oilfield has been approaching the later stages of onshore oil and gas recoverable reserves from the Ordos oil yield as the main force; offshore oil and gas from the offshore continental shelf gradually digging deep-sea transfer; land shale gas reserves, although very rich, but a large scale yet time after the formation of mining. Guangzhou Steel

3.2 boiler tubes mall atrophy of seamless steel pipe company Pondering

2015 1--5 year, the national absolute amount of 2.2187 trillion kwh electricity, an increase of 0.2%. Among them, the thermal power generation capacity is absolutely 1.7393 trillion kwh, down 3.1%; absolute power generation hydro 318.2 billion kwh, an increase of 11.5%; nuclear power, wind power increased more than 30%.

Due to environmental needs and combat air pollution and other reasons, in recent years, thermal power investment decreased, while the rise in green energy investment. 2014 8 September NDRC has approved the Wu Ling Power White City Hydropower Project and Yalong Lianghekou Hydropower Project; together, steady development of wind power, according to the National offshore wind power development in the construction program released in August 2014, and to build 44 offshore wind power plants, has been in the construction of four wind farms started in Fujian Fuqing. National decentralization of the power to approve all power generation projects in addition to nuclear power and large hydro, and wind power, solar-based energy projects, due to the support policy of subsidies, some regions even power surplus, still grab loading plan. More than wind power, hydropower and solar power plants do not use seamless boiler tubes. The use of seamless boiler tubes of coal power project is strictly controlled, countries and Reform Commission in June 2014 approved the Hebei Datang Yuxian only power plant construction projects with a total investment 6.22 billion yuan. Relevant data show that large-scale thermal power plants are prescribed basis having installed desulfurization, denitrification and dust removal equipment, the removal rate of 90%. China's three major boiler factory: East pot, Kazakhstan pot and the pot so on, because the mall atrophy, is not better than the vast majority of boiler manufacturing company. New speed thermal power project is gradually reduced, the demand for high-pressure boiler tube in shrinking.

Nuclear power is green energy, China is currently building 25 nuclear reactors, and reactors under construction worldwide only 68, not only China, but also in the face of global energy transformation, to prevent the formation of air pollution caused by coal-fired respiratory diseases. China is now only 2% of the electricity produced in 24 nuclear reactors from 17 nuclear power plants. Is planned in the construction of nuclear power plants have been built and are expected to dedicate 10% of the share of electricity. Due to Japan after the Fukushima nuclear accident, the construction of nuclear power plants in inland into focus, along with the state has adjusted the pace of development of nuclear power.

As described above, to carry out China's energy construction projects, the further development of hydropower resources potential is limited, due to the constraints of ecological balance; vision of thermal power undertaken by the norms of environmental protection, to reduce the rate of increase; the site of nuclear power plant safety in inland of how to ensure that research is still being; wind power and solar energy to carry out without external factors (such as environmental issues and security issues), but the two energy to carry out the construction of the boiler tube irrelevant. This is the state-owned company on seamless boiler tubes with forward-looking vision of the mall, there should be a cold thought.

3.3 National funding for basic construction of welded steel pipe and other civilian pipe advantageously increased

2015 first quarter gross domestic product increased by 7%, the highest in six years low. Analysis of the first five months of China's total electricity consumption, rail cargo and bank borrowings and long-term observation of the three indicators are considered a barometer of economic trends, although there have been signs of rebound, but the foundation is not solid. Total electricity consumption was 1.6% year on year rate of increase in the same period of the calendar year, only better in 2009 after the outbreak of the international financial crisis, and the same month of data generation zero increase; rail freight in May is representing a decrease of 11.5% It fell to very low levels before history; and long-term borrowing has gone up though, it is worth noting that the company's long-term borrowings decreased 22.8 billion yuan that month. Scale industrial added value and profit figures reflect the situation as well. May scale industrial profit increased by 12.03 billion yuan, of which, investment income increased by 11.61 billion yuan. Thus analysis that, in the second quarter of this tradition start the season, the industrial added value up-weakness, the company achieved profitability rely mainly on investment income, indicating the real economy is still weak.

Steady increase in the key is still stable funding. Since October 2014, the state approved a 35-intensive infrastructure projects, including 28 railway, six airports, a deepwater port and a plurality of roads, UHV transmission projects, with a total investment of about 976.1 billion yuan. May 18, 2015 Development and Reform Commission released six rail and mass transit projects financed approved, with a total contribution of nearly 250 billion yuan. June 23, countries and Reform Commission issued the second batch received approval this month of three infrastructure projects, such NDRC approved in June amounted to 250 billion in infrastructure projects. The national response to the economic downturn and the steady increase pressure on the basic principle of increasing construction efforts, "Rail-based" and other foundation facilities, the downstream demand for shopping malls on the expanded pipe is very advantageous, for example: residential steel, steel stadiums, railway vehicles, containers with pipe, tube transmission tower, urban central heating pipe network, water supply pipes, gas pipeline network and other much-needed pipe, including galvanized pipe, square and rectangular plastic composite pipe and welded pipe. Together, due to advances in improving the quality of welding and material skills, making pipe further alternative a somewhat seamless commodity goods, such as low-mid-range goods, some even a high-end merchandise, such as sleeve (J55, H40, K55, N80, P110, Automotive tube (hydraulic cylinder tubes, etc.), chemical pipe (metallurgical composite bimetallic corrosion-resistant pipe), medium pressure and low pressure boiler tube convention Island nuclear power plant and some pipes, lifting machinery boom low-alloy tubes.

Increased from 5 months of welded steel pipe output status before this year is evident, foundation facilities construction projects greatly boosting the demand for welded steel pipe. Currently pipe mainly concentrated in the high-end merchandise on the seamless, such as oil pipe, high pressure boiler tubes, nuclear power tube, precision tubes, ship and marine engineering tubes, etc., which is a bit high-end merchandise accounted for only less than China's total consumption of steel 10 %. China's steel production with the first level has a world-class, state-owned company produces seamless steel device is equipped with next level, with steel production process and skills progress, repeat the formation of high-end steel construction goods surplus more serious, Due to the narrower scope of application of the mall's high-end merchandise, even more intense competition, into a red sea.

3.4 foreign trade situation is worsening dramatically reducing enable seamless steel pipe exports

May 2015 Chinese steel exports 797,000 tons, 6.7% lower than the same period last year, of which exports 389,000 tons of seamless steel tubes, the growth rate decreased by 24.0%, while pipe exports amounted to 408,000 tons, the growth rate 19.4%. 1--5 May China steel exports 3.854 million tons, an increase of 5.1% in the previous year, of which 1.963 million tons of seamless steel pipe exports, down 9.8% on the year, welded steel pipe exports 1.891 million tons, an increase of 26.8% . Seamless OCTG exports in 60 million tons, compared with 908,000 tons the same period last year decreased by 34%, is the leading cause of seamless steel pipe exports decreased.

China Seamless Steel Tube Company faced pressure at home and abroad two shopping malls. According to the US Energy Information Administration (EIA) Short-Term Energy Outlook latest (STEO) predicts that by 2015, oil prices may drop as much as 30% to 40%, far greater than the impact of the decline in value formed in 2014 as oil prices fall, oil companies in 2015 exploration and mining will cut spending as much as $ 100 billion. Vallourec 2015 outlook malls and performance analysis, the 2015 sales will be severely affected by falling oil prices. In the US, the number of operating rigs directly affected by the WTI oil prices, and by the end of 2014 were more likely to be reduced by 40% to 50%, resulting in reduced demand for OCTG. TenarisUniversity (tenaris) plans to cut output in Mexico TAM plant 10% -15%; Canada Alogma factory layoffs of 180 people; Canada Calgary pipe plant shutdown; US state of Louisiana tube plant shutdown; Italy Dalmine factory layoffs of 400 people ; United States Bay City construction project until the start and stop of Mexico TAM plant capacity expansion of funding by the end of 2016. 2015 forecast global rig count, Central and South America average rig count was 324 units, compared with 19% reduction by 2014; European average rig count is 88 units, compared with 15% reduction in 2014; the average rig count in the Middle East is 373 units, compared with 2014 basic year; the average rig count to 174 stations in Africa, compared with 7% reduction in 2014; in 2015 the Russian average rig count decreased by 10% compared with 2014. TenarisUniversity quarterly forecast in the first quarter 2015 the global OCTG consumption of 12 million tons, compared with 17.1 million tons in 2014, reducing 5.1 million tons, a decline of 30%.

Since the global financial crisis, trade protectionism against China on seamless international has intensified the trend, since 2009, China produced OCTG basic can not enter the mall in North America and Europe and other developed countries, in 2014 Russia, Belarus, and Kazakhstan also initiated anti-dumping on Chinese seamless steel pipe, seamless steel pipe exports to make these areas substantially reduce the number of more than 40%, and national and regional trade remedy expanding.

As described above, due to domestic and foreign mall downturn, China Seamless Steel Tube Company has encountered unprecedented difficulties, the past two years, a seamless steel pipe company discontinued some SMEs, the closure, approximately 50 bankruptcy or received such as Jiangsu original Sim-Royce is a steel company had OCTG seamless production mainly of large companies, because of the mall from the previous year, basically in a shutdown, currently is taking bankruptcy proceedings.

Seamless steel companies face heavy pressure from many aspects, only take the initiative to adapt to the "new normal", focusing on structural adjustment and transformation and upgrading of the company, taking the road of innovation and quality and efficiency of the drive to carry out the. But the upgrading of structural adjustment and transition is not an overnight thing, but a long and arduous process, government, industry and companies must be prepared to long-term psychological preparation and careful contingency measures. For example, large-scale thermal power as long as doing environmental protection, due to the lower price of coal is feasible and safe on the economy, the government on energy policy has room for adjustment on the oil issue, and increase efforts to develop offshore oil and gas, but also energy policy steady Important measures in a progressive. In short, structural adjustment, in the government "toolbox" There are a lot of tools reserves. The company also timely follow-up. Guangzhou Steel