"The whole industry has been actively responding to the epidemic through the implementation of central measures, and the epidemic has had little impact on the steel industry."

"This year, next year, the steel industry 'bread' is still there."

"At present, China's steel industry is not a issue of scale, but a matter of how to be powerful. It is suggested that the concept of “Iron and Steel Power” can  be written into the 14th Five-year Plan.”

"In the future, Shagang should accelerate the promotion of core competitiveness."

……

The end of July in Zhangjiagang, Shen Wenrong, Chairman of the Board of Directors of Shagang Group, put forward a series of opinions in an interview with China Metallurgical News and China Iron and Steel News, just like a cool breeze in a hot summer, blowing off the impetuosity of the people, so that the light of rationality and soberness aspersed to the steel industry

"This year, next year, the steel industry 'bread' is still there";

In the first quarter of this year, affected by the epidemic, the steel industry and the entire national economy were affected to varying degrees, including logistical difficulties and inventory increase. How do you view the impact of the epidemic on the industry in the first quarter?

"In fact, through the implementation of the central government's measures, the whole industry has responded positively. The epidemic has had little impact on the steel industry. On the contrary, China-US relations have had a greater impact. "While the steel industry increased some inventories in the first quarter, even without the outbreak, the first quarter itself was the low point of demand in a year, and inventories will have to be increased." Shen Wenrong thinks.

Figures from the National Bureau of Statistics show that in the first quarter, China's pig iron and crude steel output were 199 million tons and 234 million tons respectively, up 2.4 percent and 1.2 percent year-on-year. According to the statistics of China Iron and Steel Association, in the first quarter, the operating income of key large and medium-sized steel enterprises was 950.092 billion yuan, down 5.31% on a year-on-year basis. The total profit reached 18.322 billion yuan, down 50.84% year-on-year.

"Combined with a 9.7 percent increase in steel imports and a 16 percent fall in exports in the first quarter of this year, it is estimated that more than 20 million tonnes of steel remained in the domestic market. Therefore, from the perspective of inventory, compared with last winter, it has increased a little, but compared with the same period of last year, after deducting the change of import and export factors, the actual inventory has not increased much, and is still at a reasonable level. Going into the second quarter, inventories have been coming down." Said Mr Shen.

"But why have profits fallen so much? Because the increase in mining price squeezed some of the profits. The China Iron ore Price index (CIOPI) averaged 327.2 points in the first quarter, up 35 points or 12.0 percent from a year earlier. At 1.6 tonnes of ore per tonne of iron, iron ore producers took almost 20 per cent of the profits, while steel prices fell by only 5.0 per cent." Shen Wenrong analysised.

So, from the perspective of the whole year of 2020, how will be the development trend of the industry?

Shen Wenrong pointed out that the steel industry's performance in the first half of the year exceeded expectations thanks to the precise control of policies, the strong industrial foundation laid by the Reform and Opening-up and the firm confidence in the healthy development of the economy.

"How can you say China's economy is depressed after consuming so much steel?" Shen Wenrong asked.

He believes that the first half year, the second quarter is better than the first quarter; the third and fourth quarters of the second half are certainly better than the first. If you look at the 10-year time period, 2020 is a normal year.

From the perspective of industry profit in the first half of the year, the black metal smelting and rolling processing industry realized an operating income of 3186.04 billion yuan, down 3.8% compared with the same period last year. The total profit reached 84.08 billion yuan, down 40.3% year-on-year.

"In the first half of the year, the tonnage profit of Chinese steel enterprises was between 100 yuan and 200 yuan, lower than last year, but still within a reasonable range. Compared with ArcelorMittal, the world's largest steelmaker, which lost $1.68 billion in the first half, China’s steelmakers are doing well." Shen Wenrong thinks.

He pointed out that in terms of national GDP, the first quarter decreased by 6.8%, and the second quarter grew by 3.2%. If the annual growth rate is estimated at 3%, the third and fourth quarters will grow by 5% to 6%, which can basically confirm that the economy will perform better in the second half of the year than in the first half.

"However, still some uncertainty in the last quarter compared to the third. This uncertainty has to do with the pace of the resumption of work and production in the world economy and the extent to which the world economy's influence on China's economy is expanding." Shen Wenrong emphasized.

In his view, the uncertainty of the fourth quarter mainly includes several aspects: one is to see the excess inventory can get rid of in third quarter, and the fourth quarter inventory can be further reduced. Second, the export is blocked and the import is increased, which makes it more difficult to destock. Third, the low price resources in the international market, including billets and steel, enter China leading to the decline of domestic prices. Fourth, there is great uncertainty about the degree of tension between China and the United States and the progress of the resumption of work and production in other countries. Fifth, with the further release of domestic production capacity, the steel market oversupply situation will be more severe.

According to the data from Customs Administration, from January to June, exported 28.704 million tons of steel, down 16.5% year-on-year. China imported 7.343 million tons of steel, up 26.1 percent year-on-year. From the perspective of inventory, according to the monitoring of China Iron and Steel Industry Association, in late June, the statistics of key steel enterprises steel inventory were 13.62 million tons, 330,000 tons more than the end of May, an increase of 2.5%; Year-on-year growth was 2.39 million tons, or 21.3%.

In terms of production capacity, it is estimated that nearly 80 million tons of crude steel capacity will enter the market in 2020, which may lead to oversupply.

"Therefore, the price of steel (long products) in the third quarter may fluctuate between 3,800 to 3,900 yuan/ton, or even up to 4,000 yuan/ton. But the fourth quarter is likely to see a significant decline, and even a drop of 1,000 yuan/ton is not impossible." Shen Wenrong said.

"Of course, the fourth quarter would not be worse than the first quarter of this year if these factors were not so severe." On an annual basis, next year will not be worse than this year, or even better." Shen Wenrong pointed out.

He explained his judgment on three main grounds: first, the rest of the world is returning to work; Second, domestic policies to control production capacity have been effectively implemented; Third, other parts of the world, such as Europe and Southeast Asia, have rebounded strongly from negative growth.

"A few days ago, the World Bank predicted that China's economic growth would rebound to 7.9% in 2021. Even if we were a little more conservative, next year would be better than this year at 6.5%. The world economy needs steel for recovery, and China needs steel for rapid economic growth. It's safe to say that the steel industry has ‘Bread’ for both this and next year!" Shen Wenrong emphasized.

"Write the concept of 'Iron and Steel Power' into the 14th Five-year Plan"

2020 is the final year of the 13th Five-Year Plan, as well as the 14th five-year Plan. General Secretary of the CPC Central Committee, National Chairman and Chairman of the Central Military Commission (CMC) Xi Jinping recently issued an important instruction on the formulation of the 14th Five-Year Plan, stressing that we should open to good advice and draw on the wisdom of all.

"The development of China's steel industry today is no longer a matter of 'big scale', but of how to make it 'powerful'. Nor can it be said that China's steel is not power at all, more than 98% of the steel products self-sufficiency rate can not be said not power. The question is how to be more power? We need to write the concept of 'Iron and Steel power' in the 14th five-year Plan." Shen Wenrong suggested.

So what makes a steel power?

First, we will achieve full coverage of medium and high-end products. All the products needed by the country should be integrated into a complete set, and the R&D and production tasks should be carried out to each specific enterprise.

"What is the difference between Chinese steel and foreign steel? What varieties can't be produced? With the support of national policies, we can do it. The steel industry has the responsibility to make manufacturing strong." Shen Wenrong pointed out.

Second, consider the raw material strategy at the national level. The country is self-sufficient in coal and coke, but imports 70 to 80 percent of its iron ore, most of it from Australia.

Data released by the General Administration of Customs showed that China imported 659.555m tons of iron ore and its concentrate from January to July, up 11.8% from 589.775 million tons in the same period of last year, of which more than 60% was imported from Australia.

"Importing iron ore from Australia is very much at the mercy of others. Companies cannot solve this problem on their own. It must be considered at the national level." Shen Wenrong pointed out. His advice:

First, to encourage the development of domestic iron mines, do not "one-size-fits-all" shut down, to develop reasonably.

Second, we should focus on the international market and control the iron ore production capacity of 200 to 300 million tons per year in other countries. For example, in resource-rich countries such as South Africa and Brazil, it is suggested that all kinds of domestic enterprises invest and operate together, from mines to railways to wharves.

Third, we should encourage the import of resource products such as scrap and coking coal. Scrap is a resource that can replace part of iron ore import; The quality of coking coal in the international market is better than that in China. Making full use of international resources is conducive to strengthening the cost competitiveness of domestic steel enterprises.

 

"Right now, the price of mineral powder is controlled by others. Singapore's Platts index USES 1% of the shares to determine 99% of the price of mineral powder. We should stipulate that only steel mills can order ore powder and use the China index to price it." Shen Wenrong pointed out.

It is understood that platts iron ore index is the main pricing benchmark, the data sources include telephone inquiries, data collected from miners, steel mills and traders, whether the actual transaction takes place or not, there is a huge speculation factor in it.

"With the efforts of the country, if the mine price is reduced by $20 per ton, 1.2 billion tons of imported mines per year, that's $24 billion, equivalent to the money per year, can be built into an extremely large mine." Shen Wenrong sighed.

Third, reasonable arrangement of capacity adjustment, put an end to unreasonable relocation adjustment.

One is that if the steel mills fail to protect the environment locally, they will also pollute elsewhere. "Such a move is not necessary. It should be closed on the spot and transformed. Because as a result of the relocation, capacity has increased even further." Shen Wenrong pointed out.

Second, do not control the BOF and develop electric furnace, BOF can still eat scrap. Now about 270 million tons of scraps are produced annually, of which 260 million tons are consumed by BOFs. BOF"eat" scrap is more economical, and more cost competitive, lower than electric furnace cost at least 600 yuan/ton ~700 yuan/ton.

"This is not the time to develop EAFs. 10 years later, the output of scrap will increase to more than 300 million tons/year, and the consumption of steel will be reduced to 500 million tons/year ~ 600 million tons/year. Now the development of the EAFs, in fact, is to increase production capacity. Shen Wenrong thinks.

Fourth, encourage and guide existing qualified enterprises to transform and upgrade locally, adjust and upgrade their product structure, and carry out energy conservation and environmental protection transformation and intelligent transformation in local.

"In short, to further enhance the core competitiveness of enterprises." Shen Wenrong emphasized. He pointed out that the steel industry needs to change its mindset, raise awareness and redouble its efforts on the existing basis to avoid self-sabotage so that the steel industry can grow more healthily and become stronger.

Shagang "14 five-years" will accelerate the promotion of core competitiveness

In the first half of this year, in the face of the sudden outbreak of CoVID - 19 and complicated situation at home and abroad, Shagang Group will make a unified deployment centering on "further improvement of high-quality development, further tackling of safety and environmental protection, further consolidation of basic management, and further breakthrough of reform and innovation". On the basis of paying close attention to epidemic prevention and control, ensuring supplies, smooth transportation, and stable production and operation; With safety and environmental protection as the focus, the list of performance of duties should be sorted completed and promoted; competition, evaluation and listing should be published and the index should be ranked. In this way, production should be highly productive and efficient, operation should be controlled, projects should be accelerated and standardized, costs should be reduced, expenditures should be cut, potential should be explored and efficiency should be enhanced, so as to maintain stable and healthy development.

"It's not as good as last year, but it's still good. In terms of profit per ton of steel, Shagang is at the level of 300 yuan/ton ~400 yuan/ton. If factors of financial cost and depreciation rate are deducted, Shagang is about the same as the private steel enterprise with the highest profit per ton of steel in the industry. Shen Wenrong said.

He introduced, Shagang took three measures in the first half of the year: one is to increase the intensity of product structure adjustment, more production in heavy plate, increase the output of Castrip products; Second, more production with good benefit, less production with little benefit, no production with no benefit, completely according to market demand optimization scheduling; Third, we should pay close attention to internal adjustment, promote the use of robots, and improve labor productivity.

According to statistics, in the first half of this year, Shagang Castrip products export delivery about 90,000 tons in total, of which the specification 0.9mm and below accounted for nearly 70%, marking the stable export  of Shagang Castrip products to achieve a large number of extreme-dimensioned specifications.

Shagang use the favorable opportunity since the second quarter market situation improve full production horsepower, iron, steel, rolled products output target basically achieve "more than half the time, more than half the task".

At the same time, Shagang contend for to be the pacesetter on ecological construction and development. By the end of June, Shagang had completed 69 projects of a new round of environmental protection bid upgrading with a total investment of 8.5 billion yuan, including sintering and flue gas desulphurization and denitrification of power plants, inndoor type stock yard, new addition of dust remover, bid upgrading and transformation, cleaning and diversion, etc., all of which cost more than 280 yuan per ton for environmental protection operation.

"When the export was blocked, Shagang made a good market analysis according to the change of market price, seized the opportunity to import a large number of billets, and achieved good results." When talking about market operation, Shen Wenrong gives an example.

It is reported that China imported 2 million tons of billets in the first half year, among which Shagang imported about 800,000 tons.

"These imported billets are more cost competitive than the billets produced by the enterprises themselves." Shen Wenrong introduced.

In addition, Shagang also exploit potential to increase efficiency, reduce cost and save expenditure.

For example, Anyang Yongxing has kept the stable and high yield of its three blast furnaces by implementing the operation regulation, standardizing the operation on furnace and implementing the standard analysis. Dongbei Special Steel Company adopted production and marketing structure adjustment and reduce costs and savings to tap potential and increase efficiency as the main line, to promote production and operation, to achieve overall profit; Huaigang through production optimization, production target tackling, worker quality improvement and other measures, daily and monthly production of some workshops have broken the historical records for many times.

"We have worked tirelessly and achieved good results without resorting to a burst of activity." Shen Wenrong said.

He believes that at present, the recovery of various industries is accelerating, China's economy has shown strong resilience, and the steel industry will usher new opportunities for development. Based on this, the main target of Shagang "14 Five-year" is to do well and to do fine, accelerate the promotion of core competitiveness.

First, further optimize and strengthen the product structure, ranking the forefront of the industry; Further improve the level of environmental protection, become an ecological development leading enterprises.

Second, the labor productivity is further improved to 2000 tons/person through intelligent and robot use, even 2,500 tons per person per year. And continue to improve the innovation ability to maintain the industry leading level.

Third, continue to become more competitive steel enterprises through complementary advantages reorganization.

"In terms of merger and reorganization, Shagang's main consideration is to become a better enterprise by complementing each other's advantages and not pursuing scale expansion unilaterally. The prerequisite for a private enterprise to become big is that it knows its own abilities." Shen Wenrong thinks.

It is reported that after the reorganization of Shagang and Dongbei Special Steel, the implementation of the "More Special, More Superior" strategy, through the input of management and talent, technology, resurrected Dongbei Special Steel in rapid, and turn a profit from the restructuring of the second month; At the same time, in the product structure, fill the shortage of high-end special steel of Shagang Group.

"Enterprise development strategy is actually a word: Do Your Best." Shen Wenrong said.