Baosteel daizhihao: the supply side reform has given the iron and steel industry three years to prepare for a tight life.
"today's rebar prices are so high that if the ground steel enterprises are not destroyed, they will now make a very good profit." Dai Zhihao, Secretary of the Party committee and chairman of Baosteel (600019), a leading domestic listed steel enterprise, said in an interview with surging and other media after the recent fourth Baosteel auto panel evi forum
Dai Zhihao talked about the impact of the supply side reform of China's steel industry launched in 2016 on China's steel industry. After the "freezing period" in 2015, the "high leverage" can explain the difficulty of the survival of the steel industry from a certain point of view. In 2016, the average asset liability ratio of member enterprises of Sinosteel association was 69.6%, 13.8 percentage points higher than the average level of Industrial Enterprises above designated size. In the previous 16 years, the average asset liability ratio increased from 48.92% to 69.60%
"the actual figure may be higher. If it continues for another three years, it may cause systemic financial risks, that is, nearly trillion assets will form non-performing assets." Dai Zhihao said, "we can imagine that if there is no steel supply side reform, the whole industry will continue to expel bad money from good money as it was in 2015, so what is the scene today?"
the most intuitive impact of supply side reform on the steel industry is the rebound in steel prices. At the end of 2015, the steel index fell to nearly 1900 yuan/ton, the lowest in recent years. Second, the friction force of the force measuring piston in the oil cylinder increased or stuck. One year later, the index rebounded to about 3500 yuan/ton. At the end of 2017, it once stood at a high point of 5000 yuan/ton. In October, 2018, the steel index basically stabilized at more than 4800 yuan/ton
the performance of listed steel enterprises also generally "changed from rain to sunshine". In 2015, when the whole industry lost money, even the leading Baosteel shares, the net profit attributable to shareholders of listed companies was only 1.013 billion yuan, a year-on-year decrease of 82.51%. In the first half of 2018 alone, the net profit was 10.009 billion yuan. Valin steel (000932), a state-owned enterprise in Hunan Province, is a "model" for turning losses into profits. In 2015, it lost nearly 3 billion yuan and once planned the asset restructuring of "steel for finance". In July 2017, it announced that it would stop returning to the main industry of steel, with a profit of 4.121 billion yuan that year and a net profit of 3.439 billion yuan in the first half of 2018
after nearly three years of industry supply side reform, combined with the current uncertain macroeconomic and international trade environment, Dai Zhihao said, "supply side reform has actually bought us three years and made some preparations for the next tight days."
the core of steel supply side reform is three things
in 1996, China's crude steel output exceeded 100 million tons, ranking first in the world. China's steel production accounts for half of the world's total for more than 20 years. In 2015, China's crude steel production fell to 840 million tons, a decrease of 19.1798 million tons over the previous year, a year-on-year decrease of 2.33%, which is the first decline in China's crude steel production since 1981
however, the once-in-25-year decline did not alleviate the contradiction between supply and demand. The apparent consumption of crude steel fell by 5.44% year-on-year, a speed that made the reduction of output out of reach
in that year, China's steel exports also soared by 19.9% to 112 million tons, setting a new record. This export volume exceeded Japan's crude steel production in 2015, 1.4 times that of the United States and 2.6 times that of Germany. A large number of Chinese steel products pouring into the international market also make China face more international trade frictions and accusations
Dai Zhihao said that under such a background, the core of supply side reform is three things, namely, strictly controlling new production capacity, cracking down on steel bars and clearing environmental protection
"in the past 40 years of China's reform and opening up, demand has not been a problem. China's steel industry has always been a problem on the supply side, and the supply side has been growing uncontrollably and savagely. The first thing to do in the supply side reform is to control the new production capacity by means of thunder and seize this bull's nose."
as for steel bars and environmental protection, "these two bulls have basically solved the problem that bad money drives out good money in the industry for many years." Dai Zhihao mentioned that enterprises such as Baosteel actually invested a lot in environmental protection, but many small steel mills did not do a good job in environmental protection, and some large steel mills did not do a good job in environmental protection. Even if they made a lot of profits, they still did not invest in environmental protection. "This is bad money driving out good money."
only to crack down on the ground bar steel, which was first launched from Jiangsu, Hebei and other places in 2016, and then the rectification action was extended to the whole country. By the end of April 2017, more than 500 "ground bar steel" enterprises had been cleared up in all provinces and regions across the country, involving a production capacity of 119 million tons
at the beginning of 2016, the senior management proposed a total reduction plan during the "13th five year plan" 500 million tons of crude steel capacity. Excluding "ground bar steel", the crude steel production capacity was actually reduced by more than 65million tons in 2016. It is expected that during this visit, the two countries will not only sign a large-scale cooperation project, but also reduce the crude steel production capacity by more than 55million tons in 2017, with a cumulative reduction of more than 120 million tons in two years, and more than 80% of the target task of the upper limit has been completed in two years. It is planned to reduce crude steel production capacity by 30million tons in 2018
however, not all industries are enjoying the dividends of supply side reform. "If you are not the object of supply side reform in the past three years, your profitability will be very good. Of course, it is not good as long as you are an iron and steel enterprise. If you are the object of supply side reform and are restricted by these rules, you may face the disaster of peak collapse in a very short time." Dai Zhihao said
"we have changed from lucky to normal"
Baosteel's flagship product over the years is automotive panels. Especially in the past 20 years, with the rapid development of China's automotive industry and becoming the world's largest manufacturing country and largest consumer country, Baosteel Co., Ltd., which has selected automotive panels as a strategic product, has also enjoyed high returnsFrom 1988 to now, Baosteel automobile plate has experienced three main stages: localization substitution, quality assurance and leading automobile steel. Baosteel Co., Ltd. has provided more than 80 million tons of automobile plates for China's automobile industry. In 2017, Baosteel sold 12.25 million tons of automobile plates, ranking among the top three in the world for the first time. Automotive steel as a whole accounts for more than 50% of China's market share
looking at the current Chinese automobile industry, if it falls into "zero growth" or even "negative growth", will the advantage of Baosteel's automobile plate disappear
"we had a good strategic layout of automobile panels before. We enjoyed a high profit stage. When this happiness comes, we can't refuse it, but we have been using this stage to lay out our second and third growth points." Dai Zhihao said, "when I returned to Baosteel five years ago, I took the initiative to hope that the contribution of auto panels to the company's profits would be reduced. This is actually healthier." In July, 2013, Dai Zhihao began to serve as the general manager of Baosteel
"as a company, we never dare to put eggs in one basket." Dai Zhihao also said, "at present, this situation is still an acceptable situation, not the worst situation."
Dai Zhihao said, "in my opinion, today's automobile industry and steel industry are the beneficiaries and witnesses of the rapid development of China's manufacturing industry in the past 40 years of reform and opening up, and have made great contributions. At this time point today, they have entered a stage of almost zero growth, which is also the epitome of China's entire economy from high-speed development to high-quality development."
Dai Zhihao stressed that this is a normal phenomenon. Whether China's automobile industry or China's steel industry, it is from luck to normal. Based on his close relationship with the automotive industry, he also expressed some opinions on the automotive industry, "we also have some feelings that steel is the 'grain' of the industry. We are very clear about who buys us' more grain 'and who buys us' less grain', as well as the sensitivity to price. We can clearly see that there is a structural differentiation within the automotive industry."
"before, the whole automobile industry was a lucky man, that is, as long as we produce cars in China, the high probability is to make money. In my opinion, this itself is a special history and a special stage." Dai Zhihao believes that if an industry is in normal and reasonable competition, "It should be that 60% - 70% of the people earn a low and reasonable return, and excellent enterprises earn an excess profit, 10%, 20%, and even 30% of the people lose money when the industry is bad. In this way, there will be an automatic market entry and exit mechanism. From this point of view, the rapid growth of the automotive industry also forces Chinese enterprises to produce by themselves, and it is found that their own plastic extrusion machinery has entered the high-quality development." Stage of. "
"in the future, we will rely more on efforts and innovation." Dai Zhihao said