In April this year, the national development and Reform Commission and the Ministry of industry and information technology conducted research and deployment on the "looking back" of steel capacity reduction and reduction of crude steel output in 2021, and clearly put forward the goal of "ensuring the year-on-year decline of national crude steel output in 2021". According to the data of the National Bureau of statistics, in the first half of this year, China's crude steel output reached 563.33 million tons, a year-on-year increase of 11.8%. Among them, the crude steel output reached 93.88 million tons in June, a year-on-year increase of 1.5%. Although as of mid July, the average daily crude steel output of China's key steel enterprises has begun to decline in ten days on month, the pressure of crude steel reduction in the second half of the year is still large. Therefore, industry researchers, market analysts and representatives of steel traders were invited to express their views on how to achieve the target of crude steel output reduction, how to deal with the market and the current problems, so as to provide new ideas for market people's views on this issue.

Steel enterprises should consciously control the release of production capacity

The goal of reducing crude steel output put forward by the state at the beginning of this year is to make the iron and steel industry change its development concept and transfer from high-speed growth to high-quality development.

Recently, several provinces across the country have held meetings to reduce steel production, and some regions have issued notices to limit production. Anhui, Gansu, Shandong, Zhejiang, Hunan, Shanxi and other provinces all require that the annual steel output this year should not exceed 2020. However, the iron and steel output of the above-mentioned provinces in the first five months of this year increased by 49400 tons to 2638700 tons compared with the same period last year. It is conceivable that the pressure of production reduction in the second half of the year.

The author believes that steel enterprises should consciously control the release of production capacity. By limiting and reducing production, steel enterprises can reduce the use of raw fuels such as iron ore, coke and scrap, which is expected to force the price of raw fuels to decline, so as to reduce the production cost of steel enterprises. At the same time, it can also alleviate the market supply pressure, promote the balance between supply and demand, and is conducive to the stable operation of the market.

In addition, steel enterprises should resist vicious competition, bid up prices higher than the cost during the rapid rise of steel prices, and resist dumping behaviors far lower than the cost during the decline of steel prices, so as to jointly maintain the market competition order and promote the healthy and orderly development of the industry.

Production reduction needs to be considered and treated comprehensively

Recently, as the special inspection working group of "looking back" on steel production capacity rushed to Jiangsu and other places for inspection, there are more and more voices on the target of reducing crude steel production in the market.

At present, the policy of reducing crude steel output in Hebei, Shandong, Shanxi, Jiangsu, Anhui and other provinces has been gradually implemented. Steel enterprises in Gansu, Jiangxi, Hunan and other provinces have also taken measures to limit and reduce production, and put forward the goal of "the annual crude steel output in 2021 will not exceed 2020", with the maximum production limit ratio reaching 50%. Targeted measures have been taken to reduce crude steel production from state-owned enterprises to private enterprises, from important iron and steel towns to all provinces in China, which shows the great determination to reduce production.

According to the author's calculation, if China's crude steel output reaches 6.35 billion tons in the first half of last year, it will not reach 1.05 billion tons in the second half of this year. Further calculation shows that the national crude steel output will be reduced by at least 61 million tons in the second half of the year and more than 10 million tons per month. At present, from mid to late June to early July, the average daily output of ten day crude steel according to the statistics of the Steel Association has decreased continuously on a ten day month on month basis, but this reduction is far from the annual production reduction target. Moreover, the reduction of production is accompanied by the rise of steel prices, so it is necessary to promote this work step by step.

This round of pressure reduction is significantly different from the previous one. The previous production reduction was only in some areas, and the total amount of crude steel did not decline. This time, it was a nationwide production reduction, with unprecedented policy and supervision. Therefore, the market's expectation of raw fuels such as iron ore and coke began to weaken and the expectation of steel began to strengthen.

At present, the reduction of crude steel production has had an impact on the market. First of all, the reduction of output has boosted the rise of steel price, the continuous rise of futures price has driven the rise of spot price, and the price of hot rolled coil in some regions is close to 6000 yuan / ton again. In the first half of this year, the high steel price has restrained the downstream demand to some extent. If it rises too fast again in the second half of this year, it will affect the release of demand in the later stage and increase the operating pressure of downstream industries. 

Secondly, from the economic operation data in the second quarter of this year, the domestic economy turned better than expected. Thanks to strong export demand, industrial production was significantly boosted, and manufacturing and infrastructure investment both recovered. Based on this, the author expects that the steel demand will maintain a steady growth in the second half of the year. If there is a serious shortage of supply, it will affect the stability of the industrial chain supply chain. Finally, due to the uneven geographical distribution of steel enterprises, key steel producing areas are facing greater pressure to reduce production. Hebei, Shandong, Liaoning, Shanxi and other "big steel producing provinces" need greater policy support.

In the long run, reducing output is conducive to the competitiveness of large steel enterprises, industry merger and reorganization and resource redistribution, but it may aggravate the contradiction between supply and demand in a certain period of time, resulting in rising steel prices and increasing cost pressure on downstream enterprises. Therefore, the author believes that reducing crude steel output needs to be considered and treated comprehensively: it is necessary to improve the market price operation mechanism and strengthen supervision; Increase the import of iron, encourage the return of finished timber export resources and give priority to domestic supply; Strengthen the research and development of low-carbon steelmaking process to meet the needs of domestic economic development.