16 Years Manufacturing Experience

Five years of capacity reduction, steel weight-loss look back

Recently, the National Development and Reform Commission and the Ministry of Industry and Information Technology announced that they will organize a nationwide “look back” inspection of steel capacity reduction and reduction of crude steel output in 2021. Earlier, Xiao Yaqing, Minister of Industry and Information Technology, also said that around the “dual carbon” goal, it is necessary to resolutely reduce the output of crude steel. During the five years of reducing production capacity, the steel industry is facing new changes and challenges.

Five-year slimming “look back”

“Starting from 2016, it will take five years to reduce the production capacity of crude steel by 100 million to 150 million tons.” This is the work target previously set forth in the “Opinions of the State Council on Resolving Excessive Capacity in the Iron and Steel Industry to Realize Difficulty Development.

On March 1, Xiao Yaqing introduced in a press conference that since 2016, the strategy of “three removals, one reduction and one supplement” has made significant progress in reducing steel production capacity, which has already compressed 170 million tons of steel production capacity. It is understood that the total crude steel production capacity that has withdrawn from “zombie enterprises” has reached 64.74 million tons.

In order to better carry out the next stage of capacity reduction, in 2021, my country’s new version of the implementation of steel capacity replacement measures and steel project filings and other important documents will be issued to ensure that the total steel production capacity is only reduced.

Controlling the replacement ratio is an important means to achieve the organic combination of prohibition of new production capacity and structural adjustment. According to data, since the implementation of the Implementation Measures for Capacity Replacement in the Iron and Steel Industry in 2018, as of 2020, 16.25 million tons of steel production capacity has been withdrawn, with a net exit of 26.3 million tons, with an overall exit ratio of 1.15:1.

Mergers and reorganizations are also progressing steadily. Last year, China Baowu successively reorganized Maanshan Iron and Steel and Chongqing Iron and Steel to expand its territory. Jiangsu Xuzhou plans to optimize and integrate 18 iron and steel enterprises to form 2 large-scale iron and steel conglomerates within the year, and achieve a reduction of more than 30% in steel production capacity by 2020.

The previous goal of overcapacity reduction has been achieved. This year’s “retrospect” of steel decapacity reduction will focus on the inspection of the implementation of steel decapacity work and rectification in all relevant regions since 2016. The key is to resolve excess steel production capacity and crack down on “districts”. The shutdown and withdrawal of smelting equipment involved in “Steel”.

Qin Yuan, an economics expert, told a reporter from Beijing Business Daily that in the process of reducing steel production capacity in the past five years, “floor steel” has been cleared out and completely withdrawn from the market. In addition, some of the “zombie steel companies” were cleared, and the other part was revived after integration. The concentration of the steel industry has continued to increase, and the assets and liabilities of a large number of steel companies have also been improved and repaired.

Despite the obvious results, the Development and Reform Commission and the Ministry of Industry and Information Technology also pointed out in the news that some deep-seated contradictions in the industry have not yet been fundamentally resolved. At the same time, with the improvement of the benefits of the steel industry, some localities and enterprises have the urge to blindly construct steel projects, and consolidating the achievements of capacity reduction are facing new challenges. The purpose of this work is to guide steel companies to abandon the extensive development method of winning by quantity and promote the high-quality development of the steel industry.

Regarding the remaining problems, Qin Yuan analyzed that with the clearing of poor enterprises, the profits of the entire industry are improving, and the desire of enterprises to increase production is relatively strong. Although the trend of integration is developing, it also means that integration becomes more difficult.

It is understood that this work will also cover the construction and commissioning of steel smelting projects, as well as the implementation of rectification and rectification of problems found in previous inspections. And this year’s crude steel output reduction work will focus on reducing the crude steel output of companies with poor environmental performance, high energy consumption, and relatively backward technological equipment levels, so as to ensure that the national crude steel output in 2021 will drop year-on-year.

Increase production while reducing production capacity

Although steel production capacity will be further compressed, Lange Steel predicts that national steel consumption demand will continue to grow in 2021, and China’s total crude steel demand for the whole year may reach 1.1 billion tons, an increase of about 5% over last year. Data from the National Bureau of Statistics also showed that from January to February, domestic pig iron output increased by 6.4% year-on-year, and crude steel output increased by 12.9% year-on-year.

While reducing production capacity while increasing production, it seems like a “strange circle”. In this regard, Xiao Yaqing said that the rapid economic recovery, the resumption of work and production, and the demand for construction in various fields have a very large demand for bulk raw and auxiliary materials, including steel. In addition, the actual per capita use of steel is still in the process of development compared with the total economic output, and there is still a lot of room for development in demand for construction and automobile transportation.

In an interview with a reporter from Beijing Business Daily, Cheng Yu, a senior researcher of the Institute of Understanding, analyzed that the capacity reduction was completed with the expansion of demand. Under the stimulation of the development of the real estate and automobile industries, the demand for steel is still strong, which also creates creation for steel mills. In order to increase investment in a better profit environment, unnecessary production capacity will be scrapped ahead of time.

And this year, making up for shortcomings and infrastructure investment will also serve as an important starting point for stable economic growth, and real estate investment will continue to grow, which will also enable China’s domestic steel consumption to continue to strengthen in 2021. Qin Yuan also believes that the current price of steel is still rising, and policies are also reducing export tax rebates and increasing imports to meet domestic demand.

In addition to market demand, we should also see market supply. Chen Kexin, chief analyst of the Lange Steel Economic Research Center, previously analyzed that the reason why this year’s output is expected to continue to grow is the newly added advanced steel production capacity in recent years. In 2021, some of these new capacity projects will be put into production one after another, and it is expected that there will still be tens of millions of tons. At the same time, the capacity utilization rate is also continuing to increase, so that this year’s output expansion still has new space.

New challenges under the “dual carbon” goal

In order to achieve the goals of “carbon peaking” and “carbon neutrality”, at the end of December last year, Xiao Yaqing made it clear at the National Industry and Informatization Working Conference that the goal of carbon peaking and carbon neutrality should be focused on the implementation of industrial low-carbon actions and Green manufacturing engineering. As an energy-intensive industry, the steel industry must resolutely reduce crude steel output to ensure a year-on-year decline in crude steel output.

In Qin Yuan’s view, the pressure on the steel industry under the “dual carbon” goal needs to be viewed separately: “In terms of carbon peaking, the pressure may not be too great. With the substitution of short processes to long processes, it will actually help. Carbon emission reduction. In the steel production process, there are still many places to reduce carbon emissions, which is why many steel companies set the carbon peak time point earlier than 2030.”

It is reported that the “Steel Industry Carbon Peak and Carbon Reduction Action Plan” has formed a revised and improved draft, and the industry carbon peak target is initially set as: before 2025, the steel industry will achieve a peak carbon emissions; by 2030, the steel industry will have carbon emissions. 30% lower than the peak value, it is estimated that 420 million tons of carbon emissions will be reduced.

Qin Yuan believes that carbon neutrality will put more pressure on the steel industry. “The carbon emission of long-process steel production is unavoidable. This requires a relatively large upgrade of the steel industry’s process. But because the time point is late, it also depends on the steel industry in the process of achieving carbon peaks. What’s the situation?” Qin Yuan told a reporter from Beijing Business Daily.

At the same time, it should be noted that the steel industry in the process of de-capacity is still huge and under pressure. At the 2021 (Twelfth) China Iron and Steel Development Forum held a few days ago, Hu Wenrui, an academician of the Chinese Academy of Engineering, also emphasized: “The iron and steel industry is the industry with the largest carbon emissions among the 31 categories of manufacturing, accounting for about 15% of total emissions.”

It is understood that although my country’s carbon dioxide emissions per ton of steel are now declining, the total amount is still relatively large. Xiao Yaqing said earlier that the current average world coal consumption per ton of steel is 575kg of standard coal, compared to 545kg in China. Because of China’s large volume, there is still potential to be tapped in terms of energy saving and emission reduction.

The “Steel Industry Carbon Peak and Carbon Reduction Action Plan” clearly states that there are five major paths to achieve the steel industry’s carbon peak goals, namely, promoting green layout, energy conservation and energy efficiency, optimizing energy use and process structure, and building a circular economy industrial chain. And apply breakthrough low-carbon technology.

Cheng Yu said that under the “dual carbon” requirement, the steel industry needs to constantly change the energy structure and energy efficiency, but at the same time, changing the energy structure also means changing the metallurgical process, which is a huge investment. Many production capacities that were originally qualified but not yet fully depreciated will also be eliminated early, so the profitability of steel mills will still face challenges.

Post time: May-13-2021