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Steel and iron sector: "from scale to strength"
Last Updated(Beijing Time):2009-02-16 09:09

By Li Xinchuang

In 2008, China's steel and iron production growth experienced a course from increase to decrease. The steel output in 2008 reached 500 million tons, making a record high in the history. The import and export of steel products both decreased slightly. 5,923 tons of steel products were exported, 1,543 tons of steel products were imported, and the domestic steel consumption reached about 430 million tons. The market share of China's domestic steel kept growing, and the type structure was optimized constantly, in particular, the production of such high value-added products as cold-rolled sheet strip steel, plated sheet/strip and electrical sheet steel made great progress. However, after September 2008, the prices of domestic steel declined drastically, and the large amount of high-price storage raw materials and fuel as well as the increase of finished goods inventory led to financial strain and serious loss of some steel enterprises. Despite the comparatively good profit level, the realized profit of steel enterprises still declined by a large margin in 2008.

Influenced by the international financial crisis, the global economy declined greatly. Global steel market shrank drastically, and the domestic and international steel demand decreased substantially. China steel industry, which has a comparatively large steel export volume, was impacted greatly, and the contradiction of China's productive excess was emphasized. Some in-depth problem of China steel industry, including low assurance level of raw materials and fuel, uncompleted market system, low industry density, comprehensive lagging productivity, unreasonable industrial structure, weak innovation capacity, were exposed more obviously.

The quick development of China's steel industry supports the quick development of China's national economy, and China's steel industry has made great contribution to China's economic construction. Presently, China has formed a steel productivity of 660 million tons, which demonstrates serious productive excess, and the external dependence degree of China's steel products is near 25 percent. With the drastically change in international steel market, the lack of a stable overseas marketing channel will influence the normal operation of China's steel industry greatly. Judging from the history and development trend of China's steel industry, the year of 2009 will be a turning point for China's steel industry, and China's steel industry will change from the previous quick increase near 20 percent into stable development.

China is still in the middle period of urbanization and industrialization, and the government took a series of measures to expand the domestic demands and urge the economic increase, which is the most effective security for the domestic steel market demand. Though the steel price showed a tendency of decline, with the decrease of the prices of raw materials and fuel, the steel industry will keep a certain profit level comprehensively in 2009. However, with the general decline of the industrial profit, domestic steel enterprises will break up in 2009, some companies with small scale and lagging technology and equipments will suffer from loss or even quit from the market. It will be a golden opportunity for steel industry to accelerate the structural adjustment and industrial upgrade.

China's steel industry should attach great importance to the development and change f global economy, strengthen the analysis and prediction of domestic and international steel market changes, strengthen our market sensibility, enhance our anti-risk capability; hasten advanced enterprise-based union and reorganization, realize the optimal resource allocation and professional work division in a comparatively large coverage, enhance the centralization of the steel industry indeed, and enhance the comprehensive competitiveness of the steel industry; speed up the elimination of lagging productivity, realize energy conservation and emission reduction, and develop recycling economy; speed up the construction of coastal steel bases, optimize the industrial layout, and develop the steel industry reasonably and orderly; accelerate the overseas resource development and marine transportation system construction, strengthen the stability and security of the operation of the steel industry, at the meantime, try hard to establish a new negotiation system on iron ore making for China's steel industry development, so as to maintain the reasonable profit of the steel industry; strengthen the independent innovation capacity, enhance the added value and core competitiveness of steel products; steel enterprises should speed up the establishment of a long-lasting and stable sales system to avoid and decrease the serious influence of market fluctuation, as well as strengthen the deep processing degree of steel products, actively explore the application field of steel products, and expand the steel consumption market.

Though we are facing plenty of difficulties in 2009, with the launch of a series of policies and measures of the government to expand domestic demands and urge the economic growth, good market circumstances for steel industry will be made. The steel industry should seize the opportunity actively, change the risk into opportunity, change the passiveness into activeness, accelerate the structural adjustment and industrial upgrade, actively make full use of all advantageous factors, focus on the solution of key problems in the steel industry operation and development, and realize the harmony of the revival and development of steel industry and the national economy and social development, as well as harmony with resources, environments and ecology. They should emphasize on key points, keep the stable market, speed up the adjustment and revival of the steel industry, focus on the key points of development like volume control, discarding of lagging productivity, union and reorganization, technological reform, and optimization of layout, try hard to walk out of the plight as early as possible, realize stable development, and drive the change of industry from scale to strength.

 (The author is the Executive Deputy President and General Engineer of Metallurgical Industry Planning Institute) 
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