The hottest steel price fell by nearly 13, and ste

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Steel prices fell by nearly 1/3, and steel enterprises lost money

recently, 27 steel mills across the country released information on reducing the ex factory price of steel products, ranging from 10 yuan/ton to 120 yuan/ton, and prices continued to fall across the board. Among them, Baosteel, a leading enterprise, lowered the ex factory price of mainstream products by yuan/ton in August, which exceeded market expectations

the price of iron ore, whose cost accounts for more than half of the total cost of steelmaking, has been in a state of easy rise and difficult fall. Although the price has fallen, as long as the crude steel output has not decreased significantly, the demand for iron ore is rigid

however, the steel mills whose profits are squeezed at both ends have no obvious willingness to reduce production in the presence of marginal profits

price reduction guarantee market

after 27 steel mills including Baosteel lowered the ex factory price of steel products on July 12, Angang and Shougang also announced the ex factory price in August, reducing the prices of medium and heavy plates, hot-rolled coils and cold-rolled coils

Baosteel is known as the leader of China's iron and steel enterprises. Every time its price adjustment is considered by the industry as a weathervane. However, in the real market, no enterprise will follow suit just because Baosteel cuts prices

"what really makes us decide to reduce the price is the sluggish market demand. We must keep our customers so that we can know the pressure state of plastic during extrusion." The general manager of a private enterprise steel plant told New Finance. According to him, with the current market situation, it is far more difficult to develop a new customer than to keep an old customer

market monitoring data showed that steel prices continued to fall in the first and middle of July, and showed a large-scale decline after entering the second half of the month. The mainstream steel prices fell to more than 200 yuan in July

"now it's not just any steel plant, but the downstream demand of the whole steel enterprise is shrinking seriously, and almost all steel plants are lowering prices this month." The director of the Publicity Department of a large steel plant in Shandong introduced to new finance that in his eyes, the market environment this year is worse than last year, and the international and domestic economic environment is not very optimistic

caohezhong, director of the market management department of Hebei Iron and Steel Group, recalled that the inspection mandrel found that since the sharp fall of steel prices last year, domestic steel prices have basically fallen, except for the continuous rebound from late February to early April this year. "We only raised the ex factory price of some products during that period, and the rest basically lowered or kept the price unchanged." He told New Finance, "when the market was good last year, the ex factory price was raised every month."

the continuous weakening of downstream demand forced steel mills to reduce ex factory prices

the business manager of a sales company in North China of WISCO group proved the downturn of demand to new finance with data, "compared with the same period last year, the total amount of various products from our company has decreased by an average of one quarter, and the demand of individual downstream industries such as construction machinery and shipbuilding has decreased by one third". He said reluctantly that the market was not awesome, and only by reducing prices could he keep his original customers. "It's not that the market expectation is poor, but that it is already very poor. There is no minimum, only lower"

he further introduced that at present, the price reduction of steel mills is completely determined by orders. For example, when the ex factory price of a large steel mill is relatively high, traders may consider taking less goods and the rest from factories with low prices. However, not everyone can act as an agent for large steel mills, so they will still purchase some, but the quantity is reduced

if the agents of this steel plant do so, the shipment volume of the steel plant will be significantly reduced. In order to avoid this situation, the steel plant may consider reducing some prices to reach a price acceptable to everyone

"in this way, even if you lose money, you must reduce the price, because the steel plant not only needs to ensure the normal progress and continuity of production, but also to ensure that its orders are not robbed by other steel plants. In case of bad demand, customers are very important, and there is no way." He said

ore price is easy to rise but difficult to fall

iron ore, as one of the important raw materials of steel products, its cost accounts for more than half of the cost of steelmaking. Affected by the losses of steel mills, iron ore prices have also been dragged down. However, compared with the "falling" steel factory ex factory price, the decline in ore prices is nothing

according to United metals statistics, from July 1 to July 17, 62% of iron ore fell from $135/dry ton to $130/dry ton, a new low this year, down 3.70%. The price of iron ore has fluctuated in the range of USD/dry ton for eight consecutive months

Li Wei (pseudonym: a staff member of the ore and sand Department of Minmetals Development Co., Ltd., who has been engaged in iron ore trade for five years, used "falling very heavily" to describe the recent wave of decline in ore prices. According to his memory, after the Dragon Boat Festival holiday, the market began to soften. At first, it only went down slightly, and sometimes it could rise a little occasionally, but the price fell sharply after July.

although Li Wei used "rapid decline" To describe the recent ore price, and said that the price of steel will fall in the short term, but he still admitted that compared with the decline of steel price, the decline of ore price is not strong

data show that since the first half of 2012, domestic steel prices have generally fallen by more than 500 yuan/ton, while the prices of raw materials such as iron ore have fallen by around 100 yuan

the current situation is, "although the prices of foreign mines, especially the three major mines, are going down, there is still room for profit because their costs are very low. It's just that life is not as comfortable as before, and they are facing greater sales pressure." Li Wei said, "the monopoly position of the three mines is very solid, and their financial strength is relatively strong. They have made a lot of money relying on the soaring ore prices a few years ago, so even if their sales decline a little now, it will not have a great impact on themselves"

Chi Jingdong, deputy secretary general and chief analyst of China Iron and Steel Industry Association, also believes that another important reason why ore prices are not easy to fall is that ores need to go through many links from mines to steel mills, such as transportation, ports, trading companies, etc. this chain is not an enterprise, which may lead to the downstream situation not being fed back to mining enterprises in a timely manner

at the same time, the mine can adjust the supply rhythm and quantity of the market through several links, "when the downstream demand decreases, the inventory of the intermediate link can be increased, which directly leads to the current high inventory of the port. Or the production link slows down. In short, the supply of the market can be adjusted through various means, so as to maintain the relative stability of the iron ore price." He said

Chi Jingdong attributed this to the overseas mines' ability to control high-quality resources, and frankly said: "without this ability, it would not have such a regulating ability."

apart from the mine itself, the actual operation of the steel plant is also an important reason why the ore price has not fallen sharply. Although at present, both the ex factory price and the market price of steel have been lowered, indicating that the demand has weakened, but "the steel plant has not reduced production, which forms a strong support for the ore price". Zhang Jiabin, general manager and senior analyst of the United metal ore business department, said that steel mills are having a hard time now, but their willingness to purchase ore is reduced. They are more cautious in purchasing. "They don't buy much at one time, but they may buy many times, and the total consumption has not decreased."

the director of Shandong steel enterprise publicity office agreed with this statement. He pointed out that the intention to purchase the product function of Jinan assaying bending and compression tester is based on the actual situation of current production. With the current situation, he certainly doesn't want to purchase too many minerals. Basically, "buy as much as you use, and on the other hand, reduce inventory"

the situation of his steel plant, "we are pressing down the ore inventory, which can reduce the scale of capital occupation. The original inventory cycle is 21 days, now it is 14 days, and sometimes it is shorter or even 11 days". He said that only in this way can the capital be revitalized when the sales profit margin continues to decline

the change brought about by this is that the amount of ore purchased in a single time has been reduced and the purchase frequency has increased. However, since the output of the steel plant has not changed much, and a certain amount of iron ore is consumed for a ton of crude steel, the total demand for ore has not changed. Therefore, the ore price is only a short-term reduction, but it is relatively strong without a sharp decline

in the final analysis, as long as the steel plant does not reduce production, the demand for raw materials is still rigid

the dilemma of coordinated production reduction

"steel mills are squeezed by high ore prices and low downstream demand, which is generally recognized in enterprises and industries. It has existed since the financial crisis, but it is particularly serious now, especially when upstream and downstream prices change asymmetrically." Shandong steel enterprise personnel said

according to the data of CISA, the profit of large and medium-sized steel enterprises in 2012 was only 2.533 billion yuan, a year-on-year decrease of 94.26%, of which the loss of loss making enterprises was 11.749 billion yuan, with a loss surface of 32.5%

the economy is slowing down, demand is sluggish, and the relationship between supply and demand is seriously unbalanced. However, such a general environment cannot prevent the steel mills from losing more and producing more

on July 13, the Bureau of statistics released data showing that the domestic average daily crude steel output in June was 2.007 million tons, second only to the record high of 2.019 million tons set in April this year. In the first six months of this year, the crude steel output reached 357.2 million tons, an increase of 1.8% year-on-year

"from last September to now, everyone has been taking chances, thinking that in case the situation improves one day, they have been holding on and unwilling to reduce production. Everyone believes that the market will not always be so depressed, and there will be a cyclical fluctuation", Cao Hezhong sighed, "the result is getting deeper and deeper"

the existence of marginal profit is also an important factor for steel enterprises not to reduce production. From the perspective of economics, marginal profit can help determine whether a product produced by an enterprise should be discontinued, As long as there is a marginal profit for the loss making product (that is, its sales revenue is greater than its variable cost, it should continue to produce.

chi Jingdong explained this situation in detail. He believed that if the steel enterprise completely reduced its production, it would be even profit before tax, depreciation and amortization (hereinafter referred to as "EBITDA") If it's gone, it will definitely stop production

in short, the current book losses of iron and steel enterprises are actually the result of the enterprise paying taxes, paying interest, and deducting the depreciation of fixed assets, amortization of intangible assets and other expenses. In other words, steel enterprises still have gross profit before deducting EBITDA, which provides cash flow for enterprises to maintain their normal production

for example, he said, "for example, an enterprise with a sales volume of 10billion and a Book loss of 200million. If the EBITDA is 1billion, the enterprise has a cash flow of 800million. It can also use this money to buy materials and organize production."

"if EBITDA can't be raised, there will be a problem in the cash flow of the enterprise, which may not even have the money to buy raw materials." Chi Jingdong believes that most steel mills have not reached this point yet, so "it is still difficult for enterprises to reduce production"

the general manager of a steel enterprise in Hebei said frankly to new finance: "although I have a loss now, I still have a marginal profit. If the loss per ton reaches 280 yuan

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