On April 26, Xu Lejiang, chairman of Baosteel Group, told this reporter that the domestic small blast furnace has stopped using imported ore because the high-priced imported mine has touched the bottom line of corporate profits. Our reporter learned from the China Iron and Steel Association (hereinafter referred to as China Steel Association) that as steel companies' profits continue to be compressed, more and more companies will choose to stop importing iron ore. Xu Lejiang told this reporter that since the beginning of this year, the profits of China's steel enterprises have continued to be squeezed by high-priced imported ore. At present, the extremely uneven industrial profit distribution pattern of miners and steel enterprises is contrary to the law and is unsustainable. Xu Lejiang said that in the first quarter of this year, the profit margin of key steel enterprises was only about 3%, and quite a number of steel enterprises fell into a quagmire of losses. Small and medium-sized steel enterprises stop purchasing Since the beginning of this year, although steel prices have rebounded, the profit margin of domestic steel companies has further narrowed due to the increase in iron ore prices far exceeding the price increase of steel products. Statistics from the National Development and Reform Commission show that in the first quarter of this year, steel prices rose by about 17% and iron ore prices rose by 40%. A staff member in charge of importing mines in Wu'an Iron and Steel Co., Ltd. told this reporter that since March, the company has reduced imports and switched to inventory. The source said that if the price of iron ore continues to rise, the amount of stop-and-buy will increase because "production is still losing money compared to production suspension." Xu Lejiang told this reporter that at present, the cessation of procurement of imported mines is mainly for small blast furnaces of steel mills, but the blast furnaces continue to be procured, so the amount of cessation of procurement is not large. The cessation of procurement of imported ore led to a reduction in domestic port stocks. According to the "Xinhua-China Iron Ore Price Index" test, domestic and inventories are at a relatively low level as some small and medium-sized steel mills have stopped purchasing high-grade foreign resources. Iron ore prices have also been affected to some extent. Our reporter learned from Rizhao Port that the price of iron ore with a domestic grade of 63.5% declined slightly, and the wait-and-see mood was strong. In fact, many government officials and steel managers have called on the industry to stop buying coal mines to counter the price increases of miners. Deng Qilin, general manager of WISCO Group, told this reporter that the best way to resist the price increase is that the national steel enterprises will not join in the import of iron ore for a period of time, and the price will naturally fall. In theory, China occupies half of the international iron ore demand, and the collective suspension of the purchase of mining companies is self-evident. In Australia, for example, iron ore has become Australia's largest export commodity and the core of business cooperation between China and Australia. China's demand has also boosted Australia's trade volume. However, market participants believe that steel demand is approaching, steel companies may re-purchase imported mines, and iron ore prices will be re-raised. Increasing risk in the industrial chain In the market situation of short supply, the transfer of industrial profits to the supplier is an objective phenomenon, but the experience of market economy development proves that this transfer is not endless. In the past ten years, the global steel industry chain has been mainly engaged in a thrilling game around the main line of iron ore supply and demand. Iron ore has a professional and unpopular metal variety that has become a hot commodity. In the past ten years, the price of global steel products has increased by 2.3 times, and the CIF price of imported iron ore in China has increased by at least 7 times. In 2010, the profits of Chinese steel companies in the whole industry were less than 3%, even lower than the bank deposit profits of the year; the total profit was less than any of BHP Billiton, Rio Tinto and Vale. The imbalance in the distribution of industrial profits continues to intensify this year and is also highly concerned by the government. Luo Bingsheng, executive vice president of China Steel Association, said that the industry's profits have been squeezed to the point where it can't be tolerated. Steel companies and miners are in a relationship of mutual dependence. One party will die and the other will die. Xu Lejiang told this reporter that the risk of the industrial chain has accumulated to the extent that it will be released soon. In addition to almost all of the demand side profits being deprived, the investment risk upstream of iron ore is also increasing. Capital has a natural profit. In recent years, under the banner of high returns on iron ore investment, under the banner of ensuring the security of resource supply, domestic iron and steel enterprises and non-steel enterprises have carried out large-scale iron ore investment, and a large number of mining enterprises have emerged in a short period of time. Xu Lejiang believes that blind investment in iron ore resources will bring new risks, because iron ore will not be consumed like oil and will continue to be stored on the earth. After the end of industrialization in China, the demand for iron ore will be large. Partial transfer to scrap. However, miners seem to be less worried than steel companies. Russell Scrimshaw, executive director of Australian iron ore producer FMG, believes that China's demand for iron ore is promising. David Flanagan, chief executive of Atlas, Australia's fourth-largest iron ore supplier, believes that many iron ore projects are postponed, and iron ore surplus will be delayed. The current market situation is very good. Steel enterprise invests in iron ore debate In the context of iron ore price increase directly to the bottom line of steel enterprises, domestic steel companies began to invest heavily in mines, and obtaining a sufficient share of overseas equity mines is regarded as a business concern by most steel companies. The important task of life. Xu Lejiang put forward a different point of view. He believes that steel enterprises invest large amounts of upstream resources, and some enterprises even propose to achieve 100% control of resources. This is the "anti-economic development law", and its essence is At present, the current status of the industry chain is dissatisfied with a kind of "overcorrection." In recent years, WISCO, the brother company of Baosteel, has continuously increased the self-sufficiency rate of resources by investing in upstream industries. To this, WISCO general manager Deng Qilin once said that WISCO is “forced by minersâ€. "I have always believed that the main purpose of steel companies to participate in upstream raw material investment is to strengthen the ties with upstream enterprises and form a fixed industrial chain system. The secondary purpose is to obtain investment income and balance the risk of raw material prices." Xu Lejiang said. However, Xu Lejiang agrees that steel companies will make appropriate investments in upstream industries through capital ties, which can increase the trust relationship between enterprises. Xu Lejiang even put forward a proposal that is extremely difficult to implement - mining companies participate in Chinese steel companies to achieve a two-way capital bond between mines and steel companies. This proposal is difficult to achieve because the domestic government has not yet released investment in the Chinese steel industry. Not long ago, at the forum held by the State-owned Assets Supervision and Administration Commission, officials of the state-owned assets system discussed the contradiction between steel enterprises and miners, and still opposed the participation of miners in major domestic steel companies.
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