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Wu Wenzhang Invited to Steel Success Strategies Online 2020

http://en.steelhome.cn [SteelHome] 2020-10-26 22:14:30

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On October 26, 2020, Eastern Time, USA, Steel Success Strategies Online 2020 was held jointly by World Steel Dynamics (WSD) and Fastmarkets AMM. Mr. Wu Wenzhang, Founder and Chairman of Shanghai SteelHome Website was invited to attend the conference and delivered a speech titled as China Steel Industry to Accelerate the Process of M&As. Mr. Philipp G. Englin, CEO of WSD, translated the speech of Mr. Wu Wenzhang.

Key Points: (Full presentation is available for subscription)

I China Steel Industry to Accelerate the Process of M&As

China's steel industry has achieved remarkable results due to the supply-side structural reform. In the future, China will continue to deepen supply-side structural reform in steel industry, reduce excess capacity and strictly control new capacity.

In 2019, China's crude steel capacity utilization rate was 86.47%, up 20.3% from 2015. From January to September 2020, the utilization rate of crude steel further increased to 89.62%, 23.46% higher than that of 2015.

In 2019, China's key steel enterprises realized a profit of 189 billion yuan, with a profit margin of 4.4%, 6.7% higher than that of 2015. From January to August 2020, China's key steel enterprises realized a profit of 109.6 billion yuan, with a profit margin of 3.8%, 6.1% higher than that of 2015.

China's steel industry will accelerate M&As. In the future, Chinas steel industry will embrace one-three-five steel giants. To be specific, there will be one mill bearing annual 200-250 million tons of crude steel capacity, three mills with annual 60-100 million tons of capacity and five mills with 50 million tons of capacity.  The concentration of the industry will account for more than 75% till 2035.

II Chinese Steel Industry Still to Meet Domestic Demand

The self-sufficiency rate of domestic steel in China's domestic market is above 90%, and the proportion of crude steel export accounted for less than 10% of the output. In the future, China's steel industry will build a new development pattern featuring dual circulation, which takes the domestic market as the mainstay while letting domestic and foreign markets boost each other.

During the COVID-19, China's domestic market demand grew steadily, and a large number of steel products, billets, pig iron (including direct reduction iron), iron ore and coking coal were imported, making positive contributions to the development of world steel industry chain and driving up the recovery of global steel prices.

From January to September 2020, China imported 15.07 million tons of steel (annualized volume of 20.15 million tons), a year-on-year increase of 72.2%. Among them, imports in the third quarter of 2020 totaled 7.73 million tons (annualized volume of 30.67 million tons), a year-on-year increase of 164%.

From January to September 2020, China imported 14.17 million tons of billet (annualized volume of 18.87 million tons), a year-on-year increase of 932.1%. Among them, imports in the third quarter of 2020 totaled 8.63 million tons (annualized volume of 34.24 million tons), a year-on-year increase of 896.6%.

From January to September 2020, China imported pig iron (including DRI) of 6.45 million tons (annualized volume of 8.59 million tons), a year-on-year increase of 444%. Among them, imports in the third quarter of 2020 totaled 2.87 million tons (annualized volume of 11.39 million tons), a year-on-year increase of 292.5%.

From January to September 2020, China imported 868.46 million tons of iron ore (annualized volume of 1.161 billion tons), a year-on-year increase of 10.8%. Among them, imports in the third quarter of 2020 totaled 321.55 million tons (annualized volume of 1.276 billion tons), a year-on-year increase of 12.7%.

From January to September 2020, China imported 59.38 million tons of coking coal (annualized volume of 79.10 million tons), a year-on-year decrease of 2.8%. Among them, imports in the third quarter of 2020 totaled 21.26 million tons (annualized volume of 84.34 million tons), a year-on-year decrease of 14.2%.

III Forecast on 2021 China Steel Market

China's economic growth rate is expected to exceed 3% in 2020 and around 8% in 2021.

It is estimated that China's crude steel output will reach 1.035 billion tons in 2020, up 3.9% year on year. Steel imports will be about 20 million tons, a year-on-year increase of 62.8%; steel exports will be 52.5 million tons, down 18.3% year on year; steel billets imports will be about 16.5 million tons, with year-on-year growth of 1131%; the apparent consumption of crude steel will be 1.017 billion tons, up 7.7% year on year.

It is estimated that China's crude steel output will reach 1.05-1.06 billion tons in 2021, with an increase of 1.9%. Steel imports will be about 14 million tons, a year-on-year decrease of 30%; steel exports will be 48 million tons, down 8.6% year on year; steel billets imports will be about 6 million tons, with year-on-year decrease of 63.6%; the apparent consumption of crude steel will be 1.025 billion tons, up 0.8% year on year.

China's iron ore imports will reach 1.165 billion tons in 2020, up 9%; Iron ore imports are expected to remain stable in 2021.

In 2020, the average annual price of common hot-rolled steel in Shanghai: rebar price is expected to be 3650 yuan/t, hot-rolled coil price is expected to be 3750 yuan/t; the annual average price of imported iron ore (62%) will be about 105 US dollars/t. In 2021, the average annual price of common hot-rolled steel will be slightly lower than 2020, and the average price of imported iron ore will be around 100 US dollars/t.

IV Q&A

Q: Which steel mills will further merge in China?

A: Personally, China Baowu Steel Group will possibly continue to acquire state-owned steel giant as it did for Maanshan steel and TISCO, as well as private steel enterprises. As a result, China Baowu will form an annual capacity of 200 million tons of crude steel. Shagang Group will also continue its merges and acquisitions. Besides, China Jianlong Steel Group is also expanding, with an estimated annual capacity of 80 million tons of crude steel in the near future.".  

Peter F. Marcus (right), Managing Partner with WSD; Philipp G. Englin, CEO with WSD (middle); Mr.Wu Wenzhang, Chairman with SteelHome (left)

Mr.Wu Wenzhang delivered a keynote speech on "China Steel Industry to Accelerate the Process of M&As" and answer questions raised by online guests

Mr. Philipp G. Englin translated the speech of Mr. Wu Wenzhang


(To contact the reporter on this story: leo.ji@steelhome.cn or 86-555-2238932 18616060095)
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