A meeting of the Standing Committee of the Political Bureau of the CPC Central Committee on May 14 for the first time called for a new pattern of development in which both domestic and international cycles reinforce each other.General Secretary Xi Jinping has pointed out that we should give full play to the advantages of China’s super-large market, gradually form a new pattern of development in which domestic and international cycles play a dominant role and both domestic and international cycles reinforce each other, upgrade the modernization level of industrial and supply chains, vigorously promote scientific and technological innovation, and speed up the tackle of key and core technologies.
So what will the steel industry do in this process?With this question in mind, a reporter from China Metallurgical News recently interviewed Li Xinchuang, secretary of the Party Committee of the Metallurgical Industry Planning and Research Institute.
Reporter: Please talk about the connotation of this new development pattern in combination with the development of the steel industry.Where is the “new”?
Li Xinchuang: China has the advantage of huge market scale. Only by translating the huge market potential into actual demand can we add impetus to China’s economic development by prospering domestic economy and unimpeded domestic circulation.In the short term, the new situation is conducive to easing the impact of the epidemic on enterprises.In the long run, it will provide a strong internal driving force for high-quality development.We will speed up the building of a complete domestic demand system, create more new areas of growth and poles of growth, focus on getting through production, distribution, distribution and consumption, and smooth the major domestic cycle. This will help the domestic market continue to upgrade its demand and increase its supply capacity.At the same time, we will promote dynamic equilibrium between supply and demand at a higher level and at a higher level, which will provide a driving force for sustainable development of the domestic cycle.
China’s steel industry is dominated by internal circulation.In 2019, China’s steel exports accounted for only 6.6%, the lowest proportion among countries and regions with crude steel output above 20 million tons.Especially during the epidemic, the super-large internal circulation market has provided strong support for the development of the steel industry, with the output and consumption growing continuously.In the first half of the year, China’s apparent crude steel consumption was 481 million tons, up 3.8 percent year on year.According to the situation of the downstream steel industry, in the second quarter, the area under construction of real estate, the output of automobiles and the output of ships increased by 145.8%, 87.1% and 55.9% respectively compared with the first quarter, which strongly supported the growth of steel output.It is fair to say that the recovery of steel demand has exceeded expectations, and the supply of steel products is strong. China’s steel industry as a whole has maintained steady operation and withstood the test of the epidemic.
For China’s steel industry, “new” is reflected in at least the following five aspects:
First, we need to foster a new balance between supply and demand.During the 14th five-year Plan period, the supply-side structural reform will still be the main line of the development of the steel industry.Maintaining the basic balance of supply and demand is the key to achieving high-quality development of the industry.In the last round of capacity cutting, polluting, substandard and technologically outdated production facilities have all been shut down, and existing steel production capacity is relatively advanced worldwide.Therefore, we need to appropriately adjust our policies and create new demand, especially leading domestic demand, so as to achieve a higher-level and higher-quality balance between supply and demand.
Second, we will expand new domestic demand.At the consumption end, the steel demand of the current construction industry has accounted for more than 55%, but the potential demand space is still large: first, China’s steel structure output only accounts for 7%~8% of the steel output, and Europe and the United States and other countries (regions) this proportion is about 40%, increasing the proportion of steel structure in various buildings will significantly expand the demand for steel.Secondly, China’s real estate steel for 40 kg/m2 ~50 kg/m2, and developed countries have reached 150 kg/m2.China builds more than 1 billion square meters of new houses every year. If the proportion of steel used in buildings can be moderately increased in the construction standards, and even the use of steel structures can be promoted to reach 150 kilograms per square meter of steel used in construction, more than 100 million tons of steel can be used in a year.In addition, there is room for further improvement in the demand for stainless steel.In 2019, the output of stainless steel in China only accounts for 2.95% of the total output of crude steel, which still lags behind the 4.27% of that of the EU.China’s per capita consumption of stainless steel is 17 kg, far lower than Germany, Japan, Italy and other manufacturing developed countries per capita consumption level of 25 kg to 45 kg.
Third, we need to create a new industrial structure.The iron and steel industry should speed up the pace of merger and reorganization, build an industrial structure featuring division of labor, coordination, effective competition and common development, pay attention to improving the ability to cope with market crises in a coordinated way, build superior enterprise groups at different levels, and cultivate leading enterprises with global influence, regional appeal and professional influence.In the future, the iron and steel industry should further deepen the reform of mixed ownership, intensify the reform of state-owned enterprises, and promote the leading enterprises in the industry to carry out cross-industry, cross-region and cross-ownership merger and reorganization. First, summarize and learn the experience of China Baowu reorganization, and then form 1 or 2 world-class super large iron and steel enterprise groups.Second, in the stainless steel, special steel, seamless steel pipe and other fields to form 1 or 2 world-class professional backbone enterprises, to avoid high-end product homogenization vicious competition;Third, advantageous enterprises are encouraged to use assets as a link to promote the merger and reorganization of steel enterprises in the region, form a number of super-large steel enterprise groups, completely change the situation of “small and disorderly”, and improve the regional industrial concentration and market influence.
Fourth, build a complete industrial system.The core of “six stability” and “six guarantees” is to ensure the safety of the supply chain and the industrial chain.For China’s steel industry, the external dependence of iron ore, manganese ore, nickel ore and chromium ore needed in the production process exceeds 80%, and the raw material supply channels are highly concentrated, while the demand side is relatively dispersed, and the market discourse power is insufficient.
Therefore, under the macro guidance of policies, the iron and steel industry should unswervingly implement the internationalization strategy, promote the “horizontal coordinated integration” and “vertical coordinated internationalization” of the industrial chain, accelerate the establishment of a long-term stable, diversified and multi-channel efficient guarantee system, and disperse the risk of raw material supply.At the same time, strengthen scrap resources supply chain construction.In 2019, China’s estimated scrap steel supply is about 240 million tons, including 0.4 million tons of self-produced scrap, accounting for 17% of the total scrap supply.Social steel scrap 200 million tons, accounting for 83 percent of the total scrap supply.From 2020 to 2030, the annual increase of scrap steel resources in China will be about 25 million tons.By 2030, China will produce about 500 million tons of scrap steel resources.Therefore, on the one hand, we should make good use of domestic resources, encourage iron and steel enterprises to establish their own waste steel recycling and processing base, and build a stable waste steel supply network;On the other hand, we should develop and utilize overseas resources.It is suggested that the policy of importing scrap iron and steel should be studied and revised, and the import of scrap steel resources should be relaxed as soon as possible, so as to reduce the hidden danger brought by excessive external dependence of iron ore to industrial safety to a certain extent.
Fifth, we will promote new technological advances.The iron and steel industry should strengthen the leading position of enterprises in innovation, fully mobilize the upstream and downstream innovation resources of the iron and steel industry chain, and build an industrial chain collaborative innovation ecosystem integrating industry, education, research and application.Expand socialized channels for innovation input, build various cooperation platforms for science, technology and finance, and explore the establishment of innovation risk funds, so as to attract more social capital to participate in the innovative development of the iron and steel industry, and effectively improve the efficiency of innovation and the conversion rate of results;We will further promote the construction of national technological innovation demonstration iron and steel enterprises and support the construction of national demonstration bases for new industrial industrialization with steel as the leading industry.Around low-carbon ironmaking technology, efficient, low-cost smelting clean steel, steel rolling technology and equipment with high efficiency, the secondary resource utilization technology, based on large data of the whole steel process product process quality control technology and the integration of organization performance prediction and control, etc key generic technology input of innovation resources, and realize technological breakthroughs, technology leading, enhance the competitiveness of iron and steel industry.
Reporter: “to build a new pattern of development that both domestic and international cycles promote each other”, what kind of requirements does it put forward for the future development of the industry?What should we do?For the steel industry and upstream and downstream industries, where are the opportunities and challenges of the new development pattern?
Li Xinchuang: This proposal requires us to control resources and energy, the most advanced part of the supply chain.
There are three problems in iron ore resource guarantee.First, domestic resources cannot meet the demand.This is the main reason why iron ore is highly dependent on imports.China has large reserves of iron ore resources, but few rich ones.Lean ore, which accounts for 98.8% of the total ore reserves, must be enriched before it can be used, but the high cost of this process, coupled with environmental, safety and land constraints, has forced China to turn to imports.
Second, the source of imported ore is too concentrated.China’s iron ore imports account for more than 65% of the world’s major iron ore trade, and more than 80% of its imported supplies come from the four major mining companies in Australia and Brazil.
Third, the industry concentration is low.The concentration of supply, coupled with the low concentration of steel enterprises, has led to the lack of a say in iron ore pricing in China, which suffers from the consequences of sharp fluctuations in iron ore prices.In 2019, the concentration ratio of the top four steel groups in China is 22.12%, the industrial concentration ratio of the top 10 steel groups is 36.82%, and the concentration ratio of 22 steel groups above 10 million tons is only 52.38%.
The coVID-19 outbreak in 2020 has highlighted the fragility and instability of China’s steel supply chain.The main reason is that the steel industry lacks long-term strategic planning for resource security for a long time, and does not establish a sound resource security strategic system, which is difficult to fundamentally change in the short term.Suggestions can be made from the following two aspects.
In the short term, local optimization should be given priority to.First, it is necessary to accelerate the merger and reorganization of the steel industry, improve industrial concentration, and enhance the power of iron ore procurement;The second is to increase the proportion of scrap steel used to reduce the demand for iron ore and dependence;Thirdly, iron ore purchasing alliance should be established to strive for price exchange with quantity;Fourth, accelerate the revitalization or optimization of existing competitive and potential equity mining projects.
In the medium and long term, the iron ore supply pattern must be changed in order to fundamentally solve the problem of iron ore guarantee.First, more efforts should be made to guide and support enterprises in establishing long-term, efficient and stable iron ore bases overseas, and strive to increase the proportion of mines with overseas interests in imported ore to more than 30%.Second, we should consider “going global” through the integrated industrial chain binding mode of resource development, iron and steel production capacity layout and infrastructure construction to promote win-win cooperation at home and abroad in the mining industry as well as upstream and downstream.Third, we should speed up the development of representative equity mining projects, strive to increase the annual supply of iron ore by more than 200 million tons, and change the current supply pattern of iron ore.
For the iron and steel industry and the upstream and downstream industry, the new development pattern requires the establishment of a complete domestic demand system, as soon as possible to remove the impact of the blockage of the domestic cycle, promote the domestic cycle.In the medium and long term steel demand will be high and slow decline, China’s steel industry still needs to face serious challenges such as prominent resource security problem, low industrial concentration, unbalanced level of environmental protection development, interweaving of old and new problems in distribution, increasingly prominent problems of energy constraints, and urgent need to strengthen technological innovation ability.
Reporter: The conference proposed that we should carry out the project of reengineering the industrial base and upgrading the industrial chain, consolidate the advantages of traditional industries, strengthen the leading position of competitive industries, accelerate the distribution of strategic emerging industries and future industries, and upgrade the industrial base and modernize the industrial chain.We should give full play to the advantages of the new nationwide system, strengthen scientific and technological innovation and technological breakthroughs, and strengthen our capacity to support key links, key areas and key products.Could you please talk about how the steel industry can make greater contribution to the construction of a new development pattern featuring mutual promotion of domestic and international double cycles through the above work?
Li Xinchuang: In terms of the new structure of the steel industry, China has a relatively complete industrial system, which provides a huge market space for the steel industry.The steel industry should make full use of this market advantage, accelerate the construction of a community of interests with the downstream steel industry, constantly meet the needs of downstream users, facilitate the transformation of the downstream industry, and create an open, Shared, connected and coordinated steel ecosystem.
The steel industry itself needs to do a good job in technological innovation, product research and development and customer service, especially accelerate the promotion of intelligent manufacturing and standardization to further improve the competitiveness of steel industry in an all-round way.In terms of technological innovation, we will strengthen basic research on iron and steel materials and research and development of cutting-edge and generic technologies through policies, funds and incentives, so as to form a number of core industrial technologies with independent intellectual property rights.In terms of products, we should focus on the key points to achieve breakthroughs in the research and development of key steel varieties, especially materials that have no production capacity at the beginning of China’s research and development. We should give full play to the advantages of the new nationwide system, form a strong joint force to conquer core technologies, and speed up the filling of domestic gaps.In terms of service, it is necessary to further fully establish the user-centered product concept and service consciousness, accelerate the transformation from manufacturer to service provider, realize the joint tackling of upstream and downstream, and build service-oriented steel.
