Since the beginning of this year, under the strong push of national decision-makers, the completion of capacity reduction tasks in the steel and coal industries across the country has increased significantly. According to data from the Ministry of Industry and Information Technology, overcapacity reduction work is progressing in an orderly manner. In the first three quarters, the steel industry has completed over 80% of annual capacity reduction tasks. Steel market prices have risen by more than 30% over the previous year, and the industry has turned losses into profits.
Analysts believe that capacity reduction is a major task of structural reform in 2016, and the steel industry bears the brunt. At present, China’s economy is shifting from high-speed growth to medium-high-speed growth, and the “three-phase superposition” effect is increasing. There is an urgent need to accelerate supply-side structural reforms to lay the foundation and increase momentum for supply and demand transmission. Resolving excess capacity is a pragmatic choice in this context.
Li Bing, director of the Enterprise Reorganization Bureau of the State-owned Assets Supervision and Administration Commission of the State Council, stated at the 3rd Iron and Steel Industry Diversified Industry Development Conference that the central SOE’s task of resolving excess steel production capacity this year is 7.19 million tons and is expected to be completed in October. Among them, Baosteel Group Co., Ltd. has already completed this year’s steel capacity reduction task ahead of schedule. Wuhan Iron and Steel (Group) Company not only completed the task, but may also exceed the task, and Anshan Iron and Steel Group Co., Ltd. can also complete the task on time.
The essence of supply-side structural reforms lies in “reducing volume and improving quality.” On the premise that there is no significant decline in demand, the withdrawal of production capacity and the shrinking of the supply side will significantly improve the profitability expectations and actual profits of companies in a favorable position, and their investment value will also be Will continue to highlight.