How China cracked the steel overcapacity dilemma

The iron and steel industry has fallen into a serious overcapacity crisis, and in June China Steel Association members appeared in this year's first single-month losses, losses totaled 699 million yuan, the loss area is also further expanding. As we all know, the steel enterprises involved in the capital is large, many plants, many people, in the current situation of the real economy is unusually low, an effective business management model for the steel enterprises is very important.

Steel enterprises are typical production-oriented enterprises, production efficiency depends largely on the production equipment advanced or not; in addition, due to the ratio of ancillary facilities is large, efforts to enhance the scale of operations and thus reduce the marginal cost of steel enterprises to become an important means of big waves. In the past time, the big steel enterprises constantly through mergers and acquisitions to expand their own scale, and small steel enterprises are not willing to lag behind, a variety of fish in troubled waters, the replacement of large-scale equipment is not uncommon. From the national level, hope that by encouraging mergers and acquisitions on the one hand is to improve the concentration of China's steel industry and thus enhance the discourse of China's steel enterprises, on the other hand, also hope that through the convergence of production capacity to resolve overcapacity; from the level of the local government, small and medium-sized steel enterprises to increase the size of the expansion not only to help solve the problem of employment, but also to stimulate the growth of the GDP, but also happy to see it. Thus, small and medium-sized steel enterprises have local governments to support, large steel enterprises have the state to support and their own huge scale of the policy also formed a certain kidnapping, the result is more and more production capacity, and ultimately in the economic downturn at the time of the emergence of a serious overcapacity.

Of course, the steel project construction period is long, take the blast furnace, the recent production of blast furnace is mostly 09, 10 years when the credit expansion of the construction, and at that time it is also the economy a good, I believe that no one has the means to predict the economic situation after 3 years exactly how the previous period of time unusually hot Li Zuojun only in the middle of last year to form thesis and conclusions there is still a great deal of uncertainty. Therefore, only from the point of view of overcapacity, there is no who is right and who is wrong, but since the problem naturally need to be held accountable, the private sector, if there is a strategic error, the result is the loss of assets, while the state-owned enterprises need to be held accountable for the failure of the executives, economic penalties, administrative penalties are OK.

To return to the main topic, after a few years of expansion in scale and equipment upgrading, at present, our country has a lot of steel enterprises in terms of scale or in terms of the size and quality of the steel industry. Many steel enterprises, whether in size or in the advanced degree of equipment retains a greater advantage, but overall, China's steel industry does not have the advantage, the reason lies in the impact of another important factor in the operational efficiency of enterprises: business management mode. "First-class equipment, second-class management" ultimately created not only a waste of money for no reason, or a lack of competitive advantage of second- or even third-rate enterprises, in the final analysis, and evolved into a dispute over ownership, which is a huge subject, let's leave it aside.

For the time being, the crude expansion of the scale has been unable to bring profit growth to the steel enterprises, transformation and upgrading, change the business model is the king's way. However, this strategy is different for different ownership, different sizes of enterprises.

For large steel enterprises, now need to do is to extend the industrial chain, diversified layout. First of all, actively involved in upstream resource development, the main purpose is to protect the resource self-sufficiency, improve the stability of the operation; Secondly, we should be reasonable on the downstream trade, logistics layout, around the main circulation of the product area and the strategic focus of the customer, the establishment of logistics enterprises or steel processing and distribution centers, enhance customer adhesion; Finally, efforts to get involved in related supporting areas, such as machinery, ships, automobile manufacturing, new materials, and so on. Of course, the most critical is to increase R & D efforts, and gradually get rid of low-end production capacity.

For small and medium-sized steel enterprises, the current scale of the enterprise is far from reaching the point of optimal marginal cost, scale expansion is the fundamental motive of the enterprise, and with the transformation of large-scale steel enterprises, small and medium-sized steel enterprises to expand the scale can also fill the loophole of low-end capacity.

The CIC consultant released the "hot industry tracking report in the third quarter of 2013" pointed out that the need to guard against large steel enterprises, giant steel enterprises continue to expand, and ultimately not only on the policy to form a kidnapping, but also damage the entire market environment. Large-scale steel enterprises scale advantage has been quite significant, continue to expand futile, will only form a more serious monopoly, and large-scale steel enterprises also have the ability to transform, not to mention as a large state-owned enterprises, itself also has the obligation to guide the transformation of the industry. In this case, it may be worthwhile to give up part of the low-end market to small and medium-sized steel enterprises, thus realizing the competitive layout of the market.