In the past two years, the steel, coal and other industries have vigorously carried out structural reforms on supply side, such as overcapacity, combating strip steel and debt-to-equity swaps, and corporate profits have generally increased substantially.
Xia Nong, inspector of the Industry Coordination Department of the National Development and Reform Commission, stressed at the 2018 director (expansion) meeting of the China Iron and Steel Industry Association ("China Steel Association") held on January 13th. "In 2018, the steel and other industries will continue to consolidate the previous period. It is hard-won to go to the production capacity, strictly control the illegal production of new capacity; at the same time, we must make up our minds to further promote mergers and acquisitions and enhance industrial concentration."
On January 5, the National Development and Reform Commission announced the "Opinions on Further Promoting the Transformation and Upgrading of Mergers and Reorganizations of Coal Enterprises" on the official website. It is clearly stated that it is necessary to “deeply promote mergers and acquisitions among coal enterprises of different scales, different regions, different ownership systems and different coal typesâ€, “support coal-electricity joint venturesâ€, and “support coal enterprises and coal chemical industry or other related industrial enterprises to merge and reorganize†".
De-capacity boosts industry boom
“If 2016 is the start-up year for de-capacity work, 2017 is a hard-fought year for steel, coal and other industries to actively implement supply-side structural reforms and vigorously promote de-capacity work. Then in 2018, we should regard it as The year of deepening the production capacity." Xia Nong concluded.
In 2016, the steel industry effectively solved the elimination of backward production capacity of 65 million tons. In 2017, on the basis of the previous large-scale de-capacity, the steel industry further deepened the “strength†to resolve the backward production capacity of 50 million tons, and completed the annual tasks ahead of schedule for two consecutive years.
In addition, the “strip steel†that has had an impact on the price and quality of the steel industry was completely banned in 2017. According to the statistics of relevant institutions, in 2017, the national total production capacity of cleaned strip steel exceeded 140 million tons.
"China has paid a lot of effort and cost to achieve such world-famous results in the past two years in the work of de-capacity." Li Xinchuang, president of the China Metallurgical Industry Planning and Research Institute, pointed out to the 21st Century Business Herald that China Steel production accounts for half of the world. China's initiative to carry out production capacity has not only eased the domestic overcapacity conflict, but also made important contributions to the balance of supply and demand in the world steel industry.
Under the background of excess illegal production capacity exiting clearing, the advantageous production capacity in the industry has gained more space. The operating efficiency of steel enterprises has generally improved, and the annual profit of many steel enterprises is expected to exceed 10 billion.
According to the statistics of China Steel Association, in the first 11 months of 2017, member steel enterprises realized a total sales income of 3.35 trillion yuan, a year-on-year increase of 35.05%; total profit reached 157.8 billion yuan, an increase of 123.2 billion yuan over the same period of the previous year (up 356 year-on-year increase) %).
The benefits of coal enterprises have also improved significantly under the influence of production capacity. Guangfa Futures Coal Industry Researcher Deng Wei pointed out to the 21st Century Business Herald that the coal industry's de-capacity work in the past two years has been very effective. "In 2016 and 2017, the coal industry has successively solved the excess capacity of 290 million tons and 150 million tons. The cumulative total de-capacity exceeded 400 million tons, and the industry's prosperity has improved significantly."
According to the National Bureau of Statistics, from January to October 2017, the coal mining and washing industry achieved a main business income of 2,349.63 billion yuan, a year-on-year increase of 32.9%; total profit was 250.63 billion yuan, a year-on-year increase of 628.8%.
"Despite the distance of the target of 800 million tons of coal in the '13th Five-Year Plan', the current structural reform of the supply side of the coal industry has shifted from total capacity to structural capacity." Deng Wei told reporters Emphasize.
Xia Nong pointed out that 2018 is the year of deepening the capacity of the steel and coal industry. At present, relevant departments, provinces, autonomous regions and municipalities are studying and formulating the 2018 annual capacity-removal target. This year we will further consolidate the hard-won de-capacity results of the past two years. "Especially in the market environment where steel prices are picking up, it is necessary to strictly guard against the new production capacity and the re-ignition of local steel strips. It is impossible to eliminate the excess capacity and violate the new capacity." Xia Nong stressed.
This year or welcome the tide of restructuring
In Li Xinchuang's view, steel production capacity has achieved practical results, and state-owned steel enterprises have made great contributions to the implementation of supply-side structural reforms and the promotion of industry mergers and acquisitions.
In June 2016, Baosteel Group and Wuhan Iron and Steel Group, among the three major steel enterprises, opened a new round of mergers and acquisitions in the steel industry through the announcement of listed companies. On December 1st of that year, the Baowu Reorganization Inaugural Meeting was held in Shanghai, which also marked the official establishment of China Baowu Iron and Steel Group, China's largest and second largest steel group.
This steel carrier with a total capacity of over 60 million tons and an asset scale of over 700 billion has actively implemented the national supply-side structural reform and capacity-related deployment in the past two years. In 2016 and 2017, it completed the de-capacity task of 9.97 million tons and 5.45 million. Ton.
“Baowu Steel's production capacity accounts for about 7% of the national steel production capacity, while the steel de-capacity scale accounts for more than 10% of the country's de-capacity. The level of Baowu's capacity is higher than the average, which has contributed to China's production capacity.†Baowu Chen Derong, the general manager of the group, summed up the effectiveness of Baowu’s capacity at the end of last year.
In 2017, Baowu's Siyuanhe Industrial Fund and the Chongqing New Capital's war new fund jointly participated in the reorganization of the troubled Chongqing Iron and Steel (*ST Heavy Steel). On the evening of January 2, *ST Chongqing Iron and Steel announced the announcement. On December 29, 2017, the company received the "Civil Ruling Book" from Chongqing No. 1 Intermediate People's Court and ruled that the company's reorganization plan was completed.
Shagang's reorganization of the northeast special steel is regarded as another typical case of mergers and acquisitions in the steel industry. In October 2016, Northeast Special Steel entered the bankruptcy reorganization process. In June last year, Shagang's Shagang Group (002075, shares it) announced its intention to participate in the reorganization. On January 4 this year, Shagang announced the “Acquisition Reportâ€, which not only means that the Northeast Special Steel Restructuring Case will enter the final implementation stage, which means that China’s first private steel enterprise will take over the restructuring of large local state-owned enterprises. The case of steel companies is about to succeed.
On January 13, Shen Bin, chairman of Shagang Group, revealed to the 21st Century Business Herald that due to the previous reorganization process, the utilization rate of the relevant production line of Northeast Special Steel was low. After the reorganization of funds was in place, the Dalian base related special steel Production capacity utilization and production capacity of the production line will be improved. "The added value of special steel products on the (Northeast Special Steel) side is still relatively high, there is Dalian Port (601880, stock bar), logistics costs are relatively low, the future market prospects are considerable."
Xia Nong pointed out: "Although China's steel production accounts for more than half of the world's total, compared with some steel powers, China's steel industry is not concentrated, and large enterprises are not strong." This situation restricts China's steel companies in the international arena. Competitiveness and voice in the market."
"We must make up our minds to promote the merger and reorganization of the steel industry, and cultivate large enterprises that have influence in the international market and occupy a dominant position in the industry. Otherwise, a big but not strong situation will always exist." Xia Nong said.
Chi Jingdong, vice president of China Steel Association, revealed that the “Steel Industry Transformation and Upgrade Strategy and Path†drafted by the Steel Association will be announced in the near future. According to the report, according to the “13th Five-Year Plan†of China's steel industry, 60%-70% of the steel output in the future will be concentrated in about 10 large groups and several specialized steel groups.
Chi Jingdong suggested that the acceleration of the merger and reorganization of the steel industry can be divided into three steps. The first step is to reduce production capacity by 2018. The production capacity of the clearing will be cleared, and demonstrations will be made for the next merger and reorganization. For example, the current merger and reorganization of Baosteel and Wuhan Iron and Steel; the second step is from 2018 to 2020, to deepen the relevant policies of mergers and acquisitions, and further expand the excess capacity by promoting mergers and acquisitions; the third step is to promote the steel industry on a large scale from 2020 to 2025. Mergers and acquisitions.
"Promoting mergers and acquisitions should focus on understanding and grasping the timing. Second, we must build a clearer enterprise scale. Third, we must lead the reform of mixed ownership reform with state-owned assets integration. Fourth, we must play the role of financial capital in the core enterprises. The active role of the five, we must play the dual role of the administrative and marketization of governments at all levels." Chi Jingdong stressed.
“In the year of 2018, the concentration of domestic steel industry is expected to continue to increase. This is undoubtedly a positive benefit for the steel industry. For steel companies, in addition to the power of capital and policy, they should also actively use the power of new technologies. Helping enterprises to transform and upgrade.†Wang Dong, founder and CEO of Steel Network, pointed out to the 21st Century Business Herald on January 14.
For the coal industry, the restructuring of Shenhua and Guodian is also a single merger case in the coal and power industry in 2017. On August 28 last year, the State-owned Assets Supervision and Administration Commission officially announced that Shenhua Group and Guodian Group were merged and reorganized into the National Energy Investment Group Co., Ltd. (hereinafter referred to as the National Energy Investment Corporation) after being approved by the State Council. The combined country will be able to invest in more than 1.8 trillion assets, becoming the world's largest coal, thermal power, renewable energy power generation and coal-to-liquid, coal chemical companies.
On January 5, the National Development and Reform Commission announced the "Opinions on Further Promoting the Transformation and Upgrading of Mergers and Reorganizations of Coal Enterprises" on the official website. (hereinafter referred to as “the “Opinionsâ€), it is clearly stated that “we must vigorously promote mergers and acquisitions among coal enterprises of different scales, different regions, different ownership systems and different coal typesâ€, “support coal-electricity joint venturesâ€, and “support coal enterprisesâ€. "Complementing and reorganizing with coal chemical industry or other related industries" will expand the average size of coal enterprises and optimize the industrial structure. "By the end of 2020, we will strive to form a number of large-scale coal groups of 100 million tons with strong international competitiveness."
"The coal industry and the power industry have regarded this incident as a weather vane event for the supply-side structural reform of the two major industries of coal and electricity. The merger and reorganization of the direction of coal-electricity integration has been regarded by the industry as the best solution to the problem of coal-fired top cattle. Path. The announcement of this new policy will benefit the redistribution of profits between the two industries of coal and electricity," Deng said.
At present, there are 9 coal enterprises with a production of more than 100 million tons in China, and 15 with more than 50 million tons. There is still a gap between the planned targets. Now, only three years from the end of 2020, it is expected that the pace of mergers and acquisitions in the coal industry will accelerate.
In the view of analysts such as Deng Wei, mergers and acquisitions and de-leverage will become the focus of the industry and capital markets in 2018.
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