The aftermath of macroeconomic regulation: Hebei small and medium-sized steel enterprises collectively stopped production

On July 21st, the sales manager of Tangshan Fuhaixin Iron and Steel Co., Ltd., on behalf of Xiao Xiaochuan, pointed to a pile of rusty steel in the factory. He told the reporter of China Times: "I have been throwing it at that no one to buy, the factory has not been for more than 4 months. Produced."

In the Fengrun District of Tangshan City, there are hundreds of steel mills on both sides of the bumpy Fengbai Road. Most of them are now closed. In fact, in Hebei Province, China's largest steel base, two-thirds of the companies have stopped production or semi-discontinued. This phenomenon is not a good sign. As the upstream of most industries in the national economy, the direction of the steel industry is closely related to the overall economy, and it can best feel the pulse of the overall economy.

A report by Standard Chartered Bank shows that China's steel demand growth rate will fall to 4% in the second half of 2010, mainly due to the slowdown in the real estate sector and the reduction in demand for automobiles.

On July 22, Li Yizhong, Minister of the Ministry of Industry and Information Technology, said that the slowdown in the growth of real estate and auto markets has already had a major impact on the steel industry.

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Tangshan Fuhaixin factory area is particularly deserted, the original factory of more than 100 people, now only a dozen logisticians are at work, steel inventory is only a few tens of tons. Dai Xiaochuan said: "The goods are not enough to load the car."

Dai Xiaochuan attributed the shutdown of the steel mill to the market downturn. According to him, before March, Fu Haixin could barely maintain a profit of 20 yuan per ton of steel, but the market price after March has been falling. On the other hand, the cost of raw materials is still high, and the prices of billet, coke and hydropower are rising. "It’s better not to do it now," he said.

Our reporter visited a number of steel mills on Fengbai Road. Some of them were closed, the equipment was idle, and some steel mills were diverted. They hang the "steam repair tires" brand, and some even started with steel. Related trade in grain and oil.

Of course, some companies have not completely stopped production. The person in charge of Xincheng Steel said that even if the loss is to be produced. "The big investment is there, the fixed assets are depreciated every day, and they don't have to do the money," he said.

After the production has been discontinued, it is also a problem for the steel mills with weaker strength to resume production. Many of the enterprises that have stopped interviewing by this reporter have said that they have no idea of ​​starting work again. As for whether they will be produced in the future, it is not very certain.

Our reporter learned from the China Iron and Steel Association that the continuous high level of inventory has a strong pressure on steel prices. At present, steel prices in the domestic market have fallen to near the cost line of steel mills, and steel companies have begun to take measures such as reducing production, stopping production, and overhauling. Control production.

Yan Xiangdong, executive deputy secretary-general of China Iron and Steel Association, believes that the cost of steel production will reach the highest level in history this year. Water, electricity, coal, tar, transportation and iron ore will increase in price sharply. Energy conservation, emission reduction and pollution control will also increase costs. At the same time, the rise of trade protectionism will lead to increased difficulties in steel exports. The combination of the above factors has led to the massive shutdown of steel companies. The diversity of discontinuation factors may also mean that this situation will last for a long time.

Loss
The initial losses of steel mills are actually mostly borne by traders who are “cutting meat” for sale even if they lose money.

Tangshan Tianming Trading Co., Ltd. is the first-class agent of Tangshan Iron and Steel Group Co., Ltd. Li Hongming, the manager of the company, said to the newspaper: "Because of the shipment volume and price, Tanggang has the final say, so we can only passively accept and accept the steel mill. The risk of being transferred."

According to reports, Tang Gang will issue a letter to the agent every month, stipulating the order quantity and price. If the agent does not perform the contract, Tang Gang will deduct 30% of the agent's deposit. The deposit of Tianming Trading Company is 2 million yuan, and the deduction of 600,000 is not a small amount for this company.

Li Hongming said that they signed a contract with Tang Gang in May of 4,600 yuan, and then the steel price fell non-stop, fell by nearly 10% in less than a month, only lost more than 1 million in June. But the loss started earlier, "I have been losing money since April."

The person in charge of Tangshan Zhongxing Steel Trading Co., Ltd. also said that the most compensation was made in April, after which the steel price turned down. "Even if the steel has risen by 200 yuan per ton in the last two days, we will not increase the inventory, the terminal market is unstable, and we will continue to wait and see for a while." The person in charge said.

However, in the face of a significant reduction in shipments from downstream steel companies, traders are still under pressure from steel mills to order them. In order to avoid the pressure of steel mills to push goods, some traders simply took the opportunity to go abroad for vacation, so that they can temporarily not purchase.

Steel mills have complained about the coldness of downstream demand. Wei Zhenrui, director of Taihe Iron and Steel Co., told reporters that the demand is not good, not to ship, and the car that did not pull the goods came over. Taihe Steel is mainly sold to Jiangsu, Zhejiang, Shanghai, Guangdong, Henan and Shandong provinces. Wei Zhenrui speculates that it may be related to floods in the south, but more importantly, the real estate industry closely related to construction steel is not very prosperous, and downstream demand is significantly weakened.

Zhang Haibing, deputy general manager of Shanghai Baiying Iron and Steel Group Co., Ltd., also had the same troubles, “the order was significantly reduced”, and the company’s current inventory has doubled than usual.

The fall in investment expectations led to a fall in the consumer market, coupled with the expected decline in manufacturing revenues, which led to a decline in demand for steel. On July 22, Li Yizhong, Minister of the Ministry of Industry and Information Technology, said that the manufacturing purchasing managers' index had fallen for two consecutive months, real estate control measures began to take effect, automobile production began to decline in April, and the growth rate of real estate, automobile and other markets declined. The industry has a big impact.

Regulation
Steel producers that have stopped production generally report that billet is in short supply this year, and the price is always at a high level, which has reduced profit margins, causing most small and medium-sized steel mills to lose money and stop production. In a sense, this is the result of macroeconomic regulation.

The "China Times" reporter learned from the Tangshan City Bureau of Industry and Information Technology that Tangshan City has dismantled nine blast furnaces under 400 cubic meters this year. Two of them are being demolished. It is expected that all the remaining 24 seats will be demolished at the end of September this year. The annual production capacity of 35 400-cubic-meter blast furnaces is 7.3 million tons, equivalent to half of Tangshan's output last year.

In an interview with this reporter, Director Wang of the Industrial and Commercial Bureau of the Ministry of Industry and Information Technology said that last year and the year before, Tangshan City had to remove more than ten blast furnaces of less than 400 cubic meters per year. Obviously this year’s strength is the biggest, and if it is not up to standard, Districts and counties are accountable.

It is understood that affected by the current round of regulation, the smelters in Tangshan area generally shrink production. This can also explain the causes of the shortage of steel billets and high prices reflected by enterprises.

However, in the face of market volatility, the resistance of large steel companies seems to be much stronger. Insiders of Tangshan Iron and Steel Group said that Tangshan Iron and Steel signed a negotiated price with large foreign mines. In the first half of the year, many small and medium-sized steel mills took iron ore prices of $160 a ton, while Tanggang’s agreement price was only $130, and three The price in the fourth quarter will also decrease.

As for the cost of coke, Tangshan Iron and Steel also has its own independent coking plant, and because of the use of blast furnaces of more than 2000 cubic meters, the overall coke ratio has been greatly reduced, and the cost per ton of steel is reduced by 140 yuan compared with the blast furnace of 400 cubic meters.

When the small and medium-sized steel mills operated at a loss and had a difficult time, Tangshan Iron and Steel Co., Ltd. realized a profit of 560 million yuan in the first half of this year. Li Xinchuang, executive director of China Metallurgical Industry Planning and Research Institute, believes that large-scale production suspension of small and medium-sized steel mills is a trend of eliminating backwardness and promoting industrial upgrading, and a very good time for steel companies to re-integrate, improve and concentrate.

This is obviously what the country is willing to see to eliminate backward production capacity. Chen Yanhai, director of the Raw Materials Industry Department of the Ministry of Industry and Information Technology, said that he has tried to reduce the current number of steel companies by about 200 to about 200 through joint restructuring and elimination.

"This time the reorganization is a small and medium-sized enterprise that does not meet the policy requirements. The small and medium-sized steel mills have given up the market and undoubtedly gave more space for large steel enterprises," said Tang Steel. However, in his view, small and medium-sized steel mills are still very competitive unless they are demolished. "There may be some days when the market is getting better, they will resurrect," he said.

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