How to Break through the "Ultra-profit Times" of Steel Consumption

In the current year, the Chinese steel industry is facing significant challenges. The industry is caught in a difficult situation marked by high production capacity, high costs, low growth, and low efficiency. This two-way pressure has left the sector struggling, with steel consumption growth hitting its lowest point since the new century. The era of "easy profits" is over, and the steel industry now needs to find a way forward in an era of low profitability. The increase in steel consumption has reached its lowest level in over a decade. According to the China Steel Association, this year’s steel production growth has dropped to a mere 2% to 3%, and the apparent consumption growth is at its lowest since the 21st century began. Many industry experts believe that even if macroeconomic policies show signs of improvement, the actual impact on the steel sector will be limited. Major institutions and analysts predict that next year’s domestic steel production and consumption growth will remain around 2% to 3%. With demand for steel growing slowly, how can the industry break through? A senior executive from Baosteel Group's Metal Company emphasized the need for the industry to "open their eyes" and seek new market opportunities. In the past, companies could rely on easy profits, but that is no longer the case. Innovation and proactive market development are now essential. Baosteel Metals, a diversified industrial enterprise under Baosteel Group, has been leading the way in product innovation. Chairman Jia Shulin once said that in the era of thin margins, steel companies must guide demand and develop new uses for steel. For example, during the third phase of Baosteel’s tinplate project, the original plan was just to produce tinplate. However, through active market development and adapting to changing demands, the company shifted to producing two-piece steel cans. Today, these cans are thinner and more efficient, and Baosteel has pioneered the production of such cans in China, creating a new brand and industry standard. Despite the "cold winter" in the steel industry, investment remains high. According to the latest data from the China Iron and Steel Association, fixed asset investment in the steel sector is still at a high level, even as steel prices have fallen to near 1994 levels. In the first ten months of this year, total investment reached 414.27 billion yuan, surpassing the previous year’s level. Non-state-owned steel companies saw their investments grow by over 46% year-on-year, while state-owned enterprises reduced their investments by more than 10%. Analysts from the “I’m Steel” information agency warned that continued high investment in an already oversupplied industry could worsen the problem. They advised investors to not only look ahead but also think flexibly, carefully analyzing both upstream and downstream trends in the industry. Contrary to some perceptions, the Chinese steel industry is far from a sunset sector. The head of the China Iron and Steel Association stated confidently that new-type industrialization, informatization, urbanization, and agricultural modernization—alongside comprehensive economic reforms and innovation-driven strategies—will create new opportunities for the industry. However, the sector must go through structural adjustments and prepare for long-term challenges, seeking strategic breakthroughs for transformation and upgrading. Traditional industries like steel are expected to meet and integrate with emerging sectors. For instance, Baosteel has successfully commercialized fuel ethanol production using exhaust gases from steel mills, setting a global benchmark for low-carbon development in the steel industry. Moreover, China’s steel companies expanding overseas and rationally allocating capital, technology, and cost elements globally are also seen as key growth areas. However, the "going out" strategy involves complex factors, including politics, economics, culture, and local customs. Industry insiders emphasize the need for cautious experimentation, smart decision-making, and building comprehensive competitive capabilities.

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