Effective Management to Become Important Factor for Steel Cost Control

SHANGHAI, Feb. 28 (SMM) -- Steel enterprises have experienced continuous troubles since the beginning of 2012. Leading steel enterprises expected significant declines in earning results for 2011, triggering discussions by investors and industry insiders on whether or not steel mills have faced hard times. In addition, the controversy about the estimates by Anshan Iron & Steel that it would record a net loss for 2011 has not stopped yet, and a significant accident occurred at the company on February 20. On February 24, a gas poisoning accident occurred in Baosteel Meishan Iron and Steel Company. The two accidents again trigger hot debate on whether or not extensive management and aging equipment are prevalent in steel industry.     

The outlook for steel industry is not optimistic, and Zhu Jimin, Chairman of Shougang Group, has publicly said that steel mills will go through hard times. Furthermore, financing costs at steel enterprises surged in 2011 due to difficulties in financing, and tight capital further caused a significant increase in accounts receivable and payable.

Data released by the China Iron & Steel Association (CISA) February 22 shows that the steel industry has entered a downward track after experiencing 10 consecutive years of rapid development. Therefore, not only have steel mills faced great difficulties, but also their extensive management, aging equipment and other problems have begun to be highlighted. 

Steelease believes in addition to expecting the recovery of steel industry, steel mills should also actively upgrade the management and improve production equipment, which also becomes an important factor in deciding whether or not steel mills can weather the hard times.

First, although China has continuously introduced international advanced technology and equipment and conducted large-scale technological innovation for domestic existing equipment in recent years, only about 20% of steel enterprises whose production equipment can reach the world advanced level, and only about 50% can reach the domestic advanced level.

Second, most domestic steel enterprises have changed their decentralized production management model to semi-centralized and centralized management models along with the rapid development of the domestic steel industry. However, steel enterprises generally conduct continuous flow production mode, with production process complicated and internal production management ineffective, the extensive production management problem indeed exists in some domestic steel enterprises.