Outlook of China's iron and steel industry: the iron and steel industry still has some profit margins and the overall credit situation will remain stable [institutional review]

Driven by downstream demand and industry profits, crude steel output continues to grow, steel prices also rose to an all-time high in the first half of 2021, and industry profits remain at a high level. In the short term, under the influence of the policies of production restriction, environmental protection and double carbon, the supply of the industry shrinks, the demand remains resilient, the steel price fluctuates, the iron and steel industry still has a certain profit space, and the overall credit situation will remain stable. at the same time, with the upgrading of environmental protection and the promotion of merger and reorganization, the development advantages of leading enterprises are more significant, but higher requirements are put forward for the refinancing ability, liquidity management and capital turnover efficiency of iron and steel enterprises.

The outlook of China's iron and steel industry is stable, which reflects that China Integrity International believes that the overall credit quality of the industry will not change significantly in the next 12 to 18 months.

Abstract

Driven by the continuous promotion of real estate and infrastructure investment, some industrial manufacturing sectors have rebounded. By the middle of 2021, crude steel output has increased, and steel prices have also reached historical highs. Since the second half of the year, the decline in demand has led to a high and downward decline in steel prices. In the future, under the influence of the production restriction policy, the supply side of the industry lacks the basis for continued growth, and the demand side will remain resilient on the premise of steady growth in infrastructure investment. Steel prices may fluctuate at a high level in a short period.

Iron and steel enterprises have weak control over upstream iron ore. Affected by the novel coronavirus epidemic, short-term capital speculation and rising demand at home and abroad, the prices of raw fuels such as iron ore are increasing rapidly. the phased cost pressure of iron and steel enterprises has increased. under the influence of regulation and control policies and falling demand in the second half of 2021, iron ore and coal prices have been adjusted back, and the cost pressure of iron and steel enterprises has been alleviated.

With the continuous progress of restructuring and integration within the industry, the increasing concentration of the industry, and with the continuous commissioning of new production capacity along the southeast coast, the competition pattern of the industry has changed, and the purchasing discourse power and cost control ability of leading iron and steel enterprises are expected to be further enhanced in the future; at the same time, professional integration and management effects still need continuous attention.

In 2021, benefiting from high steel prices, the profitability of the iron and steel industry has greatly improved, but the upgrading of environmental protection and relocation work have pushed up the investment pressure of some enterprises, superimposed the demand for rolling existing debt, and the total debt scale is still relatively high. it puts forward higher requirements for enterprise capital management and refinancing ability.