Recently, there are no major events that need to limit production, but we can't endure the decline in profits and the recession in the industry. Many steel mills have taken the initiative to stop, limit and control production.

Since last week, a total of 6 new blast furnaces have been overhauled in Tangshan, which is expected to affect the molten iron production by about 24000 tons / day. Two new blast furnaces are expected to resume production, which is expected to affect the molten iron production by 8000 tons / day. At present, 4million ton steel enterprises have stopped production, and another 28 steel enterprises have begun to stop production for maintenance

Jiangsu Binxin iron and Steel Co., Ltd., with a capacity of 6million tons, recently took the initiative to control production (some employees have holidays), and recently added a bar line for maintenance. At present, one bar line and two spiral coils in the plant are in normal production, and the daily average construction steel output has fallen to about 11000 tons.

Shandong Guangfu Group Co., Ltd. has stopped production since July 19, and the time of resumption of production is to be determined. The iron making capacity is 3.5 million tons / year, and the steel-making capacity is 3.96 million tons / year. It involves three bar production lines, one strip steel production line and one ordinary high-speed wire.

In the first half of 2022, China's steel industry as a whole moved forward with heavy loads. According to the latest statistical data of the National Bureau of statistics, from January to may 2022, China's metal mining industry achieved an operating revenue of 7193.33 billion yuan, an operating profit of 286.76 billion yuan, and an industry profit margin of 4.0%, a year-on-year decrease of nearly 27%. Among them, the overall profit of ferrous metal industry was 113.88 billion yuan, a year-on-year decrease of 55.8%, the industry profit margin was only 2.9%, and the contribution of national metal mining profits in the current period was less than 40%.

In the first half of the year, affected by the repeated COVID-19, China's consumer demand fell, and China's steel downstream consumer market as a whole was weak. As of June 30, the prices of five major categories of steel products and billets in China have fluctuated downward, and the latest prices have basically fallen to the price level at the end of 2020. According to the statistics of China Iron and Steel Industry Association, as of June 30, the price of cold-rolled steel products in China had the largest year-on-year decrease of more than 8%; The price of wire rod steel decreased the least year-on-year, only slightly higher than 2% (see Table 1).

Under the overall pattern of relatively weak steel prices and relatively high raw material prices, the profits of China's steel industry shrank significantly in the first half of 2022. According to the data released by the National Bureau of statistics, from January to may 2022, China's cumulative industry profit per ton of steel was only 184 yuan, far lower than the level of 411 yuan in 2021, and only higher than the historical low point in 2015 when the whole industry was almost at a loss.

Then, who should pay for the losses of the steel industry? Is raw fuel the "culprit"?

1. The price of raw materials and fuels is strong, and the cost of steel enterprises remains high

According to the National Bureau of statistics, from January to may, the total profit of ferrous metal smelting and rolling processing industry was 80.2 billion yuan, a year-on-year decrease of 64.2%; At the end of May, the number of loss making enterprises in ferrous metal smelting and rolling processing industry was 1784, with a total loss of 28.18 billion yuan, an increase of 338.3% year-on-year.

In the long process of steel production, 1.6 tons of iron ore and about 450 kg of coke are consumed for each ton of crude steel, while the amount of other fuels (such as coal injection) and ferroalloys is relatively small. Therefore, only from the perspective of data rise and fall, the "double coke" and "feast" staged again in the first half of 2022 has become a key factor in the decline of steel enterprises' profits.

2. Coking coal price urgently needs to return to a reasonable range

Coking coal is a relatively scarce coal variety in China, and its output has not increased in the same proportion with the original coal output. Coking coal, including gas coal, fat coal, coking coal and lean coal, is the product of coal metamorphism. In China's total coal resources, coking coal accounts for only slightly more than 25%; Gas coal reserves account for about 50% of the total coking coal reserves; The main coking coal and fat coal of high-quality coal account for about 35% of the total reserves of coking coal. With the growth of the rigid demand for coke in the long process production process of China's iron and steel industry, the demand for coking coal in China is rising. Before 2006, China was still a net exporter of coking coal. Since 2006, the export volume of coking coal has decreased significantly, while the import volume has continued to rise to more than 75million tons.

Coke (coking coal) and iron ore are the main raw materials in the long process steelmaking process of China's iron and steel enterprises. At present, the cost proportion in iron and steel production has reached about 1 ∶ 1. The high price of iron ore and the sharp rise in the price of coking coal have led steel enterprises to move forward with heavy loads in the first half of 2022. At present, most steel enterprises have been in a state of loss.

In this round of downturn in the steel industry, the difficulty of enterprise operation has increased, the profit differentiation has intensified, and the market situation may force the industry to speed up mergers and acquisitions. Enterprises also need to closely track the changes in downstream demand and strive to optimize and adjust the product structure.