In the first quarter, the loss of the whole industry was “resolving†the consolidation and restructuring of the steel industry and the speed of industrial upgrading. Affected by high raw material costs and insufficient downstream demand, steel companies' profit margins have been severely compressed, and the problem of overcapacity in the industry has become increasingly prominent. In this context, the steel industry must not wait passively for the market to slowly turn to the predicament, and cannot rely on “squattingâ€. Instead, it must make heavy punches and accelerate the pace of mergers and acquisitions. In the first quarter, the steel industry experienced the first industry-wide loss since the new century. According to the statistics of the China Iron and Steel Industry Association on key large and medium-sized iron and steel enterprises, the industry's loss in the first quarter reached 1.034 billion yuan, with a loss of 33%. In the same period of 2011, the steel industry achieved a net profit of more than 20 billion yuan, and the performance of listed steel companies was “cloudyâ€. The 34 listed steel companies lost a total of 1.731 billion yuan in the first quarter, and their performance dropped 122.55% year-on-year. Five steel companies such as Shougang, Chongqing Iron and Steel and Maanshan Iron & Steel Co., Ltd. are expected to continue to lose money in the first half of the year. From the previous huge profits to the current losses, the steel industry has experienced only a very short period of time. The huge losses in the steel industry reflect the extraordinary overcapacity in the industry. At present, the overall production capacity of China's steel industry has reached 900 million tons, and crude steel production continues to climb. According to statistics from China Steel Association, domestic crude steel production capacity reached a record high in early April, with daily output reaching 2.030 million tons, an increase of 8.9% over the average daily production level in 2011. Although the output in the first half declined slightly, the daily output was still at a high level of over 2 million tons. The iron and steel industry’s “more losses and more production†cycle continues. From this year's and future economic growth expectations, the slowdown in economic growth and fixed asset investment will lead to a weakening of steel demand. If the production capacity of the steel industry is not effectively controlled, the imbalance between supply and demand in the industry will become more serious, and it will also increase the pressure on steel companies to survive. In fact, the state has given the steel industry mergers and acquisitions a clear direction. According to the plan of the Ministry of Industry and Information Technology, the number of steel enterprises will be greatly reduced during the “Twelfth Five-Year Plan†period. The proportion of steel production in the top ten steel enterprises in the country is increased from 48.6% to 60%. Focus on supporting large-scale steel enterprises to carry out cross-regional and cross-ownership mergers and acquisitions, and form 6-7 enterprise groups with core competitiveness and strong international influence. This year, the Ministry of Industry and Information Technology plans to introduce guidance on promoting the merger and reorganization of iron and steel enterprises, and provide specific support policies for mergers and acquisitions in line with industrial policies. Obviously, the introduction of relevant policies will become a "catalyst" for mergers and acquisitions in the industry. Large-scale steel enterprises will have to speed up the pace of mergers and acquisitions in the light of economies of scale and product structure adjustments, and strive to get rid of the current situation of meager profit or even loss. Therefore, mergers and acquisitions will become the "main theme" of the development of the steel industry in the past two years. Although the merger and reorganization of the steel industry faces many problems from jurisdiction, taxation, and personnel resettlement, the integration process is facing more difficulties. However, the current industry situation has made the integration of steel enterprises imminent, requiring relevant parties to come up with wisdom and courage, and the industry is in difficulty. The period is a period of less resistance to greater integration. Steel companies that merge and restructure are not only “biggerâ€, but also need to pay attention to product upgrades to better match market demand. After the merger and reorganization, the realization of product structure adjustment and industrial chain extension is an important direction for the future development of steel enterprises.
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