On September 21, the "2020 Steel Market Outlook and Risk Control Seminar" (hereinafter referred to as the seminar) was held in Nanjing. The seminar was co-sponsored by DCE, Nanjing Iron and Steel (hereinafter referred to as Nangang), and Shanghai Jiaotong University Advanced Finance School (hereinafter referred to as Shanghai Gaojin). Jiang Wei, Director of Member Service Department of DCE, Yao Yongkuan, Executive Vice President of Nanjing Iron and Steel, and Shanghai Zhou Yujun, the person in charge of Gaojin, and nearly 50 people from steel industry enterprise representatives and related financial service institutions attended the seminar.
Analyzing the steel industry policy in 2019, Cai Yongzheng, director of the Nanjing Iron and Steel Securities Department, believes that the implementation of the industry policy in the first half of the year was not as good as expected. He said that the steel industry's goal and requirement is to continue to deepen the supply-side structural reforms; strictly prevent new production capacity and the resurgence of "floor steel"; steel companies should restrain the impulse to expand production and actively maintain the balance of market supply and demand. However, the reality is that the focus of reform is shifting to mergers and reorganizations and deleveraging; non-member steel companies' production capacity has grown rapidly; local governments are leading a new round of expansion, and market supply and demand balance may be difficult to maintain.
Cai Yongzheng believes that the merger and reorganization of my country's steel industry is unstoppable. Through mergers and reorganizations, China's steel industry will usher in the "Era of Big Steel Enterprises". Cai Yongzheng said that according to the goals set by the Ministry of Industry and Information Technology, from 2018 to 2020, the merger and reorganization policy will be improved; from 2020 to 2025, the large-scale merger and reorganization of the steel industry will be promoted. The ultimate goal is that by 2025, 60%-70% of my country's steel industry output will be concentrated in about 10 large groups; Baowu will merge Maanshan Iron and Steel, and after the merger, China Baowu's crude steel output will rise to the world's No. one. In 2018, China Baowu's crude steel output reached 67.429 million tons, while Maanshan Iron & Steel Group's output was 19.642 million tons. The combined production capacity of the two was nearly 100 million tons. Cai Yongzheng said that in the future, the number of enterprises with a scale of 5 million to 15 million tons will be significantly reduced, replaced by 3-4 steel groups including 80 million tons, and 6-8 steel groups with 40 million tons. Grade steel companies will be an inevitable event.
Regarding how to do a good job in risk management for the black industry chain in 2020, Cai Yongzheng analyzed that one is facing the risk of a decline in real estate investment caused by the adjustment of the real estate market policy. Steel mills and steel traders have high inventories, so they can take into account the appropriate basis for futures selling hedging; for the main contract of rebar and hot coil futures, according to the basis of the situation, sell the hedging at the right time.
Second, facing the risk of rising coke prices caused by the supply-side reform of the coking industry, the industry chain can use the basis of the basis to buy futures and options for the main coke contracts to maintain value; steel mills can purchase on demand and choose the opportunity to buy the main coke contracts. Insured value.
The third is facing the risk of oversupply in the industry and the profit of steel mills being squeezed. Industry chain companies can reduce spot inventories, pre-sell their own steel production in futures, reduce the purchase of spot raw materials and fuels, purchase raw fuels with virtual futures inventories, and choose far-month futures contracts for virtual steel mill profit lock-in operations.
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