"The steel industry has had an extraordinary year!" Luo Tiejun, vice president of China Iron and Steel Association, said at the 2023 China Steel Market Outlook and "My Steel" annual meeting on December 30, 2022. He further pointed out that thanks to the solid foundation laid by the continuous promotion of industrial restructuring, transformation and upgrading over the years, the industrial development in 2022 has withstood the all-round impact of the epidemic, overcome the downward pressure on economic operation that exceeded expectations, and showed strong resilience, vitality and a long-term positive trend.

The iron and steel market and the operation of enterprises are generally stable

Looking back on the operation of China's steel industry in 2022, Luo Tiejun said that in 2022, the international situation is complex and severe, the domestic epidemic spread in many places, the national economy has been under more than expected downward pressure, the steel industry operation environment is relatively severe, the industry development is faced with weak downstream demand, steel prices falling, raw fuel costs rising and other challenges. The overall benefit indicator is at a low level in recent years. In the face of difficulties and challenges, the iron and steel industry resolutely implements the decision and deployment of the CPC Central Committee and The State Council of "putting stability first and seeking progress while maintaining stability", adheres to the "two-pronged response" of epidemic prevention and stable operation, actively adopts measures to improve quality and reduce cost and increase efficiency, pays close attention to the balance between production and sales, and fully explores potential in standard. The overall operation of the industry will remain relatively stable in 2022. Recently, the steel market and the overall operation of enterprises show a steady trend.

This trend is mainly manifested in the following aspects: first, steel demand declines, and supply decreases accordingly. From January to November 2022, the national crude steel output was 935 million tons, down 1.4% year on year, and the apparent consumption of crude steel was 887 million tons, down 2.7% year on year. Both production and sales showed a downward trend, and the annual crude steel output is expected to be about 1.02 billion tons. Second, steel prices fell, the benefit of the obvious decline. From January to November, the average value of China Steel price index (CSPI) was 123.64 points, down 13.5% year on year. Since November, the price recovered slightly, to 113.19 points on December 23, up nearly 6%; The profit of member enterprises was 98.3 billion yuan, down 72.5% year on year, and the profit rate was 1.66%, down 3.88 percentage points year on year. In particular, the losses continued throughout the third quarter. In October and November, the industry benefits had stabilized and recovered.

How will steel fare in 2023? According to Luo, the recent Central Economic Work Conference has charted the course for China's economy in 2023. At the Central Economic Work Conference, we will combine the strategy of expanding domestic demand with deepening supply-side structural reform. With the continuous optimization of epidemic prevention and control measures and the gradual release of the effect of economic stabilization policies, it will benefit the steel industry and form a strong support for steel consumption.

The Iron and Steel Association is currently actively promoting five work

Luo Tiejun at the meeting further introduced the current iron and steel association is carrying out several key work. He introduced that since 2022, the steel industry operation situation has deteriorated sharply, the association has put forward ten policy suggestions for the current operation and mid - and long-term development to the relevant departments of the state in a timely manner, which have a direct impact on the unified management of coking coal, continue to promote and implement the crude steel production limit plan, strengthen the industry data management, subdivision of steel tax code to encourage the export of high-end products. "The association of steel to strengthen the ten recommendations tracking report, as far as possible to strive for policy recommendations into practical measures. Recently, the Iron and Steel Association also focused on studying and promoting the basic measures of capacity management and joint restructuring of the two major industries, promoting the three major steel transformation projects of capacity replacement, ultra-low emission and extreme energy efficiency, and planning the "cornerstone plan" and promoting the development of the two major industries of steel structure housing. Luo Tiejun focused on the following five aspects of work.

First, we will actively explore new mechanisms for regulating production capacity.

According to the latest data released by the National Bureau of Statistics, the profit margin of ferrous metal smelting and calender processing industry was only 0.3 percent from January to November 2022, ranking the lowest among 41 major industrial sectors, indicating that this year's production restrictions will have limited effect on reversing the unfavorable situation in the industry. In 2022, the second year of the reduction of crude steel output, the annual crude steel output is expected to be around 1.02 billion tons, according to data from the National Bureau of Statistics and monitoring by the association.

"Will the production be limited next year and how? Perhaps the most important question." Luo Tiejun said that the association has had close communication with relevant ministries and commissions, and generally has the following views:

First, to solve industrial problems, we should give full play to the decisive role of the market, supplemented by the role of government regulation. Downstream demand in 2022 is not optimistic, but steel production has not decreased significantly, especially in the third quarter of the industry losses, some steel companies are still in the marginal benefit organization of production. Some enterprises are even worried about the waste of output indicators and forced to scalp production, in order to complete the task of limiting production, some local steel output statistics seriously distorted. "Therefore, in order to ensure the balance between supply and demand and reasonable profits of the industry, a market-driven self-discipline consensus should be formed within the industry first. All enterprises, especially the leading enterprises, should take production restriction as an active behavior, coupled with the government's illegal capacity restriction, in order to fundamentally solve the problem of vicious competition." Luo Tiejun stressed.

Second, it is necessary for the industry to establish a set of feasible new mechanism for capacity management, and realize regular self-regulation of production limit. The association has been discussing with companies how to develop self-regulation mechanisms. Most of the feedback opinions are based on the bottom order of The State Council in 2016 and the replacement capacity, implementing the "two guarantees, three limits and one relaxation", that is, sorting out the compliance and non-compliance enterprises: We will give preferential policies to ultra-low emission A-class enterprises, all scrap electric furnace enterprises, and enterprises undergoing substantive merger and reorganization. We will strictly restrict production of production capacity in violation of regulations, and change production capacity from the base of the above annual output to the base of capacity in compliance with regulations. Capacity management is a medium - and long-term work to achieve high-quality development of the steel industry, and industry self-discipline should play a greater role in 2023, regardless of whether production restrictions will be implemented as in 2022. Industry self-discipline requires the joint efforts of the whole industry. The key is to implement the production and management principle of "three sets and three don't", that is, to determine production by sales, do not turn limited cash into inventory; Set production according to efficiency, and do not generate net cash outflow in order to maintain production scale; Don't turn all your cash into receivables. "If the 'three for three' principle can be accepted by the whole industry and become a common code of conduct, the industry situation will be improved." Luo Tiejun stressed.

Third, strengthen data governance. Further work out the number of enterprises, production capacity, output, energy consumption, environmental protection and other data, and incorporate the statistical output into the statistics of the National Bureau of Statistics.

Fourth, we should focus on joint restructuring to consolidate the foundation for high-quality development of the steel industry. We will continue to speed up industry mergers and reorganizations, create conditions for the concentration of competitive resources in competitive enterprises, and help regulate orderly market competition so that industry self-regulation can play a greater role.

Second, we will vigorously enhance our ability to secure resources.

Improving the ability to ensure the supply of strategic resources is a clear requirement of the Party's 20th National Congress, and the just concluded Central Economic Work Conference clearly stated that we should "strengthen domestic exploration and development of important energy and mineral resources and increase reserves and production". China has already stood in the front line of world steel production and is moving towards becoming a strong steel country. However, without the guarantee and support of a strong resource country, the foundation of a strong iron and steel country will not be solid and secure.

Luo said that in order to improve the ability to secure resources and optimize the supply structure of raw materials, the association has submitted proposals to relevant ministries and commissions of the state to carry out the "Cornerstone Plan". Starting from the three major sources of iron resources, such as overseas ore, domestic ore and scrap steel, the association will spend two to three five-year plans to optimize the composition of iron resources. The National Development and Reform Commission, the Ministry of Natural Resources and other relevant ministries and commissions attached great importance to this, officially launched the implementation of the "Cornerstone Plan" domestic iron ore resources promotion project. Over the past year, the National Development and Reform Commission, together with relevant ministries and commissions and local governments, established and improved a two-level promotion mechanism, focused on the blocking points and difficulties of projects, studied and proposed specific solutions for "one enterprise, one policy" and "one mine, one policy", and carried out a great deal of fruitful work. Relevant local governments have formulated sound implementation plans and vigorously promoted the implementation of the work. At present, the development of domestic iron ore resources under "Keystone Plan" has achieved obvious results. First, the approval of domestic iron ore projects has been significantly accelerated, and the attitude of local governments towards project approval has changed from not taking the initiative at the beginning to the present acceleration. Second, investment in fixed assets in iron ore industry increased significantly. In the first 10 months of this year, the cumulative fixed asset investment in black metal mining increased by 33.2%, the highest growth rate in the mining industry. Third, research on some key projects was accelerated. At present, six key iron ore projects are under construction, which will increase iron concentrate capacity by nearly 30 million tons upon completion. Among them, the largest single underground mine in China, the West Anshan Iron Mine, officially began construction on November 16. The project has 1.3 billion tons of reserves and involves annual production of 10 million tons of iron concentrate, which will provide an overall solution for the green and efficient development of lean iron ore resources. At the same time, the association is also actively carrying out "Cornerstone Program" overseas mine development, scrap recycling and other aspects of the work. Luo Tiejun pointed out that for the scrap industry, the key issue now is to promote the upstream and downstream linkages between steel production enterprises and scrap processing and recycling enterprises, promote the formation of an industrial chain, cultivate a number of leading enterprises, and promote the application of scrap through market-oriented mechanisms.

Third, we will strive to ensure that the supply and price of raw fuel remain stable.

Luo Tiejun said that it is a medium - and long-term issue to greatly improve the ability to secure resources, while ensuring the supply and price of raw fuel is a realistic issue to be solved at present. From January to November 2022, key statistics of iron and steel enterprises imported ore procurement cost decreased 26% year-on-year, but still at a high level, while coking coal rose 29%, injection coal rose 27%. While the cost of iron ore has decreased, the cost of coal coke has increased significantly. The proportion of coal coke cost in the cost of pig iron has exceeded that of iron ore, which brings great difficulties for iron and steel enterprises to reduce cost and increase efficiency. To this end, the iron and Steel association to the relevant ministries and commissions to report proposals, implore coking coal supply and stable price into the national control mechanism, coking coal into the unified management of thermal coal; Further strengthen commodity raw material futures, spot market supervision and anti-monopoly supervision. "Relevant proposals have been highly valued by national ministries and commissions, and relevant work is being carried out." Luo Tiejun introduced that at the same time, the Iron and Steel Association and the coal association to maintain close communication and communication, establish a consultation mechanism, jointly promote the implementation of the "annual quantitative, quarterly pricing, guarantee contract performance rate" in the field of steel and coking coal to continue to implement the long-term contract mechanism, research and carry out the long-term contract performance of self-assessment work, to promote the formation of long-term stable strategic cooperative relationship between coal and steel.

"It is worth noting that iron ore prices have risen by more than 40 percent since the end of October, while coking coal prices have risen by more than 10 percent. The rise in raw fuel prices lacks fundamental support. It also reminds steel companies to maintain a reasonable pace of production and raw material procurement and eliminate speculation factors. Going forward, the association will continue to promote the formation of a new mechanism to balance coal production and demand, continue to push forward the integration of coking coal into the same control balance of thermal coal, make full use of both domestic and international resources, and promote the liberalization of international coal trade." Luo Tiejun said. At the same time, in view of the increasingly strong financial attribute of the steel industry chain, the overall situation of "from real to virtual", according to the member enterprises and their demands, Iron and Steel association will organize professional forces to conduct a comprehensive and systematic study on the impact of financial derivatives on the steel industry, so as to promote the derivatives market to truly return to the essence of serving the real economy.

Fourth, we will comprehensively promote the work of extreme energy efficiency.

In the past decade, the steel industry has made remarkable achievements in energy conservation and consumption reduction. In 2021, the industry's comprehensive energy consumption per ton of steel reached 549 kilograms of standard coal, down nearly 9 percent from 2012. Since 2021, the state has issued a series of policy documents on energy conservation and carbon reduction in key areas, effectively guiding steel to speed up the elimination of backward, promote industrial transformation and upgrading, strengthen technological research, and promote cluster development. As a key industry in energy consumption and carbon emission in the industrial sector, China's iron and steel industry is actively carrying out extreme energy efficiency projects.

According to Luo Tiejun, the association has been planning and communicating with national ministries and commissions for many times since the first half of this year, forming the "Energy efficiency Benchmark three-year action plan". It is planned to submit to the industry three sets of lists of technical catalog, technical capability list and policy list, as well as the top-level design scheme and implementation path of two standards and a data governance system within three years. On December 9th, the association held the on-site launch meeting of "Energy Efficiency Benchmark Three-year Action Plan" for the steel industry, which marked that the extreme energy efficiency project had entered the substantive implementation stage. This project is not only simply to enhance competitiveness through energy conservation and cost reduction, but also to lay a solid foundation for promoting the low-carbon transformation of the industry.

Fifth, actively carry out steel export management policy research.

Since the state adjusted the export tax rebate policy twice in 2021, China's steel export structure has gradually returned to normal. Luo Tiejun introduced that many companies have reflected that their high-end steel products have been struggling in the international market for many years. After the cancellation of export tax rebates, the competitiveness of some high-end products has declined. In particular, the competitiveness of some high-end products is not as good as that of Japanese and Korean steel mills. In view of this problem, he introduced, the association actively to the relevant departments to reflect the enterprise appeal, suggested that in the control of the export of general steel products, should encourage the export of high-end products, avoid "one size fits all", at the same time organize industry experts to carry out high-end product division and tax code subdivision research. On the premise of comprehensively considering the current situation of national tariff system, opinions of enterprises and other factors, the division scheme of high-end iron and steel products including 47 tariff codes was finally formed, and the focus was on the in-depth study of 5 tax codes (non-alloy galvanized sheet, alloy hot rolled bar/coil, alloy hot rolled steel sheet/coil) with large export quantity and concentrated enterprise response. Submit proposals for subdivision of tax codes to the Tax Tariff Commission of The State Council.

"Of course, the technical classification of these five varieties is indeed difficult, so we have repeatedly reported to the Ministry of Finance and the National Development and Reform Commission and other departments. Just yesterday (December 29, 2022), The State Council Tariff Commission issued a notice on the 2023 tariff adjustment plan, which adopted our proposal for the subdivision of the three tariff codes. In fact, the number of new tax numbers added every year is very limited, so it is not easy to achieve such a result." Luo said that the next step is to follow the country's policy deployment, while limiting the export of primary products, encourage the import of primary products such as billet, hot rolled coil and encourage the export of high-end products. At the same time, in terms of the export of high-end products, we will continue to improve the division scheme of high-end steel products, continue to carry out basic research on tax code segmentation, and lay a solid foundation for the country's precise regulation of steel exports.

Luo Tiejun finally said that the Party's 20 National Congress has drawn a grand blueprint for comprehensively building a modern socialist country, iron and steel people should seize the historical opportunity with a strong sense of responsibility and mission, firmly grasp the key work, and actively promote the iron and steel industry to achieve high-quality development.