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Strict implementation of "dual control" is conducive to promoting the stable operation of the steel market

Sep. 22, 2021

On March 27, 2017, the inter-ministerial joint meeting of the iron and steel coal industry to resolve excess capacity and overcome difficulties in development work held a steel and iron reduction work conference in Beijing. The meeting requested the steel industry to carry out supply-side structural reforms, and put forward the goal of resolving 50 million tons of excess capacity in 2017. Overall, during the "13th Five-Year Plan" period, the steel industry has achieved remarkable results in controlling production capacity.


In 2020, my country has achieved major strategic results in the fight against the new crown pneumonia epidemic. In the second quarter of that year, my country's economy began to recover quickly and gradually returned to the pace of development before the epidemic. In particular, infrastructure investment greatly increased my country's crude steel consumption. That year, my country's crude steel output reached 1.065 billion tons, a year-on-year increase of 7%. In the same period, my country's steel social stocks did not increase and remained at a relatively low level. After the carbon emission control target was put on the agenda, the relevant departments further proposed the task of controlling output from the perspective of environmental protection and climate reduction targets.

Strict implementation of "dual control" is conducive to promoting the stable operation of the steel market

At that time, the author once put forward a point of view, which is to consider the adaptation to demand when reducing production. At that time, all parties in the market had inconsistent understandings of crude steel production control, which contributed to the volatility of steel prices to a certain extent. The author believes that judging whether steel production is reasonable should be considered in a comprehensive and balanced manner from multiple aspects such as overall demand, imports and exports, steel inventory, and carbon emissions. It must be admitted that the domestic crude steel consumption is showing a growth trend, which is inseparable from the demand for downstream industries, especially after the epidemic, the state has taken various measures to vigorously promote the resumption of work and production, and downstream industries have ushered in a new round of development opportunities, and downstream demand is relatively strong. . In the case of demand growth, it is reasonable to increase production in an appropriate and coordinated manner. Only when the market maintains a balance between supply and demand can steel prices tend to stabilize.


However, due to the release of the U.S. dollar, international inflationary pressures have increased, triggering a sharp rise in international commodity prices. In this context, how to maintain the stable, coordinated and healthy development of my country's economy? Practice has proved that to maintain the stable and healthy development of the steel industry, it is necessary to coordinate environmental protection indicators and production indicators to achieve a balance. At present, the steel export tax rebate policy has been cancelled, which requires the maintenance of market supply and demand balance, which is also a prerequisite for reducing crude steel production. The state has repeatedly emphasized ensuring supply and price stability, and the central government has also rectified the movement to "reduce carbon", which shows the importance of the balance of supply and demand to the stable operation of the market and the necessity of a "dual control" policy for production capacity and output.


It needs to be pointed out that under the guidance of profit, individual companies have underreported their production capacity or even under-reported their output, which has seriously compromised the effect of the "dual control" policy. How to prevent it? Not long ago, the relevant person in charge of the Ministry of Ecology and Environment said that enterprises meeting environmental protection standards can not reduce production, and at the same time, they must increase efforts to rectify polluting enterprises and control new production capacity. On the basis of stable prices, continue to maintain pressure to reduce production. The author believes that this is also beneficial for steel companies to maintain a certain profit.


All in all, the saturation point of my country's steel consumption will eventually come. The "dual control" is undoubtedly beneficial to prevent serious overcapacity and excessive competition in the future. Only by strictly implementing the "dual control" policy can the steel market achieve a stable and healthy operation.


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