China's steel industry is under tremendous cost pressures, mergers and restructuring process in the industry against the backdrop of slowing down to withstand a number of Fan the impact of rising ore prices, coupled with industrial upgrading and capacity to adjust to the fact that delay, Chinese steel companies to survive is not easy.
Recently, the National People's Congress, China Steel Industry Association, Wuhan Iron and Steel (Group) Co. Deng Qilin, general manager of the newspaper and other media interview that he hopes that the relevant state ministries and commissions to attach great importance to the difficult iron ore negotiations. Otherwise, the Chinese steel industry will suffer huge losses, leading to overall socio-economic development is unbalanced.
At the same time, Deng Qilin Chinese steel companies are also fighting each other to bring the iron ore trade, confusion, showing attitude. "We are all issued regulations, the meeting also called for, and the rest do? Able to buckle his salary has been withheld his bonus?"
Industry needs to adjust the overall
Reporter: It is said workers should be introduced immediately a letter to the Department of merger and reorganization of the steel industry guidance, what are your views?
Deng Qi Lin: China's steel industry should step up the pace of mergers and reorganizations, no longer re-emphasized. Last year, the world's 66 steel-producing countries, 65 reduced by about 30% of capacity, only the increase by 13.5% to reach 5.65 million tons. This year, our steel production capacity will reach 700 million tons, it is clear that supply exceeds demand. Not only the total does not control, eliminate backward production capacity has also been no progress, as well as industrial upgrading, energy-saving emission reduction, technological advancement, do not meet the requirements. Next, China's steel industry, the adjustment process, not just mergers and acquisitions, but the overall integration of the industry to adjust.
Reporter: Do you think the overall situation of China's steel industry, the progress of adjustment do?
Deng Qi-lin: the pace has lagged far behind, and failed to advance on time. Chinese steel companies too much mess and is also highly competitive, the market is very disordered. Imported ore for example not leaving the subject of this round of negotiations, regardless of high prices and low price, some enterprises had signed contracts. It can not engage in ah, but also how the negotiations, people are one voice, we are a lot of sound, a lot of action.
Many companies do not listen to calls, government co-ordination efforts are not very big, iron and steel industry development is very difficult.
This is just business you love I would like to get together more of the market behavior in the future, should be market behavior and the government two hands work together in order to speed up the iron and steel industry restructuring and mergers and restructuring process.
Reporter: As the iron and steel industry, highlighting the problem of excess production capacity, a number of New Project Development and Reform Commission last year requested a postponement of construction, the progress is?
Deng Qi-lin: Take WISCO Fangchenggang project, is currently awaiting state approval, preliminary work basically completed according to plan, and waited for a better opportunity to be further promoted.
Frankly, in line with national industrial policy, new projects will certainly be launched at the right time. Fangchenggang project is part of the rational distribution of industries along the coast to the western region's economic development support is also important.
Reporter: Some market participants said that the steel industry has entered a high-end products to compete homogenization stage, how do you view this issue?
Deng Qi Lin: You're right. Now China's steel construction is not low-level redundant construction in the past, there are also high-level redundant construction issues. Such as silicon steel profits higher, everyone would want on. In addition to WISCO, as well as Baosteel, Anshan Iron and Steel (000898, stock bar), Maanshan Iron and Steel, Benxi, and so about 78 enterprises are in the last of this product.
This situation, perhaps the future will bring greater industry competition to adjust the trouble. But I am also pleased that there are so many high-end products iron and steel enterprises have Laigao of national industry stronger, bigger is good, the right to occupy the high-end market in China's imports of steel products are also top out beneficial.
The transfer of excess production capacity overseas
Reporter: We note that Australia's acquisition of Chinese companies have shown a cautious approach, how do you see? Some people say that Chinese companies tend to holding, is one of the factors leading to the failure of the acquisition?
Deng Qi Lin: Yes, the heart of Australia certainly not feeling well. But the world is a big market, international integration is the trend, how Australia can not be kind. Behavior of many enterprises, especially foreign firms, Chinese companies are willing to cooperate with us, they are unable to manage the government.
In the acquisition process, we do not move too much, equity participation, partnership, joint venture, Holdings may, in any form can be, as long as resources, we are beneficial.
Reporter: Wuhan Iron and Steel and Brazil not long ago came up a steel plant project, is not it mean that China's iron and steel enterprises will gradually shift production overseas to go?
Deng Qilin: Premier Wen Jiabao in his government work report, also spoke, there is excess capacity can go overseas to invest. In such circumstances, the Brazilian companies are willing to invest in us, but also hope that we invest in, why can not we do? Besides, we Chinese iron and steel industry base, the design, investment, manufacturing, production of several millions of tons of iron and steel plant is not a problem.
The prices are not the moral position of vulnerability
Reporter: At present, very strong iron ore prices is expected, and some said that going to go up more than 50%, how do you judge?
Deng Qi-lin: Economic recovery in the steel industry, too, the world's major steel-producing countries to gradually resume production. Mine operators are precisely the three captured this information, it immediately began to price increases, leading to a very difficult right now to negotiate.
There are two possibilities, one may be they must put up their prices, China's steel companies cut production. I buy less of your ore, the loss less, but there is a certain demand for the downstream. But if you do not cut, he is now a seller's market, he says goes.
Negotiations is also very difficult, not to talk about you this side is good, a lot of SMEs put out a contract signed, and how can we talk it down? Finally, you have to accept this price, if the spot market purchases, China's iron and steel industry to bear the majority of enterprises are relatively large cost pressure. From the beginning of last year, China's coastal ports always maintained about 70 million tons of ore stocks, which are the traders prepare for the ore trade war, made a little opportunistic fiscal. Both Chinese and foreign businessmen and operators of these mines is simply ignoring China's iron and steel enterprises are very difficult situation.
Reporter: Last year, the negotiation is very difficult, lead us to no formal agreement be signed, this year is very difficult, then you predict what the outcome will be? Have been deadlocked do not sign?
Deng Qi Lin: If you give a little low-profit enterprises to retain, then we will agree on this price. If the gains exceed the cost of the added value of China's steel industry, you ask me how to accept this price? Although steel prices have rebounded a little bit, but it is impossible to completely absorb the cost pressure on ore prices. Three times to five times your money, I was a little meager profits are not, how can you accept it?
Finally, only two choices: First, large-scale loss of iron and steel industry; second, iron and steel industry itself overwhelmed, put the pressure transmission to the downstream industries, but this may result in very serious socio-economic development imbalances.
Three mine if you can not reasonably priced according to market conditions, but to drill disorder that China's iron ore trade loopholes Laigao position of vulnerability of the prices, I think it is unfair, and it is not moral.
I think, the state ministries and commissions should attach great importance to iron ore negotiations, should be given to intervene in the foreign several upstarts should not ignore the market price of regular prices arbitrarily. Ore imports and exports for the disorder and foreign suppliers and principles of the law of value regardless of the market soaring, China should be initiatives to deal with, otherwise it will seriously affect the effectiveness of China's steel industry and economy and healthy development.
Ore agent system is not a trade protection
Reporter: Vale do Rio Doce said that they will build a distribution center in China, sources said, based in Qingdao, Hong Kong, how do you think?
Deng Qi-lin: Last year, individual foreign companies played petty tricks, the judiciary to intervene, and why? Well too much! Iron and steel industry, a lot of pressure to bear, you dug up a dozen U.S. thing, more than 100 U.S. dollars sold to China, Chinese iron and steel would also like to live.
Vale to establish distribution centers, and is based on China's recent predicament two years of negotiations did not go well, would like to seize China's huge demand for the ore transported to ports in China, piled at the door to sell you. This guy powerful enough, how much you want to sell, the price a little lower than the market price, the motivation and ambition is big enough, and unfavorable to China.
Reporter: This is a consolidation of iron ore trade, you yourself have mentioned the review to establish the amount of ore import licensing system and the procurement agent system can be specifically addressed about it?
Deng Qi Lin: National Development and Reform Commission mentions the need to implement agent system, but in fact does not advance.
Does not advance the cause not enterprise, but in certain government departments, they may worry that trade protectionism would be unfavorable to China, more cautious. But protectionism which countries have the appropriate thing would not hurt, your own country does not protect their own business, then to protect the Who is that.
I do not say we have a specification, but you look at a foreign mining costs so low, have kept prices is the upstart. We are due to speculation of mine agent system, preventing them not to over-fry up the ore, which is regulating the market behavior, not to mention trade protection. Whether national ministries or enterprises should make efforts to push forward.
