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Prisoner's dilemma in the iron and steel industry: all hope that other places can reduce production capacity and preserve themselves

prisoner's dilemma in the iron and steel industry: all hope that other places can reduce production capacity and preserve themselves

China Construction machinery information

in the view of Zhao Xizi, the former honorary president of the all China Federation of small and medium-sized metallurgical enterprises chamber of Commerce, the entire iron and steel industry is a "pressure cooker"

he has been the chairman of the board of supervisors of key large state-owned enterprises for eight years and is fully responsible for "checking steel". He and the China Federation of small and medium metallurgical enterprises chamber of Commerce have just completed a survey involving five major steel producing provinces and more than 110 steel enterprises

the research results are worrying. The excess capacity of steel for several years has reached the limit, and the huge losses have been unsustainable. The industry's debts have frequently broken records, but zombie enterprises have not been cleared. The continuous low steel prices have intensified vicious competition, and the risk is accelerating. The whole industry is facing a "steel crisis"

at the time of survival, some places and enterprises began to explore the difficult way to reduce production capacity, and the industry, academia, and government agencies are also discussing more and more about how to extricate the steel industry from difficulties. How to establish exit channels, settle employees and dispose of debts? The whole steel industry stands at a critical juncture related to its survival, prosperity and decline

"prisoner's dilemma" and "steel crisis"

"the common voice of these more than 100 steel enterprises is: life is better than death, can't live and can't die." Zhao Xizi said that although the steel industry has repeatedly called for capacity reduction, there are many obstacles to its implementation. In his view, the first major resistance to the reduction of steel production capacity is the local government, the second is the bank, and the third is the steel enterprise itself

the economic growth rate of major iron and steel provinces is mostly at the bottom. The reduction of steel enterprises' production capacity is bound to cause further decline in the economic growth rate of these places, and the unemployment of employees may also increase local instability factors. Therefore, local governments are generally unwilling to see enterprises reduce their scale. When investigating in Shanxi, Zhao Xizi found that some enterprises have died and been rescued by local governments

Premier Li Keqiang chose Shanxi's iron and steel enterprises as the first stop of his inspection this year. In Shanxi, he stressed that "good steel should be tempered and good production capacity should be the survival of the fittest", which means shouting to local governments to reduce production capacity

behind the bank's resistance is the concern about the increase of bad debts. If the enterprise dies or reduces production in a large area, it will inevitably affect the bank's report card; Most steel enterprises are state-owned enterprises, and de capacity means the placement of a large number of employees. In addition, many enterprises are still lucky and hope to survive the "cyclical adjustment", and de capacity is difficult

what's more troublesome is that the steel industry is facing a "prisoner's dilemma" in reducing production capacity: each of them prevaricates on reducing production capacity, hoping that other places can reduce production capacity and preserve their own enterprises. Another "prisoner's dilemma" exists among various subjects: it is difficult to clarify the ownership of central ministries and commissions, local governments, banks and enterprises, and it is a matter of wrangling with each other who pays

the steel production capacity that cannot be withdrawn for a long time affects the balance of supply and demand in the market, and the vicious competition between steel enterprises has become popular. The steel price has hit a record low, but it has become a tool for steel enterprises to fight against each other. The vicious competition has brought prices down again and again, and the entire steel industry has been dragged to the brink of danger. Zhao Xizi believes that in the past, China will have to face a "steel crisis"

this can't help but remind people of the steel industry crisis in Europe and the United States in the 1970s and 1980s. Under the background similar to today's China, the steel industry in Europe and the United States and other countries has undergone drastic adjustments: in the 10 years from 1974 to 1984, British steel production made major improvements to the original products in terms of structure, material quality and so on, resulting in the decline of nearly 60% in new measuring appliances with changed performance and technical characteristics, nearly 40% in the United States and 26% in West Germany, France fell nearly 30%

many interviewees said that the "steel crisis" will lead to large-scale death of steel production and distribution enterprises, massive unemployment of workers, large-scale bad debts in bank debt, resulting in the dominance of financial risks, which must be avoided with all efforts

according to Li Xinchuang, Executive Deputy Secretary General of China Iron and Steel Industry Association, in the first November of last year, the key statistics showed that steel enterprises had accumulated losses of 53.132 billion yuan, main business losses of 91.77 billion yuan, and the profit margin of main business was -3.4%, which was the lowest level in the industrial industry. 51 of the 101 enterprises in the key statistics lost money, with the loss rate reaching the highest level since this century

at the same time, the debt ratio of the steel industry increased rapidly by 10 percentage points from 2009 to 2012, close to 70%, far higher than the average level of 55.7% of China's manufacturing industry, and far higher than the level of China's steel industry during the three-year turnaround of state-owned enterprises in 1998

the actual losses are far more than this. The above data are not complete. Some small and medium-sized enterprises that may have more serious losses have not been included in the statistics, and Zhao Xizi also found in the survey that the profits on the books of many enterprises are not "true", "most of the profits on the books of many steel enterprises are obtained by selling assets. Of the 110 steel enterprises surveyed, more than 70% of the cash flow is negative, which means that there will be more and more zombie enterprises."

initial signs of capacity reduction

it is worth noting that five of them are related to the current hot graphene. It is noted that China's steel production has reached an inflection point. According to the latest data of the National Bureau of statistics, the national crude steel output was 803 million tons in 2015, a year-on-year decrease of 2.3%; Pig iron production was 690 million tons, a year-on-year decrease of 3.5%. This is the first negative growth in steel production since 1981

Sheng Laiyun, spokesman of the National Bureau of statistics, believes that this means that traditional industries such as steel have actually started to reduce production capacity. "Previous data showed that the growth rate of these industries was falling. Since the fourth quarter of 2015, the growth rate has not only declined, but also entered a negative growth, resulting in a decline in the absolute volume of production. This means that some traditional industries, forced by the supply and demand market environment, finally can't stand it, and began to actively reduce production capacity."

Li Xinchuang predicts that in 2015, the national steel consumption will be 668 million tons, a year-on-year decrease of 4.8%, and there may be the first negative growth in steel consumption since 1996. He believes that the steel industry will enter a new era of "reduced development" under the pressure of weak consumption, absolute overcapacity, increased losses and high debt

Zhao Xizi's survey confirmed this judgment, "steel enterprises have been forced to take the initiative to reduce production capacity. In October last year, more than 110 steel enterprises have reduced production by 10% month on month, accompanied by steel enterprises that have created great value for farmers planting fresh agricultural products and have begun to lay off workers."

personnel placement is the key to the reduction of iron and steel production capacity. According to Zhao Xizi, there are four ways of placement for these enterprises: one is buyout. Enterprises that have laid off staff are compensated 130000 yuan per person on average to encourage them to seek employment by themselves; One is internal digestion. Some enterprises have actually laid off staff, but the transfer of employees from blast furnace to other positions is basically digested by the enterprise itself; For places with layoffs of up to 10000 or 20000, local governments directly came forward to organize training, resettlement and job transfer. In order to reduce social shock, some places mobilized thousands of Party members and cadres to do resettlement work from house to house; For private enterprises, it is more likely to be direct layoffs. Some private enterprises in the survey said that they would directly lay off 10000 people within four years

a realistic basis for the signs of capacity reduction in steel enterprises is that the current capacity utilization has fallen sharply, and many enterprises have been in the state of shutdown. According to the data of the international iron and Steel Association, since 2014, the global crude steel capacity utilization has generally shown a downward trend. After July last year, the capacity utilization has fallen to less than 70%, and the situation in China is even more severe

take Tangshan, an important iron and steel city, as an example. According to the information mastered by lizhongjuan, vice mayor of Tangshan, as of November last year, there were 88 wire rod and rebar production lines in Tangshan, of which only 52 were under construction, accounting for 59%; Only 9 of the 29 billet and rolling production lines have been started, with an operating rate of 31%. This is just the operating rate. The utilization rate of production capacity is much lower than this

in the process of capacity reduction of some enterprises, local governments have given certain subsidies. For example, in some places in Hebei, a certain amount of subsidies will be given for each ton of backward steel production capacity eliminated. However, in terms of enterprise equipment and other indicators, there are few backward production capacity that does not conform to industrial policies. How to dispose of excess but not backward steel production capacity requires more evaluation dimensions

there is an urgent need to establish an exit channel mechanism

the top priority of steel de capacity is to establish an exit channel and the corresponding exit mechanism to reduce the serious excess capacity as soon as possible

not long ago, Feng Fei, Vice Minister of the Ministry of industry and information technology, revealed that the elimination of excess steel production capacity should focus on the withdrawal of zombie enterprises. How to form an exit channel mechanism is still under discussion. The national development and Reform Commission and the Ministry of industry and information technology are studying and formulating a disposal plan for zombie enterprises

the exit channel mechanism must solve three problems: first, the placement, job transfer, training and reemployment of enterprise employees; second, the disposal of bank debt and mutual insurance between enterprises; third, the shutdown of enterprises should exit the steel industry, and the equipment should be dismantled, rather than the capacity unchanged after bankruptcy and reorganization

in 2015, the national crude steel output was 803 million tons, and at present, China's steel production capacity is about 1.2 billion tons. After a lot of prediction research and trend analysis, Zhao Xizi came to the basic conclusion that by 2020, the annual steel production must be reduced to about 600 million tons, and the production capacity must be reduced by 300 million tons

an official from the Industrial Coordination Department of the national development and Reform Commission clearly pointed out that the key to the exit channel mechanism is to design a base policy for personnel resettlement and debt disposal

according to Zhao Xizi's calculation, in terms of personnel placement, at present, the country directly and flexibly adds the required standards; The total number of employees engaged in steel production is about 1.8 million, plus associated employment, reaching more than 5 million. Removing 20% of the production capacity means that about 1 million employees need to be resettled. If calculated according to the standard of 100000 yuan buyout per person, about 100 billion funds are needed

where the money comes from is crucial. Zhao Xizi put forward a proposal to the State Council that production capacity "depends on life and death": set up a fund in the iron and steel industry, with the upper end financed by multiple parties and the lower end as the exit channel for excess production capacity

its upper end is similar to the airport construction fund: steel enterprises pay part of the money to the fund for every ton of steel sold. It is estimated that the steel output this year and next will be between 650million and 800 million tons. If 10 yuan per ton is drawn, more than 10 billion yuan can be raised in two years

however, it is urgent to reduce production capacity in the past two years. More than 10 billion yuan is obviously not enough. The gap needs to be shared between the central and local governments. The central government gives certain subsidies, and local governments raise some money through their own channels (such as issuing bonds). "It takes time for steel enterprises to accumulate the scale of the fund. They should solve the problem of using the future money in advance, and then let the fund slowly repay the debt."

the lower end of the fund is used to directly subsidize the withdrawal of production capacity, mainly for the placement of workers, staff training and reemployment. The average cost of building a ton of steel production capacity in the whole process of the steel plant is about 4000 yuan. Now the steel enterprises have been very difficult. If the fund can give a subsidy of 500 yuan to 1000 yuan, it will be very attractive. Zhao Xizi stressed that in this process, "paying money on one hand and reducing production capacity on the other" should be strictly implemented, and blast furnaces and other equipment must be dismantled on the spot

in terms of debt, data from China Steel Association showed that the balance of short-term and long-term loans of banks in the steel industry reached 1335.9 billion yuan at the end of November last year. another

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