**Abstract**
Wang Xiaoqi, vice president of the China Iron and Steel Association, stated on the 29th that the steel industry recorded profits of 1.3 billion yuan, 1 billion yuan, 260 million yuan, and 150 million yuan in the first four months of this year, respectively. He emphasized that overcapacity remains the primary challenge behind the sluggish performance of the sector. Looking ahead, the association aims to bring approximately 80% of production capacity under standardized management by raising environmental barriers and implementing stricter regulations.
These remarks were made at the 10th Shanghai Derivatives Market Forum. Wang noted that the current comprehensive steel price index, compiled by the China Steel Association, stands at around 103 points—just slightly above the 100-point baseline set in 1994. In contrast, non-ferrous metal price indices have fluctuated significantly over the same period, while steel prices have remained relatively stagnant.
The prolonged low prices of steel products have led to six consecutive quarters of losses in the main operations of the industry, starting from the fourth quarter of 2011. The most severe loss was recorded in the third quarter of last year, reaching as high as 16.5 billion yuan. While some profit is still being generated due to investments in upstream mining and non-steel sectors, Wang pointed out that this situation is unsustainable and not a long-term solution.
According to Wang, overcapacity is the core issue causing these losses. In the first four months of this year, China produced 258 million tons of crude steel, marking an 8.4% increase compared to the same period last year. Of the 20 million-ton increase in output, 10 million tons were stored in warehouses. “This year’s demand for steel is actually strong, but it has been offset by the rapid expansion of supply,†he said.
To address overcapacity, improving environmental standards is considered the most effective approach. Steel mills that fail to meet these standards will face higher electricity costs and other measures designed to reduce their market presence. Under the "Regulations on Steel Industry Standards" issued by the Ministry of Industry and Information Technology, the goal is to bring about 80% of production capacity into compliance by the end of the "Twelfth Five-Year Plan." Future improvements may push another 80% of the remaining capacity toward compliance, gradually eliminating excess supply.
In terms of short-term steel price trends, Wang noted that steel prices have declined by approximately 10% this year. At the same time, the price of coal, a key raw material, has dropped by more than 10%, while iron ore prices have fallen by about 3%. These downward pressures are expected to continue unless structural reforms take effect.
In response to market volatility, Ye Chunhe, deputy general manager of the Shanghai Futures Exchange, announced plans to prepare for the listing of hot rolled coil futures and iron ore price index futures. Building on the success of rebar futures, these new financial instruments aim to provide better risk management tools for all participants in the steel industry chain.
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