China's Steel Companies Lack More Than Just The Right To Speak?

China's steel enterprises' right to speak on iron ore prices is not to be talked about, but by continuous improvement of competitiveness.

    As the largest buyer in the world, there is not enough power to speak. One important reason is that the concentration of Chinese steel enterprises is too low to form a unified and powerful voice. (information photo)

In July 15th, a piece of news made all Chinese iron and steel enterprises generally "injured". According to sources, Australia's BHP Billiton and Rio Tinto and European steel mills reached a contract price of 71% for iron ore this year, and the price rise was far below the 96.5% gains it had just reached with Asian steel companies.

Earlier, the spokesman for China's steel industry has made a high-profile statement. "We will never allow China's price to be specifically targeted at Chinese steel mills in iron ore negotiations. "When the European steel mills and the Australian side now reach an agreement lower than China's gains, it means that the bottom line has been broken down.

Although China's steel companies can denounce morally, Rio Tinto and BHP Billiton have a "double standard" between European steel enterprises and Asian steel enterprises, expressing their anger over unfair negotiations, and even denouncing the two iron ore enterprises to abuse their dominant position in the field of iron ore supply, but we can not deny that the world's largest iron ore demand country has no price speech right.

Of course, there is also a view that high demand originally "dwarfed" the negotiating position of the demand side. For example, China's steel output increased from 30 million tons in the 80s to the astronomical figure of 4.89 million tons in 2007, which directly led to the tight supply of iron ore. China's steel mills could only accept substantial price increases and had no choice.

However, when China's steel enterprises and iron ore sellers were talking about "lip service", ArcelorMittal, the world's largest steelmaker, got a 71% low price rise from iron ore super sellers in February. To some extent, this is the key to the problem. Chinese steel companies get the right to speak, and there are still many things to learn. Among them, ArcelorMittal is a very good specimen.

Data show that global iron ore prices rose 71.5% in 2005, up 19% in 2006 and 9.5% in 2007, with an average increase of 85% this year. Joint securities research shows that if the price of iron ore rises by 30%, it means that the cost per ton of pig iron will increase by 191 yuan.

Under such circumstances, controlling the supply of upstream raw materials and raising the self-sufficiency rate of iron ore has become the most concerned issue in the international steel industry. For example, ArcelorMittal actively extended to the upstream of the steel industry, on the one hand, to ensure its iron ore supply, and on the other hand to buy coal mines.

It is reported that ArcelorMittal has been making frequent acquisitions worldwide, buying iron ore in Africa, Canada and Russia, and buying coal mines in Kazakhstan, India and South America. ArcelorMittal's steel plants are mostly built near mines, thereby minimizing production costs.

Brazil, which is rich in iron ore resources, has now become an important part of the global iron ore supply chain of ArcelorMittal. ArcelorMittal is located in tularam, Brazil's port city of Vitoria. It is only a few kilometers away from the valleys of the largest iron ore enterprise in the world. The convenient railway directly conveys the iron ore of vale to the iron and steel production workshop of thularan company, thus greatly saving the cost of iron ore transportation.

In addition to ensuring the supply of upstream raw materials and controlling costs in the production process, the ultimate way out for the global steel industry to seek sustainable development can also be the largest and strongest through mergers and acquisitions.

Since 2003, the steel industry has been catching up with mergers and acquisitions. Among them, the merger of Arcelor and Mittal shocked the global steel industry. It is noteworthy that the two steel giants themselves have gradually become stronger through integration. Mittal Steel started its development from a Indian Iron and Steel Company, and became a transnational giant after its merger and reorganization. Arcelor itself was also merged from three European Steel Corp in Luxemburg, France and Spain. The merger of the two Steel Corp shows to the world that the sustainable development of the steel industry will be based on continuous M & A and cost control.

For China's iron and steel industry, at this stage, only by increasing the reorganization of iron and steel enterprises and forming several large iron and steel groups in the whole country can the iron ore market with serious imbalance between supply and demand be harnessing. Moreover, large-scale restructuring is bound to eliminate some backward steel enterprises and relieve China's enormous environmental pressure. More importantly, China's steel enterprises can also gain greater voice in the future international negotiations.

For a long time, the distribution of China's iron and steel industry is not concentrated, which is an important reason for the rising price of iron ore. China's iron and steel consumption is very large, and it is expected to reach more than 1/3 of the world in the future. In the face of such a huge market, domestic steel enterprises must accelerate joint reorganization and improve industrial concentration in the background of accelerating international steel giants to enter the Chinese market.

Around the two major fields of iron and steel industry integration and environmental protection, China's steel industry has a clear industrial development policy. 2005 the State Council passed the "iron and steel industry development policy" adopted by the State Council. By 2010, the number of iron and steel smelting enterprises has been greatly reduced, and the proportion of steel production accounts for 50% of the top ten steel enterprises in China, reaching over 70% in 2020.

Under this framework, China's steel industry is accelerating integration. This year, from the restructuring of Shandong's steel industry to the restructuring of Baosteel, Guangdong iron and Steel Group Co., Ltd., Shaogang, and then to Hebei, the first big iron and steel province in China, the iron and steel industry has been restructured. China's steel industry is paying attention to breaking the passive situation in the international mineral price negotiations.

In the long run, China's utilization of imported ore will remain at around 50% of the total demand. Therefore, China should also attach great importance to the establishment of a stable and reliable supply chain for iron and steel raw materials overseas and change its passive state.

In recent years, some Chinese enterprises, such as Baosteel, have stepped up their pace, but the industry believes that China's overseas iron ore raw material coverage is not wide, and the proportion of real initiative is not high. It is suggested that China should take an active part in overseas iron ore selection and construction or joint venture to produce billet factories through various ways, so that some imported iron ore will be replaced by imported billets, forming a new advantage for Chinese iron and steel enterprises to participate in international economic cooperation and competition under the condition of economic globalization.

Only in this way can we gradually realize the "right of speech" and "pricing power" of Chinese steel enterprises in the world.