China's steel consumption is decreasing in absolute terms

Wang Xiaoqi, vice president of China Iron and Steel Association, said on August 30th at the 6th China Steel Raw Fuel Market Summit Forum that the current steel industry has entered one of the most difficult periods in history. Although the statistical output is still growing slightly, after deducting the increase in exports and inventories, actual consumption is declining. "It is not a decline in growth rate, but a decline in absolute quantity." At present, the domestic steel comprehensive price index compiled by China Steel Association is around 102 points, and in 1994 when the index was launched, it was 100 points. After 18 years, the steel price level has returned to the original point. Such a depressed price caused the steel industry to fall into losses in July. Wang Xiaoqi introduced that, before accounting for the previous profit, the profit per ton of steel in the first seven months of this year was only 1.68 yuan, which was lower than the profit level of 50 yuan per ton of steel in the financial crisis. The situation in August did not improve, and the loss of steel mills showed an increasing trend. Wang Xiaoqi believes that the reason why the steel industry is in trouble is the punishment that was not handled according to economic laws. Statistics show that China's crude steel production capacity is currently around 940 million tons, while last year's crude steel production was only 680 million tons. In the first seven months of this year, China achieved a crude steel output of 419 million tons, a slight increase of 2.1% year-on-year, lower than the annual average of 4% in the 12th Five-Year Plan. To make matters worse, if the increase in exports and inventories is deducted, actual consumption has dropped by about 3% year-on-year, which is a rare situation for many years. With investment falling in the proportion of China's GDP and the reduction of steel consumption in major industries, Wang Xiaoqi believes that after crude steel production reaches 700 million tons, it will enter the peak area. “Some private entrepreneurs are already considering how the future crude steel consumption will drop to 600 million tons or even 400 million tons.” What are the prospects for the steel industry due to overcapacity and sluggish demand? Industry insiders analyzed that the hope for industry recovery lies mainly in three aspects. : First, the elimination of backward production capacity. Steel prices have fallen sharply, causing steel traders to “run the road” and in the future there will be steel mills with poor returns exiting the market. The second is the improvement of concentration. At present, the concentration of the top ten steel mills in China is less than 40%. “The upstream can't bargain, and the downstream can't raise prices.” If it is increased to more than 60%, the situation will be significantly improved. The third is the decline in the price of raw fuel. At present, iron ore prices have fallen below $100, down 50% from historical highs. Coal prices have also continued to be reduced, and the cost pressure on the steel industry is easing. "If the past decade is the golden decade of rapid development of the steel industry, the next decade will be a key decade for structural adjustment," said He Wenbo, chairman of Baosteel.

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