Chinese government: A survey on China's domestic steel market
On the morning of May 18, the National Development and Reform Commission held a press conference in May. Jin Xiandong, Director of the Political Research Office of the National Development and Reform Commission and spokesperson of the Committee, attended the press conference and introduced investment projects, the operation of China-Europe trains, the promotion of the development of the Yangtze River Economic Belt, the evaluation of market access efficiency, and the evaluation of the business environment, and other relevant information. And he also addressed issues on the construction of Hainan Free Trade Port, the progress of carbon peak carbon neutralization, China-Australia investment and trade cooperation, national fitness facilities to make up for shortcomings, and iron and steel production capacity, business environment evaluation rankings, commodity price situation, cultural protection, inheritance and utilization projects, consumption promotion policies and other issues.
Jin Xiandong said that since 2016, in accordance with the decision and deployment of the Party Central Committee of CPC and the State Council on the supply-side structural reform of the steel industry, all relevant plants have continued to promote the reduction of capacity in the steel industry and achieved significant results. In order to deepen reform in the iron and steel industry and improve the results in iron and steel production reduction, the National Development and Reform Commission deployed the 2021 steel reduction plan. Relevant work will be comprehensively put to practice to reduce carbon emissions.
At present, all iron and steel plants are focusing on self-inspection and self-correction around the production capacity and optimization and will report to local authorities to resolve surplus production capacity.
Regarding the issue of iron ore supply, we will make full use of the resources of both domestic and international markets. From a domestic perspective, we will intensify the exploration and development of iron ore resources, accelerate the construction of new domestic iron ore projects and ongoing resource continuation projects, coordinate the recycling and utilization of social recycled steel resources, and improve domestic resource security capabilities. Internationally, we will give full play to the role of the main body of enterprises and encourage qualified enterprises to actively and steadily develop overseas iron ore resources. Improve the diversified import supply system, encourage enterprises to expand iron ore import channels, promote the import of overseas recycled steel raw materials and resource utilization in an orderly manner, and optimize the supply structure.
Recently, the prices of some commodities have risen sharply. Jin Xiandong said that it was mainly due to the superimposed influence of factors such as rising international commodity prices, loose global liquidity, and market expectations. The rise in commodity prices has both pros and cons on China. On the one hand, it is conducive to improving the profitability of upstream raw material companies and reducing debt risks. On the other hand, it will also increase the operating costs of mid- and downstream manufacturing and affect the efficiency of the industry.
In April this year, the producer price index (PPI) of industrial producers rose by 6.8% year-on-year; the PPI in the first four months rose by 3.3% year-on-year. From the perspective of future trends, due to the transmission effect of international bulk commodity prices and the low base in the same period last year, the PPI growth rate may further expand in recent months, and the PPI year-on-year growth rate in the second quarter may continue to rise. However, with the continuous release of price signals to guide the production and circulation of raw materials, commodity prices will gradually return to the fundamentals of supply and demand. The year-on-year growth rate of PPI for the whole year is expected to be "low at both ends and high in the middle" trend, and the year-on-year growth rate in the second half of the year will decline.
In response to the recent new situations and problems in the bulk commodity sector, the National Development and Reform Commission, in conjunction with relevant departments, has issued adjustments and improvements to relevant policies on steel import and export, and strengthened the supervision of the futures market. We will coordinate the resources of the domestic and international markets to effectively strengthen supply. Currently, the National Development and Reform Commission and the State Administration of Market Supervision are jointly investigating market conditions such as steel and iron ore to further understand industry trends. In the next step, we will continue to work with relevant departments to continuously strengthen monitoring and early warning, strengthen market supervision, and take targeted measures to effectively maintain market stability.