Pattern of supply and demand continued to deteriorate the cost side effect is limited

Jan 15
12:44

2016

Allice S Lee

Allice S Lee

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How to avoid the risk of steel industry

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On January 12,Pattern of supply and demand continued to deteriorate the cost side effect is limited Articles 2016 in debt credit rating co., LTD. Held in Beijing "under the new start of industry transformation and risk challenge - debt credit credit outlook conference" in 2016 the outlook conference attracted nearly 60 people in the market participation and nearly 20 media reports, the atmosphere is warm and deep communication. With dispatch bonds backed by media coverage at the scene. Experts and scholars at the meeting to discuss the dynamic situation of iron and steel industry at present and the industry development situation in 2016 were discussed. Main points are as follows:

 

In 2015, real estate, machinery, automobiles, and other areas of the main steel demand growth significantly decline, apparent consumption of crude steel fell for the first time for nearly 10 years, and excess capacity in the process is slow, the industry pattern of supply and demand continued to deteriorate, and the cost side effect is limited, the boom of industry decline significantly. In 2016, "administrative capacity" and "market-oriented to capacity" coexist, industry or capacity will shrink slightly, but the demand for the infrastructure, steel demand growth is not enough to offset the real estate, machinery and other fields with the decline in the amount of steel, domestic steel consumption or will continue to decline, the vulnerable and trade friction intensified the global economic recovery or will lead to China's steel export growth continued to slow, the industry pattern of supply and demand will be slightly worse, capacity utilisation rates will remain low, steel prices have to fall.

 

Financial aspect, industry profit is still not optimistic, the debt burden will remain heavier level, solvency indicators will remain poor. Under the background of the central pitch "reform" supply side, the market clearing or strengthen capacity, increase its competitive ability of small and medium-sized enterprise production, external support or weakening, corporate debt defaults will increase in the industry. Debt credit to maintain China's iron and steel industry in the "poor" credit quality, outlook changed from "stable" to "negative", pay attention to the regional environmental difference, cost control ability and high leverage and flowing pressure is big iron and steel enterprise credit risk.

 

Key concerns:

 

1, 2016, "administrative capacity" and "market-oriented to capacity" coexist, the steel industry capacity or will shrink slightly, but the downstream demand support or lack of domestic steel consumption will continue to decline, the industry pattern of supply and demand will be slightly worse, capacity utilisation rates will remain low, steel prices have to fall.

 

2, iron ore prices drop space is limited, production for the steel price support is not strong, the whole industry profitability is still not optimistic.

 

3, in the boom of industry downturn, and the reform of the "supply side" policy, the market clearing or strengthen capacity, increase probability of default risk exposure to the individual. Poor focused on regional environment, cost control ability and high leverage and flowing pressure is big iron and Steel enterprise credit risk.