2017 became the first full profit year for China’s steel industry after years of industrial downturn. The national steel de-capacity task was successfully completed one year ahead of schedule. In this single year, China eliminated more than 50 million tons of high-pollution, low-efficiency backward steel capacity, far exceeding the annual scheduled target. The thorough clearance of backward capacity fundamentally changed the loose supply pattern of the steel market and formed a tight supply-and-demand pattern for mainstream steel products.
Superimposed on the national atmospheric environmental governance upgrade, seasonal staggered production and environmental restriction policies were officially launched in key northern steel-producing regions. During the winter heating season, steel enterprises in Beijing-Tianjin-Hebei, Shanxi and Shandong regions implemented mandatory production reduction of 30% to 50%, resulting in a sharp contraction of market supply. At the same time, national infrastructure fixed-asset investment rebounded steadily, and downstream manufacturing demand maintained stable growth, jointly pushing steel prices to rise sharply throughout the year. Rebar, wire rod, hot rolled coil and medium plate all achieved substantial increases, with the domestic steel spot index rising by more than 60% annually, forming a typical super bull market.
In this year, the profitability of domestic steel mills hit a new high in nearly a decade. Both state-owned large steel groups and high-quality private steel enterprises achieved considerable ton-steel profits, and the overall cash flow and asset status of the industry were significantly improved. Relying on profit accumulation, a large number of steel enterprises began to invest heavily in environmental protection equipment upgrading, intelligent transformation and production line optimization. In addition, the state further optimized the capacity replacement policy, giving preferential replacement ratios to short-process electric arc furnace projects, guiding the industry to gradually reduce the proportion of high-carbon long-process smelting.
Industry Far-reaching Impact: The industry completely got rid of the loss predicament; seasonal environmental restriction became a normalized regulatory means; market pricing mechanism became more mature; and the industry officially stepped into a high-profit, high-standard and high-threshold development stage.