Steel companies strive to create differentiated models

Under the impact of the deep downturn in the steel industry, it is also difficult for the leading steel companies to remain alone. Recently, Baosteel and Taigang Stainless and other steel companies began to integrate their businesses, either to offset their losses or increase their investment in the main industry. It can be seen that the steel industry is gradually becoming more differentiated and characterized through business integration.

As a domestic leading steel company, Baosteel's traditional core products are mainly automotive steels, which have been widely used in domestic joint ventures and auto brands of auto companies. In particular, the quality and quality of automotive exterior panels, high-strength steels, etc. are all available in the domestic market. Obvious competitive advantage. At present, the company's cold rolled products have a share of nearly 50% in the domestic market. The company plans to sell its stainless steel and special steel assets to Baosteel Group, a controlling shareholder, as one of the acquisitions raised in 2005. However, after the acquisition, the profitability of this part of the assets is not optimistic. Except in 2006, the rest was basically loss-making or on the edge of break-even. Although it is not yet possible to determine the future use of the company's funds, the company can focus its resources on the development of major profitable products such as ordinary carbon steel sheets after unloading losses.

Compared with Baosteel's stripping of loss-making assets, TISCO Stainless continues to increase investment in its main business. The company increased the shareholding of TISCO from 50% to 65% through a capital increase of 559 million yuan. The design and production capacity of TISCO's Phase I project is an annual production of 160,000 tons of stainless steel sheet, and the second phase of the project is designed to produce 360,000 tons of stainless steel. Although in the short term, it will not have a direct impact on the company's performance, but it can expand the company’s stainless steel production capacity through the capital increase and lay the foundation for the future development of the main business.

The move of the two major steel companies will undoubtedly indicate the rise of business integration in the industry. In fact, the steel industry has come to a critical period of transformation and development. This year, as domestic macroeconomic growth continues to slow under the influence of inflationary pressures, monetary policy tightening, and the aftermath of the European debt crisis, steel production continues to grow, but the profitability of the entire industry under the background of soaring raw material prices such as iron ore Has been greatly inhibited. By 2012, the real estate regulation and control will not change, and the lack of consumer power, and exports will face a more complex international economic environment. The macroeconomic economy will probably continue to slow down, which also makes the economic environment facing the steel industry in the future still not optimistic. Obviously, the operation of steel companies will still face greater pressure, and the desire for business integration and transformation will become even more urgent.

From the “Twelfth Five-Year Development Plan for Iron and Steel Industry” issued by the Ministry of Industry and Information Technology, it can also be seen that during the “Twelfth Five-Year Plan” period, China’s iron and steel industry will focus on implementing “differentiated competition”. The "Planning" proposes that a small number of powerful steel companies be encouraged to differentiate the development of high-end steel products and prevent high-grade homogenization. Obviously, the future steel industry will explore the path of “differentiated competition” whether it is from product development or large-scale application. Not only is it limited to the differences in product varieties, but technological areas, regional differences, and service differences are all future directions. This also means that during the “12th Five-Year Plan” period, the policy will change the development strategy of blindly pursuing high value-added in the past, and instead encourage enterprises to take a differentiated, distinctive development path based on their own development and market demand.