In the first half of this year, due to factors such as overcapacity and sluggish demand, Baosteel's performance also fell sharply. According to its semi-annual report, Baosteel’s net profit in the first half of the year was only 3.703 billion yuan, a year-on-year decrease of nearly 6 billion yuan. This performance further reflects the survival of steel enterprises.

Net profit fell by 61.47%

According to statistics, Baosteel’s operating income for the first half of the year was RMB 96.1 billion, a slight decrease of 1.84% year-on-year. However, the net profit attributable to the shareholders of the listed company dropped drastically to 3.703 billion yuan, a decrease of 61.47%. In the same period of last year, the index was 9.61 billion yuan, which also means that in the first half of this year, it had lost 5.907 billion yuan over the same period.

Regarding the above results, Baosteel believes that, on the one hand, it was caused by the poor overall environment, and also that due to the sale of related assets of the stainless steel and special steel business units in the same period last year, it was RMB 9.09 billion.

According to the data, in the first half of this year, the profit of 86 large and medium-sized steel enterprises fell for six consecutive months since the beginning of the year, with a loss of 680 million yuan for the first time in June; the total profit realized in the first half of the year was 2.29 billion yuan, and the average sales margin was only 0.13%. At the lowest level in the industry.

Encouraging increase of capital to provoke overcapacity In addition to the sharp decline in profits year-on-year, Baosteel’s plan to increase capital has also attracted the attention of the industry. It is reported that the company plans to add 12 billion yuan in unilateral cash to Baosteel Zhanjiang Iron and Steel Co., Ltd. to adopt a batch of capital increase methods to build the project. After the completion of the capital increase, Zhanjiang Steel has a registered capital of 20 billion yuan, Baosteel holds 90% of Zhanjiang Steel, and Guangdong Hengjian holds 10% of its equity. The total static investment of the Zhanjiang Iron and Steel Project is 41.5 billion yuan, which was started in May of this year and is expected to be completed and put into operation in September 2016.

With the start-up of Zhanjiang Iron and Steel Base of Baosteel Group and Fangchenggang Steel Base of Wuhan Iron and Steel Group, it triggered the question of “the two major central SOEs are still against the market to expand production capacity under the background of excess steel production capacity”. In response to this, relevant responsible person of Baosteel stated that the increased production capacity of the new project has replaced a batch of backward production capacity and has not caused an increase in overall capacity.

In fact, the concerns of the steel industry about excess capacity are not unreasonable. In the first half of this year, the average daily output of crude steel in the country was 2,154,000 tons, equivalent to an annual production of 786 million tons, which was always at a relatively high level, putting pressure on the market. People in the industry generally believe that if steel stocks and corporate inventories are still at a high level, if the steel production cannot be effectively controlled in the second half of the year, the situation of oversupply will not be eased.

Steel companies will be more difficult to manage For the second half of the year, Baosteel said that it will actively respond to difficulties and challenges, and strive to continue to maintain the leading business performance of the domestic industry. However, it goes without saying that the second half of the year is not good for steel companies.

Zhang Changfu, secretary-general of the China Iron and Steel Association, pointed out that although the entire industry still had a meager profit, the business performance of the company did not improve much compared to last year. From the point of view of realizing profits in each month, the situation is reduced month by month; at the same time, the number of loss-making enterprises has increased significantly, and the loss level has increased by 3.5 percentage points from the same period of last year. This situation reminds us that the production and operation status of many steel companies this year is even more difficult than the same period last year.

“Especially at the end of June, the bank loans of key large and medium-sized steel companies increased by 105.156 billion yuan or 8.8% year-on-year. Borrowings were mainly used for expansion and expansion, but at present, the iron and steel enterprises have difficulties in operation and low profitability. Enterprises must strictly control operations. Risk." Zhang Changfu said.