Steelmakers urged to partner with downstream firms to boost profit
Beijing. July 4. INTERFAX-CHINA - China steelmakers can improve profitability by partnering with downstream industries, an official with the State-owned Assets Supervision and Administration Commission (SASAC) said at a June 3 conference in Beijing.
Wang Xiaoqi, director of SASAC's Planning and Development Bureau, said at the 3rd Steel Industry High Level Conference that the highly concentrated nature of upstream and downstream industry in China diminishes the pricing power of the domestic steel sector.
As an example, Wang cited the domestic automotive, shipbuilding and petroleum industries - downstream industries that have a direct correlation to the steel sector. "The output from China's top five automakers account for 70 percent of the country's total output, while the top three shipbuilding firms occupy a 44 percent market share," said Wang. The domestic petroleum industry, meanwhile, is controlled by three companies - China National Petroleum Corp. (CNPC), China Petrochemical Corp. (Sinopec) and China National Offshore Oil Corp. (CNOOC), Wang added.
Wang advised the nation's steelmakers to partner with downstream industry in order to increase the amount of steel products being used and learn more about downstream demand.
The Ministry of Industry and Information Technology (MIIT) aims to increase cooperation between the steelmaking- and downstream equipment-manufacturing industries, Interfax previously reported. Corrosion-resistant steel used in shipbuilding is the first segment to come under the initiative. If successful, the model will be applied to other products.
According to Wang, China's steel industry is facing low profitability in the long term - a situation that can only be solved through consolidation.
The domestic steel industry recorded average margins of 2.91 percent in the first five months of 2011, down 0.67 percent year-on-year, according to China Iron and Steel Association (CISA) figures.
- KHM