As a representative of the domestic steel pipe industry, Tianjin steel pipe occupies a significant location in the steel pipe market. The steel pipe industry here has been a leader in the development of the steel pipe especially for the galvanized steel pipe since the founding of new China. Although there have achieved good achievements in the past, there are still some problems to be solved in order to better face the future.
When it comes to product profit, reasonable is the first rule for the steel pipe managers that means basic profit should be kept in a reasonable range. Nowadays, however, the competition of steel pipe price is fierce, many small steel pipe suppliers will strike a price war, which is very unfavorable to the development of the market. Taking galvanized steel pipe price as an example, its profits should be at about five percent and many enterprises not reach that level. If taking this development strategy for a long time, small or medium-size enterprises will fall into a dilemma that will be a stone on the development road. Although the price war can play a role in the short term, it is not conducive to the enterprise in the long run. It suggests that the manufacturers should pay attention to this problem whether the square steel pipe or other pipes to guarantee a reasonable profit.
Secondly, we should enrich the pipe specifications such as hot rolled steel pipe size. According to some pipe specifications provided by various steel pipe suppliers, we can find that the product type is quite simple. If steel pipe manufacturers fail to enrich the product sizes, they will at a disadvantage place in the future competition. It is a pity that Tianjin steel pipe is eliminated because of the problem of product specifications as tube companies in Tianjin have a certain advantages. Besides, we should enrich the specifications according to the customers’ demand and enterprises need to explore the market demand actively.
Finally, Tianjin has a good geographical advantage, which is conduced to the development of foreign trade. As professional steel pipe manufacturers, they should pay attention to the problems appeared in the trade to improve their own competitiveness. International steel pipe market is a big opportunity for all the suppliers, which is also the main direction of future development. In a word, we need to win more opportunities for the development of enterprises to realize the progress of the whole industry.
China has approximately 10 times the steelmaking capacity of the United States. It has been accused of dumping cheap steel on the global market to beat out competitors, and the Trump administration has encouraged Chinese leaders to cut production in order to improve the profitability of U.S. steelmakers. In 2017, China cut overcapacity in the steel sector by shutting down about 50 million tons for domestic environmental and economic reasons.
The country was the largest exporter of steel in the world in 2015, and its steel exports represented approximately 24 percent of all steel exported globally in 2015.
In 2015, the Chinese economy was slowing down, and the demand for steel, iron ore and other ferrous metals declined significantly. The policies, subsidies and dumping margins imposed by the Chinese government impacted stock prices of many global steel companies, with major metal companies like Anglo American and Rio Tinto taking a hit. Here's a look at the state of the global steel industry more recently and the impact of the Chinese economy.
Anatomy of the Global Steel Industry
Steel is one of the most innovative and flexible alloys, which can be customized for many requirements. Variants of steel are used in housing, transportation, industrial, automobile, infrastructure and utilities sectors, making it one of the world's most versatile materials, one that's easily reused and recycled. (For more, read: Strength in Steel.)
China, Japan, India, the United States and Russia were the top five steel-producing nations in 2016, in that order, with China the leader by far. In 2017, China produced 831 million metric tons of crude steel, Japan produced 104.7 tons, the United States produced 116 tons, India produced 101.4 tons and Russia produced 71.3 tons, all far below the leader. While China and Japan are the top exporters of steel, the United States and Germany are the leaders for imports because of their economies' high consumption rates.
China is the world's largest producer of steel, and it is also the world's largest consumer of the material. Given such a dominant market share, along with the large amounts of steel used across different sectors of its economy, any slowdown in the Chinese economy will have a major impact on the global steel industry. The graph below shows what happened to the VanEck Vectors Steel ETF (SLX) in 2015 when the Chinese economy slowed down.
Image by Sabrina Jiang © Investopedia 2020
Recent Developments
More recently, global steel output has been increasing, investors fear a slow down in the Chinese economy and the prospect of trade wars initiated by the Trump administration. However, steel prices are on the increase.
The World Steel Association reported that in July 2018, global steel output rose by 5.8% in a month, an increase that follows growth of almost 13% in the same quarter one year ago.
Although China has attempted to cut steel production to mitigate pollution, some plants are ramping up capacity, and China’s steel output is on the rise. This increase in output has also maintained the demand for high-grade iron ore, a raw material for steel and a determinant of the cost of steel, and has propped up prices.
In the United States, encouraged by robust domestic demand, domestic steel producers are increasing their steel prices because of increasing input costs and a depreciation in the rupee. Thus, because steel output is growing and prices are increasing, steel companies should see increased earnings and higher share prices.
However, if the demand for steel drops, China will export surplus steel and lower international prices. If output falls, the demand for raw materials will slow down and further affect prices. Thus, China is the biggest influencer on global steel.