China Refractory Materials Network

1、 Overall operation of industries above designated size nationwide

In June 2014, the added value of industrial enterprises above designated size increased by 9.2% year-on-year in real terms (the growth rate of added value was the actual growth rate after deducting price factors, the same below), with a month on month increase of 0.77%, which was 0.4 percentage points faster than May. From January to June, the added value of industrial enterprises above designated size increased by 8.8% year-on-year.

1. From January to June, industrial enterprises above designated size achieved a main business revenue of 51.45 trillion yuan, a year-on-year increase of 8.6%; The main business cost was 44.21 trillion yuan, an increase of 9%.

From January to June, the profit margin of the main business income of industrial enterprises above designated size was 5.57%. The cost per 100 yuan of main business income was 85.94 yuan, and the main business income realized per 100 yuan of assets was 121.5 yuan. The turnover days of finished product inventory were 13.8 days.

2. From January to June, industrial enterprises above designated size in China achieved a total profit of 2.86 trillion yuan, a year-on-year increase of 11.4%, with a growth rate 1.6 percentage points higher than that from January to May; The main operating profit reached 2.67 trillion yuan, a year-on-year increase of 10.8%, with a growth rate 1.7 percentage points higher than that from January to May.

3. At the end of June, the accounts receivable of industrial enterprises above designated size reached 9.97 trillion yuan, a year-on-year increase of 12.7%; Finished goods inventory reached 3.53 trillion yuan, an increase of 12.6%

2、 Production and Operation of Refractory Industry from January to June 2014

1. Production status of refractory materials

From January to June, compared with the same caliber, the national refractory production was 12.769 million tons, a year-on-year increase of 5.26%. Among them, 8.1617 million tons of dense shaped refractory products were produced, a year-on-year increase of 3.88%; 264400 tons of thermal insulation and fire-resistant products, a year-on-year increase of 1.44%; 4.3429 million tons of amorphous refractory products, a year-on-year increase of 8.23%.

2. Import and export trade of refractory raw materials

From January to June, the total import and export trade volume of refractory raw materials in China was 1.721 billion US dollars, an increase of 8.10% over the same period last year. The export trade volume was 1.611 billion US dollars, a year-on-year increase of 9.31%; The import trade volume was 110 million US dollars, a year-on-year decrease of 7.15%.

The total export volume of refractory raw materials in China was 2.7828 million tons, a year-on-year increase of 12.97%. The export volume of refractory raw materials was 1.8375 million tons, a year-on-year increase of 16.79%; The export volume of refractory products was 945400 tons, a year-on-year increase of 6.23%.

(1) Export situation of main refractory raw materials

① The export volume of fused magnesia and sintered magnesia was 164200 and 282000 tons respectively, an increase of 10.13% and 27.91% year-on-year.

② The export volumes of refractory aluminum clay, brown corundum, and white corundum were 432400 tons, 307600 tons, and 96500 tons, respectively, an increase of 12.92%, 15.76%, and 21.90% year-on-year.

③ The export volume of graphite and silicon carbide was 61400 and 157700 tons respectively, an increase of 9.25% and 17.45% year-on-year.

(2) Export situation of refractory products

① The export volume of alkaline refractory products was 516200 tons, a year-on-year decrease of 1.17%.

② The export volume of aluminum silicon refractory products was 355700 tons, a year-on-year increase of 22.18%.

③ The export volume of other refractory products was 73500 tons, a year-on-year decrease of 3.91%.

3. Production and export operation characteristics

(1) The yield of refractory materials has slightly increased

From January to June, driven by the growth of domestic market demand, the national refractory production increased by 638500 tons compared to the same period last year, with a year-on-year growth of 5.26%.

(2) The average export price of refractory raw materials continues to decline.

Among the main export varieties of refractory raw materials queried by customs, except for a slight increase in the average export price of brown corundum, white corundum, and silicon carbide, all other major varieties have decreased. Especially, the export volume of refractory aluminum clay, fused magnesia, sintered magnesia, and lightly burned magnesia has increased significantly, while the average export price has dropped significantly. From January to June, the export volume increased by 12.92%, 10.13%, 27.91%, and 32.79% respectively, while the average export price decreased by 6.54%, 8.78%, 3.88%, and 4.79% respectively.

(3) The export volume of refractory products has decreased to varying degrees, except for the growth of aluminum silicate products, alkaline products, and other refractory products.

From January to June, the export volume of refractory products increased by 6.23% year-on-year, while the comprehensive average export price decreased by 2.39%. Among them, the export volume of aluminum silicon refractory products increased by 22.18%; The export volume of alkaline products and other refractory products decreased by 1.17% and 3.91% respectively.

The comprehensive average export price of refractory products decreased by 2.39%, mainly due to the year-on-year decrease in the average export prices of aluminum silicate products and other refractory products, with an average export price decrease of 5.09% and 26.91%, respectively.

(4) From January to June, the import volume of refractory products was 9900 tons, a year-on-year decrease of 41.93%. The import volume of alkaline products was 2700 tons, a year-on-year decrease of 5.57%; The import volume of aluminum silicon refractory products was 4600 tons, a year-on-year decrease of 47.90%; The import volume of other refractory products was 2600 tons, a year-on-year decrease of 51.23%.

The comprehensive average import price of refractory products increased by 12.36% year-on-year, mainly due to an increase of 37.65% and 43.71% in the average import prices of alkaline products and aluminum silicate refractory products, respectively. The average import price of other refractory products decreased by 17.20% year-on-year.

3、 Production and operation status of major downstream industries

（1） Operation of the steel industry

1. Production and operation status of China's steel industry

From January to June, the national crude steel production was 412 million tons, a year-on-year increase of 2.99%, with a growth rate slowing down by 4.4 percentage points year-on-year. Among them, the crude steel production of member enterprises of the Steel Association increased by 3.77% year-on-year, and non member enterprises increased by 0.36%. Steel production reached 552 million tons, an increase of 6.45% and a slowdown of 3.8 percentage points.

2. World Steel Industry Production Situation

From January to June, the global crude steel production (total of 65 countries and regions) was 821 million tons, a year-on-year increase of 2.51%. The crude steel of the Commonwealth of Independent States (6 countries) decreased by 0.98%, while that of South America decreased by 2.6%. The main region where the crude steel output increased was Asia, with a year-on-year growth of 5.5% (including 7.4% in Chinese Mainland). Other regions grew slightly, with China accounting for more than 50%. The crude steel production in the main regions is shown in the table below.

Country or Region

From January to June 2014

(10000 tons)

Last year's same period

(10000 tons)

Year-on-year growth

(10000 tons)

Year on year growth rate%

28 EU countries

eight thousand seven hundred and thirty-six

eight thousand four hundred and seventeen

three hundred and eighteen

three point seven eight

Other European countries

one thousand eight hundred and thirty-two

one thousand eight hundred and seventeen

fifteen

zero point eight two

CIS (6 countries)

five thousand three hundred and ninety-one

five thousand four hundred and forty-four

-53

-0.98

North America

five thousand nine hundred and seventy

five thousand eight hundred and seventy-three

ninety-seven

one point six six

South America

two thousand two hundred and sixteen

two thousand two hundred and seventy-five

-59

-2.60

Africa

seven hundred and ninety

seven hundred and eighty-one

nine

one point one nine

the Middle East

one thousand three hundred and eighty-four

one thousand two hundred and sixty-six

one hundred and seventeen

nine point two seven

Asia

fifty-five thousand five hundred and fifty

fifty-three thousand nine hundred and sixty-nine

one thousand five hundred and eighty-one

two point nine three

Including: Chinese Mainland

forty-one thousand one hundred and ninety-one

thirty-nine thousand nine hundred and ninety-six

one thousand one hundred and ninety-five

two point nine nine

Total of 65 countries worldwide

eighty-two thousand one hundred and thirty-five

eighty thousand one hundred and twenty-three

two thousand and twelve

two point five one

Deduct Chinese Mainland

forty thousand nine hundred and forty-four

forty thousand one hundred and twenty-seven

eight hundred and seventeen

two point zero four

In the first half of the year, after deducting China's production, crude steel production in other countries and regions around the world increased by 2.04%; China accounts for 50.15% of global production, an increase of 0.23 percentage points compared to the same period last year.

（2） Production and operation status of building materials industry

From January to June, the national cement production was 1.144 billion tons, a year-on-year increase of 3.6%, with a growth rate slowing down by 6.1 percentage points compared to the same period last year;

The production of flat glass reached 411 million weight boxes, an increase of 4.7%, with a year-on-year slowdown of 6.1 percentage points in growth rate.

（3） Production and operation status of non-ferrous metal industry

From January to June, the national production of ten types of non-ferrous metals was 20.89 million tons, a year-on-year increase of 5.4%, with a growth rate slowing down by 4.6 percentage points compared to the same period last year. The production of electrolytic aluminum was 11.54 million tons, an increase of 7.4%, a decrease of 0.5 percentage points; Copper production increased by 8.1%, slowing down by 4.8 percentage points; Lead production decreased by 2.8%, compared to a 12.5% increase in the same period last year; Zinc production increased by 1.3%, slowing down by 7.9 percentage points. The production of alumina increased by 6.5%, slowing down by 3.5 percentage points.

（4） Main operating characteristics of downstream industries

1. The production has shown an increasing trend, but the growth rate has significantly declined.

From January to June, the growth rate of crude steel production in China fell by 4.4 percentage points; The growth rate of cement decreased by 6.1 percentage points; The growth rate of flat glass decreased by 6.1 percentage points; The growth rate of ten non-ferrous metals fell by 4.6 percentage points.

2. Except for the rebound in cement prices, prices of other products continue to decline.

In June, cement prices increased by 2.7%, while others showed a downward trend.

The average monthly futures prices of copper and electrolytic aluminum on the Shanghai Futures Exchange were 49475 yuan/ton and 13322 yuan/ton, respectively, a year-on-year decrease of 7% and 9.5%;

The factory price of flat glass is 61.1 yuan/weight box, a year-on-year decrease of 2.7 yuan/weight box, a decrease of 4.2%.

The price of steel continues to decline. In June, the average comprehensive index of steel prices in the domestic market was 93.58, a year-on-year decrease of 5.58 points. The average prices of 6.5mm high wire, 20mm medium plate, and 1.0mm cold-rolled coil were 3253 yuan/ton, 3461 yuan/ton, and 4175 yuan/ton, respectively, down 84 yuan/ton, 48 yuan/ton, and 52 yuan/ton from last month, a year-on-year decrease of 5.6%, 4.1%, and 7.6%.

3. From January to May, profits in the non-ferrous metal and steel industries significantly decreased, while profits in the building materials industry increased significantly.

The non-ferrous metal industry achieved a profit of 57.8 billion yuan, a year-on-year decrease of 9.4%. Among them, the profit of non-ferrous metal mining and beneficiation industry was 20.9 billion yuan, a decrease of 17.2%; The profit of non-ferrous metal smelting and rolling processing industry was 36.9 billion yuan, a decrease of 4.2%; 

The steel industry achieved a profit of 56.7 billion yuan, a year-on-year decrease of 9.2%. Among them, the profit of the black metal mining and beneficiation industry was 28.4 billion yuan, a decrease of 3.8%; The profit of steel smelting and processing industry was 25.7 billion yuan, a decrease of 3%.

The building materials industry achieved a profit of 159.7 billion yuan, a year-on-year increase of 20.7%. Among them, the profit of the cement manufacturing industry was 26 billion yuan, an increase of 69.5%; The profit of the flat glass industry was 1.79 billion yuan, an increase of 46.7%.

4、 Analysis and prediction

1. The main downstream industries are affected by overcapacity, and the low efficiency situation of the industry will continue.

From the operating conditions of major downstream industries in the first half of the year, whether the profit growth or decline is fluctuating at a low efficiency level. Overcapacity will inevitably lead to disorderly competition in the market, making it difficult to raise product prices and changing the situation of low profit operation of enterprises in the short term.

From the actual situation of large and medium-sized steel enterprises, a profit of 7.48 billion yuan was achieved from January to June, a year-on-year increase of 133.49%, with a sales profit margin of only 0.41%. From the perspective of profit composition, the main business profit is still in a loss state, with a reduction of 1.525 billion yuan, a decrease of 69.8%. The main business profit reduction is mainly due to the decrease in purchasing prices of raw materials such as iron ore and coal, as well as the results of cost reduction and efficiency improvement for enterprises. The decrease in the cost of raw material procurement is also difficult to make up for the profit losses caused by the continuous decline in steel prices for enterprises. Investment income and non operating income increased by 3.848 billion yuan, a year-on-year increase of 46.81%. It presents a situation of declining production growth rate, decreasing steel prices, decreasing social inventory, high enterprise inventory, decreasing raw material prices, and sluggish enterprise efficiency.

At the same time, the debt level of large and medium-sized steel enterprises is at a high level. As of the end of June, bank loans increased by 6.39% year-on-year, with an average asset liability ratio of 69.27%. However, 46 enterprises have debt exceeding the average level, accounting for 52.27% of the total number of large and medium-sized steel enterprises, and 19 enterprises have debt exceeding 80%, accounting for 21.59% of the total number. Some enterprises are already overwhelmed by financial pressure, and their operating conditions are constantly deteriorating. Some enterprises are struggling to sustain production.

From the perspective of enterprise operation, the differentiation is further evident, with 63 profitable enterprises with a profit of 15.157 billion yuan and 25 loss making enterprises with a loss of 7.677 billion yuan.

2. Business Status of Refractory Enterprises

From January to June, a survey of the operating conditions of 60 key enterprises showed that the production of refractory materials was 4.9533 million tons, a year-on-year decrease of 5.56%; Sales revenue was 17.208 billion yuan, a year-on-year increase of 4.12%; The sales revenue profit margin is 4.56%, which is 1.01 percentage points lower than the average sales profit margin of industrial enterprises nationwide. Overall, the business situation is relatively stable. But there are still the following issues:

(1) Accounts receivable continue to rise, further increasing the financial pressure on enterprises

The total amount of accounts receivable from key enterprises was 12.723 billion yuan, accounting for 73.94% of the total sales revenue in the first half of the year, a year-on-year increase of 6.4%. Among them, 19 enterprises, accounting for 31.67%, saw a year-on-year increase of over 20% in their accounts receivable; Seven companies have grown by over 50%, accounting for 11.67%. Financial issues remain the main problem for business operations.

(2) The differentiation of enterprise management effects is obvious

Among the 60 key enterprises, there are 51 profitable enterprises with a profit of 912 million yuan, and 9 loss making enterprises with a loss of 15% and a loss of 127 million yuan. Among them, 21 enterprises, accounting for 35%, achieved a year-on-year increase in profits of more than 15%, while 14 enterprises, accounting for 23%, saw a year-on-year decrease in profits of more than 15%. Nine companies, accounting for 15%, experienced a year-on-year decrease of over 20% in their accounts receivable. The differentiation of business performance is obvious.

3. The situation faced by the refractory industry in the second half of the year

At present, China's economy is running steadily, with both opportunities and challenges. In the first half of the year, the economic growth rate reached 7.4%. In the second half of the year, we will continue to adhere to the general principle of seeking progress while maintaining stability, which is conducive to promoting sustained medium to high speed economic growth in China.

President Xu Lejiang pointed out at the 8th Executive Council (Expanded) Meeting of the 4th session of the Steel Association that "overall, the growth rate of steel demand is still limited, and steel production is affected by overcapacity, making it difficult to have a significant decline. It is expected that crude steel production will increase by about 3% for the whole year. The difficult situation of enterprise production and operation will not significantly improve, and the high cost, low price, and low efficiency industry operation trend will continue.

In this regard, refractory industry enterprises should have a clear understanding. In order to maintain the smooth operation of industry production and operation throughout the year, all enterprises should attach great importance to the following three aspects.

(1) We must strictly guard against business risks, especially strengthen enterprise fund management, and elevate fund management to a level that affects the safety of enterprise operations. Strengthen the collection of accounts receivable, verify the amount of Chen's outstanding debts with the debtor units at the end of each year and provide evidence for confirmation, to ensure the effectiveness of legal proceedings against Chen's outstanding debts. We must resolutely resist the dishonest behavior of units that engage in "reduced payment".

(2) The disorderly competition in the market seriously affects the operational quality of production enterprises, and should be highly valued by production enterprises, especially key enterprises. In the current difficult business situation, not only should we pay attention to preventing unfair competition by dumping at low prices, but we should also adhere to the self-discipline requirements of enterprises that do not produce without contracts and do not ship without payment, and jointly create a good order and environment in the refractory material market.

(3) Efforts should be made to reverse the passive situation of increasing export volume and decreasing average export prices of major refractory raw materials such as refractory clay, fused magnesia, sintered magnesia, lightly burned magnesium, and graphite. In particular, the export volume of aluminum silicon refractory products increased by 22.18% year-on-year, while the average export price decreased by 5.09% year-on-year. This should attract high attention from export enterprises, and jointly maintain a good export order from the perspective of the interests of the entire industry.

5、 The pressure and opportunities faced by China's refractory industry under the new normal

The "new normal" first manifests as a slowdown in economic growth, which is a "shift" period after high-speed growth and an inevitable trend. This also includes the improvement of the quality of economic growth. The most obvious feature is that China's economy has shifted from high-speed growth to medium high speed growth, and the economic growth model has shifted from extensive scale growth to innovation driven growth. The impact of the new normal on the refractory material industry will be profound and long-term.

1. The refractory material industry will face three pressures.

One is the market oversupply and disorderly competition caused by overcapacity, which is difficult to change in the short term, and the long-term low operating pressure on refractory product prices and business quality.

The second is the insufficient self owned funds of the enterprise, making it difficult to recover accounts receivable, and the pressure of high financial costs and insufficient working capital caused by the rise in actual interest rates of bank loans.

The third is the pressure of increasing environmental protection costs due to the large amount of arrears in environmental protection investment.

2. Production enterprises should seize the new opportunities of transformation, upgrading and development

For refractory material enterprises, the new normal is pressure, a challenge, but more importantly, an opportunity. It is a new opportunity for the refractory material industry to accelerate structural adjustment, improve technological innovation capabilities, increase industry concentration, and enhance overall competitiveness.

Firstly, actively seize the new opportunities of optimizing the policy environment for enterprise joint restructuring and increase industrial concentration.

In recent years, refractory advantage enterprises have made breakthrough progress through complementary advantages and cross regional joint restructuring. On March 7th of this year, the State Council issued the "Opinions of the State Council on Further Improving the Market Environment for Enterprise Mergers and Acquisitions" (Guofa [2014] No. 14). Miao Changxing, Deputy Director of the Industrial Policy Department of the Ministry of Industry and Information Technology, recently summarized and introduced the new progress made after the release of the "Opinions" and the related supporting policies being formulated. The content includes "improving financial and tax policies to further reduce the tax burden of enterprise mergers and acquisitions; optimizing financing and stabilizing job subsidies related policies; canceling or simplifying approval procedures and policy guidance, etc." Relevant policies will be released before the end of the year. Refractory enterprises, especially advantageous enterprises, should seize the favorable opportunity of transferring market resources to advantageous enterprises and optimizing the policy environment for joint restructuring, actively promote cross regional and cross ownership. Joint restructuring, expanding the results of restructuring, and improving production concentration.

Secondly, seize the new opportunity of transforming from a scale based efficiency model to an innovative efficiency model.

President Xu Lejiang pointed out at the expanded executive meeting of the Steel Association that "the extensive development model of China's steel industry has come to an end. The adverse effects brought about by this need us to spend a considerable amount of time to resolve. The refractory material industry is the same. In the past decade, the production of refractory materials has increased significantly, and the production capacity has been expanding year by year. The result is overcapacity, disorderly market, and low efficiency, which affects our business quality. Therefore, production enterprises need to increase investment in scientific and technological research and development, integrate and strengthen research and development resources, strengthen cooperation with scientific research institutions and colleges in technology research and development, form an integrated technology innovation model of industry university research and application, improve the independent innovation capability of enterprises, and strive to achieve the transformation from scale efficiency to innovation efficiency and quality efficiency.

Thirdly, we must seize the new opportunities presented by the changes in product demand structure

In the future, the demand for refractory materials in China will no longer have double-digit growth, but will enter a lower growth range, and may even slightly decrease. At the same time, the demand structure for refractory materials in downstream industries will also change. For example, among the 9 major industries with severe overcapacity in China, such as steel and cement, there are 5 related to refractory materials. Li Zhongjuan, Deputy Inspector of the Industry Coordination Department of the National Development and Reform Commission, stated at a recent meeting that "we will resolutely curb the addition of new production capacity in industries with severe overcapacity, and all departments and localities will suspend the approval and filing of new production capacity projects in industries with severe overcapacity. Therefore, fixed assets investment in industries with overcapacity, especially new projects, will rapidly decrease, and the demand for refractory materials for infrastructure will gradually decline. At the same time, structural adjustment of downstream industries and product upgrading will also bring new changes and new requirements to the demand structure of refractory materials. In this regard, refractory production enterprises should deeply understand the impact and opportunities brought by the new normal to their own enterprises, closely track changes in market demand, actively expand into new areas of the refractory market, and continuously meet the new requirements of the refractory market.

In short, the situation facing the refractory industry is still severe. We need to adapt to the new normal with a positive and rational attitude, respond to new challenges, seize new opportunities, closely track changes in market demand, adjust business strategies in a timely manner, and focus on promoting the innovative development of the refractory industry.