In the next five years, Xinjiang's "steel demand" is expected to exceed 75 million tons to attract large-scale steel enterprises to "build up"

The groundbreaking ceremony for the first phase of the technical transformation project for the steel project of Shougang Yili Steel (hereinafter referred to as “Iron”) was held. This is the last company in the four major competitors in the local steel industry to expand after the country’s development of Xinjiang.

According to the plan, the total investment for the first phase of the technical transformation project implemented by Yigang is more than 4 billion yuan. It is estimated that the annual output value will reach 8 billion yuan and profits and taxes will reach 1 billion yuan.

Yigang currently has a capacity of 500,000 tons. Shougang’s insiders told the “First Financial Daily” yesterday that in 2015 Yigang will achieve a production capacity of 5 million tons, with a total static investment of 16.4 billion yuan, which will be divided into two phases.

Shougang entered the Xinjiang market by reorganizing Yigang in November 2008, while Baosteel entered Xinjiang in 2007 by acquiring Xinjiang Bayi Steel (600581.SH). Bayi Steel currently has a capacity of 7 million tons and plans to increase production capacity to 10 million tons during the "12th Five-Year Plan" period.

The emerging cast pipe group almost simultaneously entered into Xinjiang with Baosteel. On April 13, 2007, Xinxing Ductile Iron & Steel Group reorganized Xinjiang Jintehe Steel & Iron & Steel Co., Ltd., and established Xinjiang Jinte Iron & Steel Co., Ltd. Jinte Iron & Steel is the second largest steel company in Xinjiang in the Bayi Iron and Steel Group in Xinjiang. Its main products are rods and high-speed wire rods. The current production capacity reaches 1.5 million tons, and the future plan is 2 million tons.

Earlier this year, Xinxing Ductile Iron Pipes (000778.SZ) acquired the Group’s steel project in Xinjiang and plans to add another 3 million tons of new capacity in Xinjiang. On March 11 this year, the newly-built cast pipe Xinjiang Hejing 300,000-ton special steel ironmaking project started, and is expected to reach capacity in 2013.

Shandong Iron and Steel Group also entered the Xinjiang market this year. However, Shandong Iron and Steel did not take mergers and acquisitions measures, but directly built new projects in the area. On April 10, the steel industry upgrade project of Shandong Iron and Steel Group Kashgar was started. At the groundbreaking ceremony, Zou Zhongkai, chairman of Shandong Iron and Steel Group, said that the project has a total investment of 12 billion yuan and covers an area of ​​3,800 hectares. It is a key industry-assisted project determined by the Shandong Provincial Party Committee and the provincial government. It has formed 3.6 million tons of iron, steel, and wood materials annually. Production capacity will be put into operation in June 2012.

In the case that the crude steel production capacity of other provinces in the country is not allowed to increase, the four companies have large-scale production capacity in the Xinjiang region. An important reason is that the iron and steel enterprises in Xinjiang have higher profit levels. Last year, when the profits of the entire industry were only about 3%, Yigang's sales revenue reached 1.118 billion yuan last year, a year-on-year increase of 1.6 times, and a profit of 125 million yuan, an increase of 5.7 times year-on-year. In the first quarter of this year, it achieved a good start and realized a year-on-year increase in profits. 1.5 times.

Zhong Xueliang, an analyst at China Investment, believes that the total investment in Xinjiang during the 12th Five-Year Plan will exceed 3.5 trillion yuan, drawing more than 75 million tons of steel demand, with an average annual demand exceeding 15 million tons.

Last year, Xinjiang's crude steel output was only 8.079 million tons. Xu Lejiang, chairman of Baosteel Group, believes that Xinjiang will enter a new period of rapid development. A large number of infrastructure and livelihood projects will be started one after another. The demand for basic materials such as steel will continue to expand.

According to the prediction of China Investment Research Institute, in 2011, the demand for crude steel in Xinjiang is about 10 million tons, and it is expected that in 2015, the demand for crude steel will reach about 24 million tons.

According to the calculation of the future capacity expansion of the four companies, the total capacity of the four companies will increase to 23.6 million tons in the next five years. Coupled with the introduction of steel from other provinces into the Xinjiang region, the crude steel production capacity in Xinjiang will shift from the current supply shortage to oversupply.