In May 2023, China exported 8.356 million tons of steel, an increase of 7.7%, and the monthly export volume exceeded 8 million tons, hitting a new high since October 2016. Cumulatively, from January to May, China exported 36.369 million tons of steel, an increase of 40.9%, and the export amount was 41.5966 billion US dollars, an increase of 15.1%. China's steel exports have been rising year-on-year for 13 consecutive months, while total steel industry profits fell 99.4 per cent from January to April. Export market is good why steel companies profit pressure?
Steel companies to achieve profitability pressure is still greater
"Going to sea" and selling to the world has become the consensus of China's traditional foreign trade industry to seek the future. The steel consumption potential of countries along the "Belt and Road" and RCEP member states is huge, and China's steel export prices are generally lower than the international market level, superimposed recent RMB depreciation and other factors, which have enhanced the export competitiveness of China's steel and steel products to a certain extent.
In contrast to the favorable export market, the pressure on steel companies in terms of profitability continues to increase. In the first quarter of 2023, the price of raw materials such as iron ore and scrap steel rose more than the price of steel, the pressure on the cost side of steel enterprises increased, and the quarter-on-quarter increase in the income side failed to match the quarter-on-quarter increase in the production side, and the profit space was greatly compressed. Since April, the fundamentals of the steel industry have shown a trend of oversupply, and steel prices have declined rapidly, at the same time, iron ore prices have rebounded after bottoming out in May, rising continuously, and the cost pressure of steel enterprises has risen again after a short decline.
"In addition, the depreciation of the renminbi against the US dollar exchange rate is favorable for the export of large steel enterprises in the short term, but for small and medium-sized steel enterprises with weak bargaining power, in the face of the risks brought by exchange rate fluctuations, there may be problems such as customer price pressure." Dong Dawei, vice president of iPayLinks, a one-stop cross-border payment and fund clearing and settlement platform, said in an interview with a reporter from China Metallurgical News.
Steel enterprises export "capital flow" face many challenges
Last year, in the face of a sharp decline in industry profits, He Wenbo, Party secretary and executive chairman of the China Iron and Steel Association, proposed the operating principle of "three sets and three do not". "Set production by sales, set production by effect, and set sales by now", one of the core points of view is to ensure that the "capital flow" is sufficient, and there can be no operational "blood loss".
The same principle applies to export trade. Since 2023, the steel export situation is better, under the role of market laws, steel enterprises are prone to rush to export, with the change of international demand, steel enterprises may face operational risks. To ensure the safety and stability of "capital flow" has become the key to avoid risks in the export trade of steel enterprises.
Due to the characteristics of steel exports themselves, in the export trade, the "capital flow" of steel enterprises faces more than one challenge. Steel trade covers a global scope, the transaction complexity is high, and the demand for the richness of the supported transaction currency, the time of capital circulation, and exchange is higher than that of ordinary commodity trade. In addition, China's steel exports are large, and the single transaction volume is also relatively high, which put forward high requirements for capital security.
To this end, the steel industry needs a better understanding of payment and industry payment solutions, the global payment network is the foundation, customizable, intelligent risk management and exchange solutions are the key to solving the problem.
Intelligent payment enables steel enterprises to go to sea efficiently
Steel foreign trade business faces many card points in the traditional collection methods: slow collection, exchange rate fluctuations squeeze profit margins, high costs, complicated foreign currency collection and payment procedures, slow service time... These problems have always affected the capital turnover efficiency of enterprises and restricted the development of enterprises. In addition, high-frequency logistics costs, advertising costs, and other payments are also one of the jobs that occupy a lot of energy of financial personnel.
"These problems can be solved by local collection services, the funds of overseas buyers can arrive on the same day, the intelligent risk control engine scans to confirm that there is no risk, and the steel company can check the funds on its own account." For frequent and trivial payment needs, the 'inter-account transfer' function makes it easy to implement fund transactions and centralized management. In addition, if customers cannot control the risk of exchange rate fluctuations when negotiating with overseas buyers, they can lock in the trading rate by booking a foreign exchange tool, thereby locking in the profit margin, and then settle the foreign exchange at the locked rate after the customer receives the foreign currency." "Through continuous optimization of products and services, iPayLinks provides better payment experience and support for steel foreign trade enterprises, in order to strengthen the competitiveness of Chinese steel enterprises in the international steel market," Dong said.
In the face of the complex international environment, steel enterprises go to sea opportunities and challenges coexist, the capital chain is one of the key factors, only in the joint efforts of the industry, develop strengths and avoid weaknesses, in order to achieve stability. In the future, as more and more enterprises transform to digital intelligence and use excellent intelligent payment tools, the "hidden worries" of steel exports will be less and less, and the pace of steel enterprises "going out" will be more and more stable. (Liu Jingwei)
Source: China Metallurgical News
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