In the face of the new policy aimed at eliminating outdated production capacity, how is Henan's steel industry coping with this "cold winter"? Is shifting toward special steel the most effective strategy for industrial transformation? Recently, the State Council issued the "Guiding Opinions on Resolving Severe Overcapacity in Production Capacity," marking the beginning of a major restructuring in overcapacity industries, particularly the steel sector.
The "Guiding Opinions" emphasized structural adjustments in key provinces such as Shandong, Hebei, Liaoning, Jiangsu, Shanxi, and Jiangxi. According to Luo Tiejun, deputy director of the Ministry of Industry and Information Technology’s raw materials department, Shandong’s steel restructuring plan has already been approved by the State Council, while Hebei is still finalizing its own. Both provinces are expected to cut around 80 million tons of steel production capacity through these reforms.
While Henan hasn’t been hit as hard as some other provinces, the overall decline in the steel industry has made it increasingly difficult for local steelmakers. Last year, Anyang Iron and Steel Group, one of the province’s leading steel companies, reported a loss of 3.5 billion yuan. Faced with these challenges and new regulations, what steps are Henan’s steel enterprises taking?
According to a senior official from Anyang Iron and Steel, the company had already started phasing out outdated production facilities, including non-compliant blast furnaces and small furnaces. The next step involves enhancing environmental protection measures and improving management systems. To tackle losses, the group has been gradually recovering, expanding its downstream industrial chain and focusing on high-value steel products that better meet market demand.
This year, the company launched several projects, including a medium- and heavy-plate quenching and tempering line, a cold-rolled sheet project, and an RH furnace alloy vacuum feeding upgrade. Additionally, Anyang Iron and Steel has partnered with Henan Investment Group to develop a cold-rolling project producing high-quality automotive and appliance sheets. Looking ahead, the company plans to promote high-performance steel, replace low-quality products, and drive both product and consumption upgrades.
Other steel companies in Henan are also adapting their strategies to achieve industrial transformation. For instance, Jiyuan Iron and Steel recently completed a 1-million-ton special steel bar project, investing 800 million yuan. This marks the completion of the company’s "Twelfth Five-Year" plan, shifting its product structure from construction steel to industrial steel, and transitioning from ordinary to high-end special steel.
Since 2011, Jiyuan Iron and Steel has invested over 4 billion yuan in three stages, upgrading equipment and adjusting product structures across multiple processes, including sintering, ironmaking, steelmaking, refining, continuous casting, rolling, and power systems. It is considered the largest and most technically advanced project in the company’s history.
Industry experts suggest that larger steel mills like Anyang Iron and Steel can leverage economies of scale, reduce costs, and expand their downstream chains. Smaller mills, on the other hand, may focus more on the special steel market due to their lack of cost advantages compared to large producers.
**Is the Special Steel Road the Right Path?**
With severe overcapacity in general steel products like construction steel and building steel, many steel companies have turned to "special steel" to find a niche in the market. But what exactly is special steel? Also known as specialty steel, it refers to steel products with unique physical, chemical, or functional properties, often due to specific compositions or production methods.
Wuyang Iron and Steel Plant is one of the well-known special steel producers in Henan. Its wide and thick plates are used in large-scale engineering and military applications. Notably, the steel used in the Bird’s Nest stadium for the 2008 Beijing Olympics was produced there. Recently, Wuyang received an order for over 1,000 tons of high-thickness die steel from Hong Kong, marking the first large-scale replacement of imported steel by a domestic producer.
Despite the overall downturn in the steel industry, Wuyang continues to maintain profitability, suggesting that the special steel path could be a viable solution. However, industry experts warn that many companies are rushing into special steel production, which could lead to another round of overcapacity. In fact, the special steel market has not yet delivered strong profits in the early years.
Mr. Liu, an industry insider, pointed out that while special steels are used in specialized applications, the volume is relatively small. If too many manufacturers produce them, the market could become saturated. Additionally, the production of some special steels requires high technical barriers, but for those with simpler processes, it could lead to overcapacity and inefficiency.
Moreover, the demand for special steel is sensitive to fluctuations in upstream and downstream industries. For example, during the boom of the photovoltaic industry, cutting wire steel was in high demand, with China needing about 600,000 tons annually. At the time, Chinese companies couldn’t produce it, so they had to import from Belgium. A company in Hebei once tried to launch a similar project but faced challenges in process, formula, and funding.
Today, with the photovoltaic industry struggling, the demand for cutting wire steel has declined. Launching high-cost projects now would likely result in weak market demand and unsellable products. This highlights the risks of chasing trends without proper planning.
**Craft Is King**
So, how can Henan’s steel enterprises break out of this challenging situation amid industrial upgrading? Mr. Han, an industry insider, believes that focusing on the downstream industrial chain—such as hot rolling, deep processing, and product innovation—is key. He argues that the real value lies in craftsmanship rather than just production capacity.
Regarding special steel, Mr. Han pointed out that Henan currently lacks true special steel factories. For example, Wuyang’s wide-plate steel relies more on equipment design than advanced steelmaking technology, making it easier to imitate and leading to intense competition.
Nationally, Jiangyin Xingcheng Special Steel Co., Ltd. stands out as a leader in special steel production. Affiliated with CITIC Special Steel Group, the company has established itself as a global leader in tire radial steel, supplying major brands like Toyota and BMW. Its success comes from continuous innovation in steelmaking processes, allowing it to maintain high profitability even in a volatile global market.
Similarly, Wuhan Iron and Steel Group has achieved success with silicon steel sheets, a high-performance material used in transformers and motors. Despite the broader struggles of the steel industry, Wuhan’s silicon steel division remains profitable, contributing significantly to the company’s earnings.
Experts emphasize that while large steel companies need to innovate and invest in advanced technologies, they should avoid spreading themselves too thin. As the industry continues to evolve, only those who master the craft and adapt strategically will survive and thrive.
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