In the face of new policies aimed at eliminating outdated production capacity, how is Henan’s steel industry coping with this "cold winter"? Is shifting toward special steel the best strategy for transformation? Recently, the State Council issued the "Guiding Opinions on Resolving Severe Overcapacity in Production Capacity," marking the beginning of a major reshuffle in overcapacity industries. The steel sector, in particular, is expected to be heavily affected.
The guidance focuses on promoting 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 currently finalizing its own plan. Both provinces are expected to cut around 80 million tons of steel production capacity through these reforms.
Compared to other provinces, Henan hasn’t been hit the hardest by capacity reductions, but the overall decline in the steel industry has made it difficult for local companies. Last year, Anyang Iron and Steel Group, one of the province’s leading steelmakers, reported a loss of 3.5 billion yuan. Faced with this challenging environment and the new rules for eliminating outdated production, what steps are local steel enterprises taking?
According to a senior official from Anyang Iron and Steel, the company has already started phasing out outdated blast furnaces and small-scale facilities. The next step involves enhancing environmental protection measures and improving management practices. In response to financial losses, the group has been gradually recovering and expanding its downstream industrial chain, focusing on deep processing of steel products to better meet market demands.
This year, Anyang Iron and Steel launched several new projects, including a medium- and heavy plate quenching and tempering line, a cold rolled sheet project, and an RH furnace alloy vacuum feeding reform. Additionally, the company partnered with Henan Investment Group to develop a cold rolling project that produces high-quality automotive and appliance sheets. Looking ahead, Anyang plans to promote high-performance steel, replace low-quality products, and drive both product upgrades and consumption trends to achieve enterprise transformation.
Other steel companies in Henan are also adjusting their strategies to adapt to the changing landscape. For example, 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†system, transforming its product structure from construction steel to industrial steel and moving from Pugang to Ute Steel. The shift toward medium- and high-end special steel represents a broader trend across the region.
Since 2011, Jiyuan Iron and Steel has invested over 4 billion yuan in upgrading equipment and reorganizing its product structure, covering areas like 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 large steel mills like Anyang Iron and Steel can leverage economies of scale, reduce costs, and develop downstream chains to maintain their market position. Smaller mills, on the other hand, may focus more on niche markets, particularly in special steel, where they lack cost advantages compared to larger players.
With the pressure from overcapacity in ordinary steel, many steel mills are turning to special steel as a way to secure a place in the market. But what exactly is special steel? Special steel refers to steel products that possess unique physical, chemical, or functional properties due to their composition, structure, or production process.
Wuyang Iron and Steel Plant is one of the well-known producers of special steel in the province. Its wide and thick plates are used in large-scale engineering and military applications. Notably, the steel used in the Beijing 2008 Olympic Stadium was produced there. Recently, Wuyang received an order for over 1,000 tons of large-thickness die steel from Hong Kong, marking a significant step in replacing imported steel.
Despite the overall downturn in the steel industry, Wuyang continues to remain profitable, suggesting that the special steel path could be a viable solution. However, some experts warn that this shift might lead to another form of overcapacity if too many companies enter the special steel market. The market for special steel is still relatively small, and many products are highly specialized, making them vulnerable to fluctuations in upstream and downstream industries.
For instance, when the photovoltaic industry boomed, demand for cutting wire steel surged. At the time, China needed about 600,000 tons annually, but domestic production couldn't meet the demand, forcing imports from Belgium. Some companies attempted to develop similar products but faced challenges in technology, formulas, and funding.
Today, with the photovoltaic industry struggling, demand for cutting wire steel has dropped significantly. Companies that invested in such projects now face the risk of overproduction and weak market demand. As one executive noted, it might have been better not to pursue such projects at all.
So, in the context of industrial upgrading, how can steel companies break out of this difficult situation? An industry insider, Mr. Han, suggests that focusing on downstream processes—such as hot rolling, cold rolling, and deep product processing—is crucial. He argues that the real key lies in mastering advanced techniques rather than just producing special steel.
Taking Wuyang Iron and Steel as an example, he points out that while its wide-plate steel has size advantages, the production relies more on specialized equipment than on advanced steelmaking processes. This makes it easier for others to imitate, leading to increased competition.
On a national level, companies like Jiangyin Xingcheng Special Steel Co., Ltd., part of CITIC Special Steel Group, serve as models. Established in 1993, it has become a leader in tire radial steel production, known for its high purity and strict manufacturing standards. Through continuous innovation, it has gained a global edge, supplying top automakers like Toyota and BMW.
Despite global market fluctuations, Jiangyin Xingcheng has maintained strong profitability. In 2011, while many steel companies struggled, it achieved sales revenue of 3.3 billion yuan.
Similarly, Wuhan Iron and Steel Group has successfully developed silicon steel sheets, a key material in transformers, motors, and generators. Despite the overall downturn in the steel industry, the company has maintained stable profits from its silicon steel business, proving that innovation and technical development are essential for long-term survival.
In conclusion, while transitioning to special steel offers potential, it is not a guaranteed solution. Success depends on technological advancement, market understanding, and strategic planning. For Henan’s steel industry, the path forward requires not just policy compliance, but also a commitment to innovation, quality, and sustainable growth.
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