After the collapse of steel prices, why do steel mills lay off workers and expand steel mills?

Since 2022, the steel market has taken a sharp turn for the worse, and with the decline in the global economic situation, the steel industry has also been greatly impacted. Steel companies are under enormous pressure. Steel prices plummeted, raw material costs rose, steel companies profit a large area of decline loss steel prices from the highest price of 4,880 yuan per ton in 2022, plummeted to the lowest of 3,300 yuan per ton in 2023, a plunge of 1,580 yuan per ton; Many iron and steel enterprises are operating in difficulties, forced to lay off employees to save themselves, and the number of workers in the steel industry has plummeted by more than 120,000 people in 13 months! Weak market demand at home and abroad, serious excess steel production capacity, and high production and operating costs are called the "three mountains" that are currently under pressure from steel companies in the industry. The "three mountains" have pushed the steel industry to the edge of a cliff.
The main factors affecting steel consumption are housing construction, infrastructure and machinery manufacturing, of which housing construction accounts for nearly half. Since last year, due to the continuous adjustment of real estate investment, construction and sales market, the sales and profits of upstream steel enterprises have been greatly affected. Excess production is excess on the high point, lack of demand is also insufficient at the low point of the economy, the huge contrast caused by the decline in steel prices, so that many steel companies can not afford. According to statistics, as of the first half of 2023, the total assets of the 50 listed steel enterprises were 2375.885 billion yuan, the total liabilities were 1328.837 billion yuan, and the average asset-liability ratio was 49.12%, with an average year-on-year increase of 1.09%. Among them, there are 8 steel enterprises asset-liability ratio between 60% and 70%, respectively, Liusteel, Citic Special Steel, general special Material, Masteel, Shougang, Nangang, Yulong and Baotou Steel. There are five asset-liability ratios of more than 70%, respectively, 95.24% of *ST West Steel, 92.62% of Bayi Iron and Steel, 83.53% of Anyang Iron and Steel, 74.06% of JISCO Hongxing, and 73.06% of Hesteel shares.
On the one hand, many steel enterprises lose money and reduce staff, on the other hand, a large number of new steel mills have been built. China recently has seven steel projects ready to start construction: 1, Jiangsu Yongsteel Group steel plant expansion project No. 3 new steel; 2. Nippon Steel Group's new steel project investment of 10 billion yuan, including two 3,000 cubic meter blast furnaces; 3, Tangshan Donghua integration and restructuring reduction replacement transformation and upgrading project steelmaking workshop project started; 4, Shagang Yongxing Special steel Anyang production capacity integration project started construction; 5. Xuzhou Jinhong Steel 130-ton green electric furnace project started; 6. The project of Henan Jinhui Industry Group started on September 6; 7, Anshan Iron and Steel Group to build six 100-ton converter started. This shows that in the current situation of the entire international steel market downturn, China has accelerated the upgrading and upgrading of steel enterprises, and a small number of backward production capacity, serious pollution, low efficiency and a large number of loss-making enterprises have been shut down and transferred. At the same time, the state has increased support for large steel enterprises with advanced technology, energy conservation and environmental protection, good benefits and promising market prospects. Eliminate those backward production capacity that are not suitable for market demand, and at the same time add some steel enterprises with good market prospects.
The raw materials of steel are mainly iron ore and coke, although China is the world's first steel producing country, but our iron ore has long relied on foreign imports. At the same time, the pricing mechanism is also very passive, and the pricing power of iron ore is mainly in the hands of iron ore oligarchs such as British capital giants Rio Tinto, Vale, and BHP Billiton. They have long controlled the pricing power of iron ore in the international market, which has brought great uncertainty and high cost risks to the development of China's iron and steel industry. China is not without iron ore, China's iron ore is mainly the iron content of about 30% of the lean iron ore, need to go through beneficiation to enter the blast furnace smelting. And China's iron ore is mainly deep underground, mining difficulties, high cost, lack of competitiveness in the international market. Mining iron ore in Australia is very simple, very low cost, is to clean the grass on the surface of the mountain, and then use excavators to dig out the iron ore, through the conveyor belt to the train, and then through the train to the port, on the sea to China or India. The main cost is the total cost of transporting, mining and transporting each ton of iron ore plus only $19 per ton, while selling to China costs $120 per ton, and each ton of iron ore sold adds $100 to the wealth of the Australian government. Western Australia, Rio Tinto's main iron ore mining area, is rich enough to buy stones on the ground. Rio Tinto, a supplier of high-quality iron ore to China's biggest steel mills, earns billions of dollars a year from China. Often spend a lot of effort on what kind of price war in China, through the extremely rich resources and high-grade iron ore and the monopoly operation of capital giant Rio Tinto, they are in a position of confidence for a long time, and occupy the price dominance for a long time. Chinese steel mills have a great market dependence on Australian iron ore, Rio Tinto understood our lack of rich iron ore in China's national conditions, sitting on the price, so that we were once at a disadvantage, heavy losses.
At present, China's real estate is in a downward stage and flagging, which to some extent also accelerated the overcapacity of China's steel industry, making the steel industry worse. China's steel industry has come to this step today, we can't help but ask, what happened to the steel industry? Steel industry has come to today, we should reflect on what? In the view of the industry, the steel industry is in such trouble, mainly to pay for the disorderly expansion in the early stage. As a strong cyclical industry, the cyclical boom and bust of the steel industry should be very normal. Generally speaking, the steel industry is highly related to economic growth, and over the past decade, with the rapid development of China's economy, especially the investment driven infrastructure and real estate industry, China's crude steel production has jumped from 100 million tons to 1,013 million tons. It can be assumed that if the steel industry began in 2006, in accordance with the unified deployment of the country, the elimination of backward production capacity, and the integration of the industry, today's situation would not appear. From the early lessons of the photovoltaic industry, we can see the future of the steel industry, the reshuffle will be very cruel. No matter what industry, do not respect the law of the market, will be mercilessly punished by the market. For the current trend of the steel market is that the industry reshuffle is inevitable, and after the tide has retreated, the survival of the fittest is an inevitable trend.