The same iron and steel enterprises are also subject to iron ore price factors, but the performance of Baosteel, Wuhan Iron and Steel Co., Ltd. and Angang Iron and Steel Co., Ltd., the three largest domestic steel listed companies, in the first quarter of this year, is quite different.
According to the first quarter report released by Angang Steel, the company achieved a net profit of 71 million yuan in the first quarter of this year, a significant decrease of 93.82% year on year; WISCO achieved a net profit of 610 million yuan, up 111% year on year; Baosteel has not yet released its first quarter report, but a securities analyst said that Baosteel's net profit in the first quarter decreased slightly, possibly by about 10%.
Similar to the iron ore procurement mode of WISCO, the profit of Nangang in the first quarter of this year also increased, with a net profit of 271 million yuan, up 9.21% year on year.
Ansteel gave a seemingly "reasonable" explanation for the decline in the performance of the first quarter. The company said that it was mainly due to the sharp rise in the price of raw materials and fuels that led to the rise in product costs. However, it is worth noting that the price rise of raw materials and fuels such as iron ore and coking coal is not only a problem encountered by Angang Steel. In fact, it is a common problem faced by domestic steel enterprises.
Since domestic iron and steel enterprises are facing the same problems, the difference in the performance of the three companies in the first quarter of this year is so large. In addition to the different product structure of the three companies, it is also largely due to the iron ore procurement mode of the three companies.
The iron ore of Wuhan Iron and Steel Group Co., Ltd. and Baosteel Group Co., Ltd. mainly depends on imports, while the self-sufficiency rate of iron ore of Angang Iron and Steel Group Co., Ltd. is relatively high, but nearly half of the iron ore of Angang Iron and Steel Group Co., Ltd. is domestic iron ore purchased from Angang Group Mining Company.
From the perspective of pricing model, after the annual long-term pricing model was broken by the three major international mining companies, according to Deng Qilin, the chairman of Wuhan Iron and Steel Co., Ltd., who previously introduced to this newspaper, Wuhan Iron and Steel Co., Ltd. used quarterly pricing, monthly pricing, spot pricing and other modes to purchase iron ore; Baosteel only adopts quarterly pricing mode; The ore purchased by Angang Steel from the Group is based on the semi-annual pricing model. In addition, Angang Steel Group also promised to give Angang Steel a price preference at the maximum amount determined. The preferential amount is 5% of the average customs price of China's iron ore concentrate imported to the shore in the first half of the year.
According to the purchase pricing principle of Angang Iron and Steel Co., Ltd., the purchase price of Angang Iron and Steel Co., Ltd. in the first quarter of 2010 was based on the second half of 2009, while the international iron ore price was at a low point in the second half of 2009; The purchase price in the first quarter of 2011 was based on the second half of 2010, but the international iron ore price was at a high point in the second half of 2010.
The price of iron ore in the first quarter of this year dropped compared with that in the fourth quarter of last year. Relatively speaking, the cost of steel mills using spot pricing is lower, while the cost of steel mills using semi-annual pricing is higher. This means that from the financial situation of the three companies in the first quarter of this year, the annual and semi-annual pricing models are not necessarily more conducive to the development of steel enterprises.
At the 2010 performance presentation meeting of Baosteel held on March 31, he Wenbo, the chairman of Baosteel, believed that the short-term pricing mechanism has advantages and disadvantages for Baosteel, for example, the long-term price agreement in the fourth quarter of 2008, 10 million tons of ore are all high-price ore, which is not easy to digest.
In the view of He Wenbo, if the ore price rises and the steel price also rises, there is little risk to the steel factory, but the adjustment of the steel price lags behind the adjustment of the ore price. The turning point is often the steel price falls first and the ore price is adjusted again.
However, the performance of the three major steel mills in the first quarter of this year does not explain the short-term pricing models such as spot pricing and quarterly pricing, which will certainly benefit the development of steel mills. Whether the short-term pricing model or the long-term pricing model is beneficial to steel enterprises depends on the future trend of iron ore prices. If the iron ore price is in the rising channel in the next few years, the annual, semi-annual and other long-term pricing models will be beneficial to iron and steel enterprises; If the iron ore price is in a downward channel, the long-term pricing model is not conducive to steel enterprises, and the spot pricing model is more conducive to steel enterprises to reduce the procurement costs.