I. Overall Operating Conditions of Large-Scale Industries Nationwide

In June 2016, the year-on-year actual growth of the added value of large-scale industries was 6.2%, an increase of 0.2 percentage points compared to May. From a month-on-month perspective, in June, the added value of large-scale industries increased by 0.47% compared to the previous month. From January to June, the year-on-year growth of the added value of large-scale industries was 6.0%.

1. From January to June, large-scale industrial enterprises achieved 52.84 trillion yuan in main business revenue, a year-on-year increase of 3.1%; the main business cost was 45.33 trillion yuan, an increase of 3%;

From January to June, the profit margin of main business revenue was 5.68%. For every 100 yuan of main business revenue in large-scale industrial enterprises, the cost was 85.79 yuan, the main business revenue per 100 yuan of assets was 108.3 yuan, the per capita main business revenue was 1.179 million yuan, the finished product inventory turnover days were 14.4 days, and the average collection period of accounts receivable was 38.1 days.

2. From January to June, the total profit of large-scale industrial enterprises nationwide reached 3 trillion yuan, a year-on-year increase of 6.2%, with the growth rate falling by 0.2 percentage points compared to the period from January to May.

3. At the end of June, the accounts receivable of large-scale industrial enterprises was 11.62 trillion yuan, a year-on-year increase of 8%; the finished product inventory was 3.70 trillion yuan, a decrease of 1.9%.

II. Production and Operation of the Refractory Materials Industry from January to June 2016

1. Refractory Materials Production

From January to June, the national refractory materials output was 10.5746 million tons, a year-on-year decrease of 5.71%. Among them, the output of dense shaped refractory products was 6.9763 million tons, a year-on-year decrease of 2.02%; the output of heat-insulating refractory products was 0.2591 million tons, a year-on-year increase of 15.09%; the output of unshaped refractory products was 3.3392 million tons, a year-on-year decrease of 13.69%.

2. Import and Export Trade of Refractory Raw Materials

From January to June, the total import and export trade volume of refractory raw materials nationwide was US$1.377 billion, a decrease of 14.04% compared to the same period last year. Among them, the export trade volume was US$1.287 billion, a year-on-year decrease of 15.69%; the import trade volume was US$0.09 billion, a year-on-year increase of 18.68%.

The total export volume of refractory raw materials nationwide was 2.5067 million tons, a year-on-year decrease of 2.95%. Among them, the export volume of refractory raw materials was 1.716 million tons, a year-on-year decrease of 0.72%; the export volume of refractory products was 0.7907 million tons, a year-on-year decrease of 7.44%.

Main Refractory Raw Material Export Situation

① The export volume of electrofused magnesia and sintered magnesia was 0.1568 million tons and 0.252 million tons respectively, with year-on-year increases of 9.98% and 1.99% respectively.

② The export volume of refractory alumina clay, brown corundum, and white corundum was 0.4139 million tons, 0.285 million tons, and 0.0898 million tons respectively, with year-on-year changes of -6.98%, 2.08%, and 6.46% respectively.

③ The export volume of graphite and silicon carbide was 0.0525 million tons and 0.1594 million tons respectively, with year-on-year decreases of 1.33% and 5.16% respectively.

Refractory Product Export Situation

① The export volume of basic refractory products was 0.411 million tons, a year-on-year increase of 1.16%.

② The export volume of aluminosilicate refractory products was 0.3223 million tons, a year-on-year decrease of 11.64%.

③ The export volume of other refractory products was 0.0574 million tons, a year-on-year decrease of 31.03%.

3. Production and Export Operation Characteristics

Decrease in Refractory Material Output

From January to June, the national refractory material output decreased by 0.64 million tons compared to the same period last year, a year-on-year decrease of 5.71%.

Continued Decline in the Average Export Price of Refractory Raw Materials

From January to June, among the main refractory raw materials exported, the average export prices showed varying degrees of decline. The export volume and average export price of graphite, refractory clay, and silicon carbide continued to decline, with decreases of 1.33%, 6.98%, and 5.16%, and 5.43%, 16.80%, and 5.36% respectively; while the export volume of electrofused magnesia, sintered magnesia, brown corundum, and white corundum all increased to varying degrees, but the average export prices decreased. The export volumes increased by 9.98%, 1.99%, 2.08%, and 6.46% respectively, while the average export prices decreased by 10.39%, 12.09%, 3.34%, and 13.02% respectively.

Except for the increase in basic refractory products, the export volume of aluminosilicate refractory products and other refractory products decreased to varying degrees.

From January to June, the export volume of refractory products decreased by 7.74% year-on-year, and the comprehensive average export price decreased by 18.62%. Among them, the export volume of basic products increased by 1.16%, while the export volume of aluminosilicate refractory products and other refractory products decreased by 11.64% and 31.03% respectively;

The comprehensive average export price of refractory products decreased by 18.62%. Among them, the average export prices of basic products, aluminosilicate products, and other refractory products decreased by 8.42%, 31.63%, and 0.69% respectively.

From January to June, the import volume of refractory products was 0.0091 million tons, a year-on-year increase of 8.20%. Among them, the import volume of basic products was 0.0024 million tons, a year-on-year decrease of 31.86%; the import volume of aluminosilicate refractory products was 0.005 million tons, a year-on-year increase of 33.48%; the import volume of other refractory products was 0.0017 million tons, a year-on-year increase of 47.76%.

The comprehensive average import price of refractory products increased by 53.42% year-on-year, with the average import prices of basic products, aluminosilicate refractory products, and other refractory products increasing by 0.82%, 50.94%, and 64.08% respectively.

III. Production and Operation of Major Downstream Industries

Steel Industry Operating Conditions

1. Production and Operation of China's Steel Industry

From January to June, the national crude steel output was 400 million tons, a year-on-year decrease of 1.05%, with the decrease narrowing by 0.2 percentage points year-on-year; the steel output was 560 million tons, an increase of 1.11%, with the growth rate falling by 0.9 percentage points year-on-year.

2. World Steel Industry Production

From January to June, the global crude steel output was 795 million tons, a year-on-year decrease of 1.9%. Except for the Commonwealth of Independent States, the United Kingdom, and India, which increased by 0.6%, 0.2%, and 2.7% respectively, all other countries showed varying degrees of decrease.

From January to June, among the top 10 countries in global crude steel output, India, the United States, Turkey, and Ukraine saw an increase in output, while other countries saw a decrease. China accounted for 59.44% of the top 10 crude steel output and 50.3% of the global crude steel output.

Production and Operation of the Building Materials Industry

From January to June, the national cement production reached 1.109 billion tons, a year-on-year increase of 3.2%, compared with a decrease of 5.3% in the same period last year; the output of flat glass reached 384 million weight boxes, an increase of 1%, compared with a decrease of 4.2% in the same period last year.

Operating conditions of the non-ferrous metals industry

From January to June, the national output of ten non-ferrous metals reached 25.12 million tons, a year-on-year increase of 0.1%, with the growth rate falling by 9.2 percentage points year-on-year. Among them, copper production was 4.03 million tons, an increase of 7.6%, a decrease of 1.8 percentage points; electrolytic aluminum production was 15.32 million tons, a decrease of 1.9%, compared with an increase of 11.7% in the same period last year; lead production was 1.97 million tons, an increase of 2.8%, compared with a decrease of 3.5% in the same period last year; zinc production was 3.03 million tons, a decrease of 0.9%, compared with an increase of 12.8% in the same period last year. Alumina production was 28.63 million tons, a decrease of 1.6%, compared with an increase of 13.1% in the same period last year.

IV. Some views on the operating trend of major downstream industries

1. Steel industry

In the first half of this year, the operating conditions of steel enterprises have generally improved, reversing the industry's losses. In addition to the joint efforts of all employees in the steel industry, the main factors are the increase in steel prices and the decrease in the prices of major raw and auxiliary materials.

Steel prices have rebounded from the bottom, but are still operating at a low level; although crude steel production has decreased, the overall supply still exceeds demand. Therefore, low-level fluctuations in steel prices will be the norm.

Since 2012, domestic steel prices have been falling. At the end of 2015, the comprehensive steel price index fell to 54.48 points, a decrease of 34.43% compared with the end of 2014.

Since the beginning of this year, steel prices have rebounded. By the end of April, the comprehensive steel price index rose to 84.66 points, exceeding the same period last year for the first time. In particular, in March and April, the speed and magnitude of the increase in steel prices exceeded expectations. However, after May, steel prices fell rapidly. By the end of June, the comprehensive steel price index fell to 67.83 points, a decrease of 19.8% compared with the end of April.

In terms of crude steel production, from January to February, the national average daily crude steel production was 2.0178 million tons. In March and April, the daily crude steel production surged to 2.279 million tons and 2.314 million tons, respectively. In June, the daily crude steel production reached 2.3175 million tons, setting a new historical high.

Therefore, the increase in product prices is accompanied by the release of production capacity, and the release of production capacity is accompanied by a decrease in product prices. This is the result of overcapacity inevitably leading to low-level hovering of product prices.

The decline in the price of raw and auxiliary materials is also one of the main factors contributing to the improvement in operating conditions.

From January to June, the purchase prices of major raw materials and fuels used in steel smelting have decreased significantly. In addition to the purchase prices of imported iron ore and metallurgical coke decreasing by 13% and 16.94% respectively, the others have decreased by about 20% year-on-year.

Year-on-year decrease in the purchase cost of major raw and auxiliary materials

Variety

Unit

January-June 2016

Same period last year

Year-on-year increase

Year-on-year growth rate (%)

Domestic iron

Concentrate

Yuan/ton

413.39

504.13

-90.74

-18.00

Imported iron ore

Yuan/ton

404.73

465.19

-60.46

-13.00

Coking coal

Yuan/ton

620.34

772.44

-152.10

-19.69

Injection coal

Yuan/ton

511.64

656.56

-144.92

-22.07

Metallurgical coke

Yuan/ton

779.68

938.65

-158.97

-16.94

Scrap steel

Yuan/ton

1183.07

1478.74

-295.67

-19.99

Therefore, the significant decrease in the procurement cost of steel enterprises in the first half of the year is also one of the main factors contributing to the improvement in economic efficiency.

2. Building materials industry

In the first half of the year, the output of cement and flat glass increased slightly, by 3.2% and 1.0% respectively. In June, cement prices fell by 5.6% year-on-year; flat glass prices rose by 1% year-on-year.

According to data from the Digital Cement Network, the cement industry achieved sales revenue of 304.7 billion yuan from January to May, a year-on-year decrease of 5.54%; and profits of 4.49 billion yuan, a year-on-year decrease of 52%. However, the single-month profit in May reached 4.64 billion yuan, 150 million yuan higher than the total profit from January to May. This shows that the profit level from January to April was almost at the breakeven point. In June, cement prices fell by 5.6% year-on-year, making operations very difficult.

3. The operating conditions of the non-ferrous metals industry are better than other downstream industries.

From January to May, the national non-ferrous metals industry achieved main business income of 2.21 trillion yuan and profits of 68.74 billion yuan, with year-on-year increases of 2.6% and 8.6% respectively. Among them, the aluminum smelting industry achieved revenue of 165.78 billion yuan, a year-on-year decrease of 6.0%, and profits of 2.42 billion yuan, a significant year-on-year increase of 184.7%, turning losses into profits. The losses of loss-making enterprises amounted to 17.6 billion yuan, a year-on-year decrease of 11.8%; among them, the losses of loss-making enterprises in the aluminum industry amounted to 4.05 billion yuan, a year-on-year reduction of 22.4%.

However, the operating quality is still relatively low, with the sales revenue profit margin of the aluminum smelting industry being only 1.46%.

Therefore, under the premise of serious overcapacity, in the initial stage of the market economy, the market order is not yet very standardized, and the self-discipline ability of enterprises is not yet high, it will inevitably lead to disorderly market competition, low-level operation of product prices, and fluctuations in costs will be the norm, and it will be difficult to achieve fundamental improvement in the short term.

V. Operating characteristics and existing problems of the refractory materials industry

1. Operating characteristics of the refractory materials industry

In the first half of this year, the production and operation of the national refractory materials industry continued the downward trend of last year, continuing to show a "six decreases and one increase" operating trend, with a passive situation of comprehensive decline in output, sales revenue, profit, export volume, trade volume, and average export price, only accounts receivable increased, but the increase narrowed.

From January to June, affected by market demand, compared with the same period last year, the national refractory materials output was 10.5746 million tons, a year-on-year decrease of 5.71%, with the decline narrowing by 6.46 percentage points.

A survey of the operating conditions of 60 key refractory material enterprises shows that refractory material output, sales revenue, and profits decreased by 6.32%, 10.30%, and 31.68%, respectively.

From the perspective of the operating conditions of key enterprises, the operating quality has significantly decreased, showing a passive situation where the decline in profits is greater than the decline in sales revenue, and the decline in sales revenue is greater than the decline in output.

Key enterprises achieved sales revenue of 15.614 billion yuan, a year-on-year decrease of 10.30%; profits reached 475 million yuan, a significant year-on-year decrease of 31.68%; 21.38 percentage points larger than the decrease in sales revenue.

The main business revenue profit margin was 3.04%, a year-on-year decrease of 1.66 percentage points. This is 2.64 percentage points lower than the 5.86% main business revenue profit margin of national industrial enterprises.

Among the 60 key enterprises, 45 were profitable, accounting for 75%; the total profit was 668 million yuan. 15 enterprises were loss-making, accounting for 25% of the total, with losses of 192 million yuan.

The total accounts receivable of key enterprises at the end of June was 14.79 billion yuan, a year-on-year increase of 2.19%, with the growth rate decreasing by 7.35 percentage points compared to the end of 2015.

2. Several Issues That Production Enterprises Should Pay Attention To

Funding issues remain the primary issue affecting the operational safety of enterprises.

By the end of June, the growth rate of accounts receivable of key enterprises has narrowed, decreasing by 7.35 percentage points compared to the end of 2015, achieving good results. This is the result of the high attention and unremitting efforts of production enterprises on funding issues, but it still increased by 2.19% year-on-year.

Among key enterprises, 9 enterprises, accounting for 15%, saw a year-on-year decrease of more than 20% in accounts receivable, while 11 enterprises, accounting for 18.3%, saw a year-on-year increase of 20%. In particular, several enterprises saw a year-on-year increase of more than 100% in accounts receivable.

Therefore, refractory material production enterprises should further strengthen their awareness of financial risks, persistently strengthen accounts receivable collection work, and constantly prevent operational risks for enterprises.

Downward market demand for refractory materials and major downstream industries, and the marginal operation of production enterprises has become the norm, which should be rationally treated.

After more than a decade of rapid development, it has reached the peak arc area. The downward trend in market demand is inevitable and conforms to the laws of economic development. Therefore, the decline in market demand is irreversible and will not be easily improved in the short term. Coupled with serious overcapacity, it will inevitably lead to market disorder, low-level market price fluctuations, and the marginal operation of enterprises will be difficult to change in the short term.

Therefore, production enterprises should have a clear understanding of the current economic operating conditions and market demand, and treat them rationally. They should adapt to the market through technological innovation and structural adjustment, rather than letting the market adapt to the enterprise, so that they can stand firm and develop steadily in a complex and changing market environment.

3. The Significant Decrease in the Average Export Price of Major Refractory Raw Materials and Products Should Be Highly Valued by Exporting Enterprises

In the first half of the year, among the 14 refractory raw materials and product varieties queried by the association from the General Administration of Customs, except for bentonite and three stones, the average export prices of the remaining 12 export varieties have decreased to varying degrees. Among them:

Among refractory raw materials, the major export varieties refractory alumina clay, fused magnesia, sintered magnesia, white corundum, and silicon carbide have experienced relatively large declines, with year-on-year decreases of 16.8%, 10.39%, 12.09%, 13.02%, and 5.36%, respectively.

Among the three categories of refractory products, the average export prices of alkaline refractory products, aluminosilicate refractory products, and other refractory products have all decreased, with year-on-year decreases of 8.42%, 31.63%, and 0.69%, respectively.

Although the gradual reduction in market demand may lead to a decline in exports, the decline in export prices is mainly the result of disorderly market competition, which should be highly valued by exporting enterprises.

Ke Xin New Materials

4. Strengthen Cost Management and Improve Operating Quality

Since the beginning of this year, the operating quality of key refractory material enterprises has significantly decreased, with an average sales profit margin of only 3.04%, a year-on-year decrease of 1.66 percentage points. The main reason for the decline in profit margin is the disorderly market order and the reduction in sales prices. However, weak enterprise management and serious losses and waste are also important factors contributing to the low operating quality.

Therefore, refractory material production enterprises should strengthen their cost awareness, tap internal potential, control product manufacturing costs to the greatest extent possible, and expand profit margins. Strictly control the three expenses of enterprise finance, management, and sales, strive to reduce procurement costs, truly follow the requirements of tightening belts, carefully calculate, strictly manage, and do everything possible to reduce various expenses, and make every effort to control production manufacturing costs to the minimum, ensuring that the operating quality of enterprises improves.

I. Overall Operating Conditions of Large-Scale Industries Nationwide

In June 2016, the year-on-year actual growth of the added value of large-scale industries was 6.2%, an increase of 0.2 percentage points compared to May. From a month-on-month perspective, in June, the added value of large-scale industries increased by 0.47% compared to the previous month. From January to June, the year-on-year growth of the added value of large-scale industries was 6.0%.

1. From January to June, large-scale industrial enterprises achieved 52.84 trillion yuan in main business revenue, a year-on-year increase of 3.1%; the main business cost was 45.33 trillion yuan, an increase of 3%;

From January to June, the profit margin of main business revenue was 5.68%. For every 100 yuan of main business revenue in large-scale industrial enterprises, the cost was 85.79 yuan, the main business revenue per 100 yuan of assets was 108.3 yuan, the per capita main business revenue was 1.179 million yuan, the finished product inventory turnover days were 14.4 days, and the average collection period of accounts receivable was 38.1 days.

2. From January to June, the total profit of large-scale industrial enterprises nationwide reached 3 trillion yuan, a year-on-year increase of 6.2%, with the growth rate falling by 0.2 percentage points compared to the period from January to May.

3. At the end of June, the accounts receivable of large-scale industrial enterprises was 11.62 trillion yuan, a year-on-year increase of 8%; the finished product inventory was 3.70 trillion yuan, a decrease of 1.9%.

II. Production and Operation of the Refractory Materials Industry from January to June 2016

1. Refractory Materials Production

From January to June, the national refractory materials output was 10.5746 million tons, a year-on-year decrease of 5.71%. Among them, the output of dense shaped refractory products was 6.9763 million tons, a year-on-year decrease of 2.02%; the output of heat-insulating refractory products was 0.2591 million tons, a year-on-year increase of 15.09%; the output of unshaped refractory products was 3.3392 million tons, a year-on-year decrease of 13.69%.

2. Import and Export Trade of Refractory Raw Materials

From January to June, the total import and export trade volume of refractory raw materials nationwide was US$1.377 billion, a decrease of 14.04% compared to the same period last year. Among them, the export trade volume was US$1.287 billion, a year-on-year decrease of 15.69%; the import trade volume was US$0.09 billion, a year-on-year increase of 18.68%.

The total export volume of refractory raw materials nationwide was 2.5067 million tons, a year-on-year decrease of 2.95%. Among them, the export volume of refractory raw materials was 1.716 million tons, a year-on-year decrease of 0.72%; the export volume of refractory products was 0.7907 million tons, a year-on-year decrease of 7.44%.

Main Refractory Raw Material Export Situation

① The export volume of electrofused magnesia and sintered magnesia was 0.1568 million tons and 0.252 million tons respectively, with year-on-year increases of 9.98% and 1.99% respectively.

② The export volume of refractory alumina clay, brown corundum, and white corundum was 0.4139 million tons, 0.285 million tons, and 0.0898 million tons respectively, with year-on-year changes of -6.98%, 2.08%, and 6.46% respectively.

③ The export volume of graphite and silicon carbide was 0.0525 million tons and 0.1594 million tons respectively, with year-on-year decreases of 1.33% and 5.16% respectively.

Refractory Product Export Situation

① The export volume of basic refractory products was 0.411 million tons, a year-on-year increase of 1.16%.

② The export volume of aluminosilicate refractory products was 0.3223 million tons, a year-on-year decrease of 11.64%.

③ The export volume of other refractory products was 0.0574 million tons, a year-on-year decrease of 31.03%.

3. Production and Export Operation Characteristics

Decrease in Refractory Material Output

From January to June, the national refractory material output decreased by 0.64 million tons compared to the same period last year, a year-on-year decrease of 5.71%.

Continued Decline in the Average Export Price of Refractory Raw Materials

From January to June, among the main refractory raw materials exported, the average export prices showed varying degrees of decline. The export volume and average export price of graphite, refractory clay, and silicon carbide continued to decline, with decreases of 1.33%, 6.98%, and 5.16%, and 5.43%, 16.80%, and 5.36% respectively; while the export volume of electrofused magnesia, sintered magnesia, brown corundum, and white corundum all increased to varying degrees, but the average export prices decreased. The export volumes increased by 9.98%, 1.99%, 2.08%, and 6.46% respectively, while the average export prices decreased by 10.39%, 12.09%, 3.34%, and 13.02% respectively.

Except for the increase in basic refractory products, the export volume of aluminosilicate refractory products and other refractory products decreased to varying degrees.

From January to June, the export volume of refractory products decreased by 7.74% year-on-year, and the comprehensive average export price decreased by 18.62%. Among them, the export volume of basic products increased by 1.16%, while the export volume of aluminosilicate refractory products and other refractory products decreased by 11.64% and 31.03% respectively;

The comprehensive average export price of refractory products decreased by 18.62%. Among them, the average export prices of basic products, aluminosilicate products, and other refractory products decreased by 8.42%, 31.63%, and 0.69% respectively.

From January to June, the import volume of refractory products was 0.0091 million tons, a year-on-year increase of 8.20%. Among them, the import volume of basic products was 0.0024 million tons, a year-on-year decrease of 31.86%; the import volume of aluminosilicate refractory products was 0.005 million tons, a year-on-year increase of 33.48%; the import volume of other refractory products was 0.0017 million tons, a year-on-year increase of 47.76%.

The comprehensive average import price of refractory products increased by 53.42% year-on-year, with the average import prices of basic products, aluminosilicate refractory products, and other refractory products increasing by 0.82%, 50.94%, and 64.08% respectively.

III. Production and Operation of Major Downstream Industries

Steel Industry Operating Conditions

1. Production and Operation of China's Steel Industry

From January to June, the national crude steel output was 400 million tons, a year-on-year decrease of 1.05%, with the decrease narrowing by 0.2 percentage points year-on-year; the steel output was 560 million tons, an increase of 1.11%, with the growth rate falling by 0.9 percentage points year-on-year.

2. World Steel Industry Production

From January to June, the global crude steel output was 795 million tons, a year-on-year decrease of 1.9%. Except for the Commonwealth of Independent States, the United Kingdom, and India, which increased by 0.6%, 0.2%, and 2.7% respectively, all other countries showed varying degrees of decrease.

From January to June, among the top 10 countries in global crude steel output, India, the United States, Turkey, and Ukraine saw an increase in output, while other countries saw a decrease. China accounted for 59.44% of the top 10 crude steel output and 50.3% of the global crude steel output.

Production and Operation of the Building Materials Industry

From January to June, the national cement production reached 1.109 billion tons, a year-on-year increase of 3.2%, compared with a decrease of 5.3% in the same period last year; the output of flat glass reached 384 million weight boxes, an increase of 1%, compared with a decrease of 4.2% in the same period last year.

Operating conditions of the non-ferrous metals industry

From January to June, the national output of ten non-ferrous metals reached 25.12 million tons, a year-on-year increase of 0.1%, with the growth rate falling by 9.2 percentage points year-on-year. Among them, copper production was 4.03 million tons, an increase of 7.6%, a decrease of 1.8 percentage points; electrolytic aluminum production was 15.32 million tons, a decrease of 1.9%, compared with an increase of 11.7% in the same period last year; lead production was 1.97 million tons, an increase of 2.8%, compared with a decrease of 3.5% in the same period last year; zinc production was 3.03 million tons, a decrease of 0.9%, compared with an increase of 12.8% in the same period last year. Alumina production was 28.63 million tons, a decrease of 1.6%, compared with an increase of 13.1% in the same period last year.

IV. Some views on the operating trend of major downstream industries

1. Steel industry

In the first half of this year, the operating conditions of steel enterprises have generally improved, reversing the industry's losses. In addition to the joint efforts of all employees in the steel industry, the main factors are the increase in steel prices and the decrease in the prices of major raw and auxiliary materials.

Steel prices have rebounded from the bottom, but are still operating at a low level; although crude steel production has decreased, the overall supply still exceeds demand. Therefore, low-level fluctuations in steel prices will be the norm.

Since 2012, domestic steel prices have been falling. At the end of 2015, the comprehensive steel price index fell to 54.48 points, a decrease of 34.43% compared with the end of 2014.

Since the beginning of this year, steel prices have rebounded. By the end of April, the comprehensive steel price index rose to 84.66 points, exceeding the same period last year for the first time. In particular, in March and April, the speed and magnitude of the increase in steel prices exceeded expectations. However, after May, steel prices fell rapidly. By the end of June, the comprehensive steel price index fell to 67.83 points, a decrease of 19.8% compared with the end of April.

In terms of crude steel production, from January to February, the national average daily crude steel production was 2.0178 million tons. In March and April, the daily crude steel production surged to 2.279 million tons and 2.314 million tons, respectively. In June, the daily crude steel production reached 2.3175 million tons, setting a new historical high.

Therefore, the increase in product prices is accompanied by the release of production capacity, and the release of production capacity is accompanied by a decrease in product prices. This is the result of overcapacity inevitably leading to low-level hovering of product prices.

The decline in the price of raw and auxiliary materials is also one of the main factors contributing to the improvement in operating conditions.

From January to June, the purchase prices of major raw materials and fuels used in steel smelting have decreased significantly. In addition to the purchase prices of imported iron ore and metallurgical coke decreasing by 13% and 16.94% respectively, the others have decreased by about 20% year-on-year.

Year-on-year decrease in the purchase cost of major raw and auxiliary materials

Variety

Unit

January-June 2016

Same period last year

Year-on-year increase

Year-on-year growth rate (%)

Domestic iron

Concentrate

Yuan/ton

413.39

504.13

-90.74

-18.00

Imported iron ore

Yuan/ton

404.73

465.19

-60.46

-13.00

Coking coal

Yuan/ton

620.34

772.44

-152.10

-19.69

Injection coal

Yuan/ton

511.64

656.56

-144.92

-22.07

Metallurgical coke

Yuan/ton

779.68

938.65

-158.97

-16.94

Scrap steel

Yuan/ton

1183.07

1478.74

-295.67

-19.99

Therefore, the significant decrease in the procurement cost of steel enterprises in the first half of the year is also one of the main factors contributing to the improvement in economic efficiency.

2. Building materials industry

In the first half of the year, the output of cement and flat glass increased slightly, by 3.2% and 1.0% respectively. In June, cement prices fell by 5.6% year-on-year; flat glass prices rose by 1% year-on-year.

According to data from the Digital Cement Network, the cement industry achieved sales revenue of 304.7 billion yuan from January to May, a year-on-year decrease of 5.54%; and profits of 4.49 billion yuan, a year-on-year decrease of 52%. However, the single-month profit in May reached 4.64 billion yuan, 150 million yuan higher than the total profit from January to May. This shows that the profit level from January to April was almost at the breakeven point. In June, cement prices fell by 5.6% year-on-year, making operations very difficult.

3. The operating conditions of the non-ferrous metals industry are better than other downstream industries.

From January to May, the national non-ferrous metals industry achieved main business income of 2.21 trillion yuan and profits of 68.74 billion yuan, with year-on-year increases of 2.6% and 8.6% respectively. Among them, the aluminum smelting industry achieved revenue of 165.78 billion yuan, a year-on-year decrease of 6.0%, and profits of 2.42 billion yuan, a significant year-on-year increase of 184.7%, turning losses into profits. The losses of loss-making enterprises amounted to 17.6 billion yuan, a year-on-year decrease of 11.8%; among them, the losses of loss-making enterprises in the aluminum industry amounted to 4.05 billion yuan, a year-on-year reduction of 22.4%.

However, the operating quality is still relatively low, with the sales revenue profit margin of the aluminum smelting industry being only 1.46%.

Therefore, under the premise of serious overcapacity, in the initial stage of the market economy, the market order is not yet very standardized, and the self-discipline ability of enterprises is not yet high, it will inevitably lead to disorderly market competition, low-level operation of product prices, and fluctuations in costs will be the norm, and it will be difficult to achieve fundamental improvement in the short term.

V. Operating characteristics and existing problems of the refractory materials industry

1. Operating characteristics of the refractory materials industry

In the first half of this year, the production and operation of the national refractory materials industry continued the downward trend of last year, continuing to show a "six decreases and one increase" operating trend, with a passive situation of comprehensive decline in output, sales revenue, profit, export volume, trade volume, and average export price, only accounts receivable increased, but the increase narrowed.

From January to June, affected by market demand, compared with the same period last year, the national refractory materials output was 10.5746 million tons, a year-on-year decrease of 5.71%, with the decline narrowing by 6.46 percentage points.

A survey of the operating conditions of 60 key refractory material enterprises shows that refractory material output, sales revenue, and profits decreased by 6.32%, 10.30%, and 31.68%, respectively.

From the perspective of the operating conditions of key enterprises, the operating quality has significantly decreased, showing a passive situation where the decline in profits is greater than the decline in sales revenue, and the decline in sales revenue is greater than the decline in output.

Key enterprises achieved sales revenue of 15.614 billion yuan, a year-on-year decrease of 10.30%; profits reached 475 million yuan, a significant year-on-year decrease of 31.68%; 21.38 percentage points larger than the decrease in sales revenue.

The main business revenue profit margin was 3.04%, a year-on-year decrease of 1.66 percentage points. This is 2.64 percentage points lower than the 5.86% main business revenue profit margin of national industrial enterprises.

Among the 60 key enterprises, 45 were profitable, accounting for 75%; the total profit was 668 million yuan. 15 enterprises were loss-making, accounting for 25% of the total, with losses of 192 million yuan.

The total accounts receivable of key enterprises at the end of June was 14.79 billion yuan, a year-on-year increase of 2.19%, with the growth rate decreasing by 7.35 percentage points compared to the end of 2015.

2. Several Issues That Production Enterprises Should Pay Attention To

Funding issues remain the primary issue affecting the operational safety of enterprises.

By the end of June, the growth rate of accounts receivable of key enterprises has narrowed, decreasing by 7.35 percentage points compared to the end of 2015, achieving good results. This is the result of the high attention and unremitting efforts of production enterprises on funding issues, but it still increased by 2.19% year-on-year.

Among key enterprises, 9 enterprises, accounting for 15%, saw a year-on-year decrease of more than 20% in accounts receivable, while 11 enterprises, accounting for 18.3%, saw a year-on-year increase of 20%. In particular, several enterprises saw a year-on-year increase of more than 100% in accounts receivable.

Therefore, refractory material production enterprises should further strengthen their awareness of financial risks, persistently strengthen accounts receivable collection work, and constantly prevent operational risks for enterprises.

Downward market demand for refractory materials and major downstream industries, and the marginal operation of production enterprises has become the norm, which should be rationally treated.

After more than a decade of rapid development, it has reached the peak arc area. The downward trend in market demand is inevitable and conforms to the laws of economic development. Therefore, the decline in market demand is irreversible and will not be easily improved in the short term. Coupled with serious overcapacity, it will inevitably lead to market disorder, low-level market price fluctuations, and the marginal operation of enterprises will be difficult to change in the short term.

Therefore, production enterprises should have a clear understanding of the current economic operating conditions and market demand, and treat them rationally. They should adapt to the market through technological innovation and structural adjustment, rather than letting the market adapt to the enterprise, so that they can stand firm and develop steadily in a complex and changing market environment.

3. The Significant Decrease in the Average Export Price of Major Refractory Raw Materials and Products Should Be Highly Valued by Exporting Enterprises

In the first half of the year, among the 14 refractory raw materials and product varieties queried by the association from the General Administration of Customs, except for bentonite and three stones, the average export prices of the remaining 12 export varieties have decreased to varying degrees. Among them:

Among refractory raw materials, the major export varieties refractory alumina clay, fused magnesia, sintered magnesia, white corundum, and silicon carbide have experienced relatively large declines, with year-on-year decreases of 16.8%, 10.39%, 12.09%, 13.02%, and 5.36%, respectively.

Among the three categories of refractory products, the average export prices of alkaline refractory products, aluminosilicate refractory products, and other refractory products have all decreased, with year-on-year decreases of 8.42%, 31.63%, and 0.69%, respectively.

Although the gradual reduction in market demand may lead to a decline in exports, the decline in export prices is mainly the result of disorderly market competition, which should be highly valued by exporting enterprises.

Ke Xin New Materials

4. Strengthen Cost Management and Improve Operating Quality

Since the beginning of this year, the operating quality of key refractory material enterprises has significantly decreased, with an average sales profit margin of only 3.04%, a year-on-year decrease of 1.66 percentage points. The main reason for the decline in profit margin is the disorderly market order and the reduction in sales prices. However, weak enterprise management and serious losses and waste are also important factors contributing to the low operating quality.

Therefore, refractory material production enterprises should strengthen their cost awareness, tap internal potential, control product manufacturing costs to the greatest extent possible, and expand profit margins. Strictly control the three expenses of enterprise finance, management, and sales, strive to reduce procurement costs, truly follow the requirements of tightening belts, carefully calculate, strictly manage, and do everything possible to reduce various expenses, and make every effort to control production manufacturing costs to the minimum, ensuring that the operating quality of enterprises improves.

 

 

Source: Luoyang Ke Xin New Materials Co., Ltd.: https://www.kcnh.com/