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"Dongfeng" in need of exit mechanism to resolve excess capacity

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On November 10, at the 2015 (first) China Iron and steel industry chain e-commerce Summit Forum hosted by China Metallurgical news agency, Luo Tiejun, deputy director of the Department of raw materials industry of the Ministry of industry and information technology, pointed out that "promoting the exit of" zombie enterprises "is the main direction to solve overcapacity", which aroused resonance in the industry. A netizen wrote on the official wechat of China Metallurgical Daily: "it's time to do this. It's time to get to the point."

In fact, since the second half of last year, in the context of the continuous deterioration of the profits of steel enterprises, production suspension and production reduction has become an unavoidable problem for steel enterprises. In March, Panzhihua Iron and Steel Co., Ltd. shut down 3.5 million tons of excess capacity; on July 31, Xinjiang Bayi Iron and Steel Co., Ltd. shut down in southern Xinjiang; in the third quarter, Jiugang Yushan iron and Steel Co., Ltd. shut down in full; in October, Shaanxi Hanzhong iron and Steel Group Co., Ltd. shut down in full; on November 13, Tangshan Songting iron and Steel Co., Ltd. announced that it would shut down; Banshan production base of Hangzhou Iron and Steel Co., Ltd. would also shut down by the end of 2015

At present, in the cold winter of the market, how to exit the inefficient production capacity and the enterprises that can't persist has become a problem that must be answered.

The lack of exit mechanism has become the "bottleneck" of solving excess capacity

To explore the reasons behind the shutdown and production reduction of a number of iron and steel enterprises, mainly the long-term loss and cash flow shortage of steel enterprises caused by the market downturn, has initially formed the market forcing mechanism for enterprises to exit in the steel industry with serious overcapacity. In the first nine months of this year, the total loss of the main business of the iron and steel enterprises of the members of China Iron and Steel Industry Association exceeded 55 billion yuan, with an average loss of 115 yuan / ton, and the loss of the enterprises with serious losses reached more than 400 yuan / ton. In this context, the most reasonable choice for iron and steel enterprises is to stop production and reduce production.

According to the data of the Steel Association, from January to September, there were 9 steel mills with production reduction of more than 30%, and 21 steel mills with production reduction of 10% - 30%. Among the large-scale iron and steel enterprises, Shougang reduced production by 6.9%, Anshan Steel by 6.7%, Benxi Steel by 7.2%, Shangang by 7.6% and WISCO by 7.5%. Even Baosteel and Shagang reduced production by 4.5% and 1.8% respectively. But Tangshan bainite, Jilin Siping modern, Jiangyin Xicheng, Jinan Gengchen and other small and medium-sized steel plants have been completely shut down.

However, just as the power of market mechanism is gradually playing out in resolving the contradiction of serious overcapacity, a problem that has been called for a long time but has not been solved has become the "bottleneck" in front of the steel industry -- exit mechanism.

Exit is a systematic project involving the relationship among government, enterprises, employees and society. The construction of exit mechanism is not easy. Because of this, from 2007 to the elimination of backward steel production capacity, in recent years to fully resolve the contradiction of serious overcapacity, the exit mechanism has always been regarded as an important part of improving the market competition order of the steel industry, which is expected by the industry. Now, for the structural adjustment of the iron and steel industry, the exit mechanism has become the "east wind" that is owed after "everything is ready".

There are two bottom lines in the exit process

The most important significance of the exit mechanism is to clarify the responsibilities and obligations of the government and the enterprise in the process of enterprise exit, so as to make the exit process more stable, orderly and standardized.

In this process, there are two untouchable bottom lines: first, not violating the relevant laws and regulations, and second, ensuring that the legitimate rights and interests of workers are not damaged.

For example, when some iron and steel enterprises that are not included in the standard condition management or fail to meet the environmental protection standards are preparing to quit the industry due to a large loss, their employee treatment and placement and other issues will often become an unclaimed account. For example, in order to solve the problem of unemployment, there are also local governments that require enterprises not equipped with environmental protection equipment to resume production. In this way, although the problem of unemployment has been alleviated temporarily and partially, it is obviously not worth the loss: first, it violates the provisions of the environmental protection law; second, it delays the withdrawal of excess steel production capacity; third, it goes against the original intention of the reform of "giving play to the decisive role of market allocation of resources".

For local governments, construction function, social security function and social development function are the three most basic functions. In the period of rapid economic development, it is the embodiment of the construction function of the local government to attract investment and develop the iron and steel industry through various preferential conditions. When the operation of enterprises is difficult, it is the duty of the local government to do a good job of social support. Obviously, this kind of responsibility can't be realized by forcing the enterprises to run inefficiently, but by means of tax adjustment, secondary distribution, transfer payment and so on.

For enterprises, operation according to law is also a red line that cannot be touched. According to the requirements of the labor contract law and other laws and regulations, it is the unshirkable responsibility of the enterprise to pay off the employees' wages. At the same time, enterprises should make full use of their ability of diversified development or transformation development to provide jobs for the employees who leave the main steel industry.

Update date:2020-04-15