Steel consumption in the manufacturing sector has surpassed that in the construction industry: the leading driver of steel demand has shifted.

A major change rarely noticed by the general public but enough to reshape the entire industrial chain is taking place in the steel industry:

Steel consumption by the manufacturing sector has exceeded that by the construction sector.

For many years in the past, when talking about steel demand, the market would first associate it with real estate, infrastructure and construction sites.

The more houses are built, the better rebar sells; the more infrastructure projects are launched, the stronger the demand for steel. Real estate used to be one of the most critical variables determining the prosperity of the steel industry.

But now, this logic is gradually failing.

A recent survey by Xinhua News Agency points out that China's steel industry has basically bid farewell to the extensive expansion of production capacity, the steel consumption of the manufacturing sector has surpassed that of the construction sector, and the output and proportion of high value-added sheet products, stainless steel and other products have continued to rise.

This means that what is really worth paying attention to in China's steel industry is no longer "how much more steel can be produced".

Instead, the question is:

Who will eventually buy all this steel?

The answer is increasingly shifting from real estate to the manufacturing sector.

In the past, the steel industry relied on real estate. Why should we now focus on the manufacturing sector?

Steel is a typical cyclical industry.

In the past, when the real estate industry was developing at a high speed, the most familiar logic of the industry was very simple:

The more construction starts, the more steel is consumed.

Real estate development requires a large amount of construction steel such as rebar and wire rods, and infrastructure also requires a large amount of steel. Therefore, as long as the investment in real estate and infrastructure maintains high growth, steel mills can easily obtain relatively stable large-scale demand.

This is also why in the past, when analyzing the steel industry, people often focused on new real estate construction starts, construction area, and infrastructure investment.

But now, the demand structure is beginning to change.

After the real estate industry gradually transitions from high-speed incremental development to the stock era, the demand for construction steel naturally cannot grow at the past rate for a long time.

On the other hand, China's manufacturing industry is still continuously upgrading.

Automobiles need steel.

Shipbuilding needs steel.

Construction machinery needs steel.

Wind power, nuclear power and power equipment need steel.

Home appliances, rail transit and high-end equipment are also inseparable from steel.

As a result, a very important "gear shift" has taken place in steel demand.

In the past, the logic was:

Building more houses requires more steel.

Now it is increasingly turning to:

Manufacturing more complex equipment requires better steel.

These two eras put forward completely different requirements for steel enterprises.

What has really changed is not just "who uses steel", but "what kind of steel is used"

If the manufacturing sector simply takes over the reduced demand from the construction sector, the changes in the steel industry will not be that profound.

But the problem is:

The steel required by the manufacturing sector is not exactly the same as that required by the construction sector.

Long products such as rebar and wire rods are widely used in the construction field.

After entering the fields of automobiles, ships, energy equipment and high-end machinery, the market increasingly needs high-strength sheets, automotive steel sheets, electrical steel, special steel, stainless steel and various customized steel products.

In other words:

Demand has not only changed its customers, but also changed the products it needs.

This will directly change the competition mode of steel enterprises.

In the past, as long as the output was large enough and the cost was low enough, economies of scale could be formed.

However, manufacturing customers often have more complex requirements for materials.

For example, automotive steel not only needs to consider strength, but also take into account lightweighting, stamping performance and safety.

Shipbuilding steel needs to face the marine environment, and has higher requirements for strength, welding performance and corrosion resistance.

Materials required for energy equipment may face more complex service environments such as high temperature, high pressure and extreme cold.

Once steel enters these fields, it is no longer just "sold by the ton".

It also includes material R&D, process stability, customer certification and continuous supply capacity.

The competition in the steel industry has gradually shifted from "who produces more steel" to:

Who can produce the steel that customers really need?

In the real estate era, competition focused on tonnage. In the manufacturing era, competition focuses on certification

This is probably the most critical point in this round of steel demand transformation.

Construction steel is relatively standardized.

As long as it meets the corresponding national standards, the substitutability between similar products is usually relatively strong.

However, after entering the manufacturing supply chains of automobiles, ships, machinery and other sectors, the situation becomes much more complex.

Large manufacturing enterprises usually need to conduct long-term testing and certification of material suppliers.

Whether a certain type of steel can enter the supply system of automobile factories, shipyards or high-end equipment enterprises does not only depend on the quotation.

It also depends on:

Whether the product performance is stable for a long time?

Whether the quality of different batches is consistent?

Whether it is possible to adjust the composition and process according to customer needs?

When there is an abnormality in the supply, can the problem be solved quickly?

This means that once manufacturing customers complete supplier certification, the partnership is often more stable.

For steel enterprises, what is really valuable is no longer just production capacity, but:

How many high-value customer supply chains they have entered.

This is increasingly similar to industries such as semiconductors and automotive components.

An advanced production line is only the foundation.

What truly forms a competitive barrier is customer certification, product mix and long-term supply capacity.

Therefore, in the future, if we only judge the competitiveness of a steel enterprise by its "annual output of tens of thousands of tons", the information will be far from sufficient.

What is more worth paying attention to is:

How high is the proportion of high-end steel?

How high is the proportion of manufacturing customers in the automotive, shipbuilding and energy sectors?

Has the added value per ton of steel increased?

Can R&D investment be continuously converted into new products?

These indicators truly determine whether steel enterprises can gain benefits from the upgrading of the manufacturing sector.

Why is "manufacturing steel consumption exceeding construction steel consumption" an important signal?

Because this means that the economic driving force behind the steel industry is changing.

In the past, steel demand was more driven by real estate investment and infrastructure investment.

In the future, steel demand will increasingly follow the prosperity of the manufacturing sector.

The growth of automobile exports will affect the demand for automotive steel sheets.

The increase in shipbuilding orders will affect the demand for ship plates.

The expansion of new energy equipment will affect the demand for special steel and high-end sheets.

The upgrading of high-end mechanical equipment will also promote the transition of steel from ordinary materials to products with higher strength and higher precision.

As a result, the relationship between the steel industry and the manufacturing sector will become increasingly close.

This is why in the future, when observing the steel industry, we cannot only focus on real estate.

There may even be a situation where:

The demand for real estate-related steel remains weak, but the demand for certain types of manufacturing steel remains strong.

The industry is no longer uniformly "good" or "bad", but shows increasingly obvious structural differentiation.

Weak construction steel demand does not mean that all steel demand is weak.

The growth of the manufacturing sector does not mean that all steel mills can benefit.

What really determines the performance of an enterprise is what it produces and who it sells to.

The most difficult hurdle for the steel industry is to move from "large-scale manufacturing" to "material manufacturing"

China is one of the largest steel producers in the world.

In the past, the biggest advantages of China's steel industry were a complete industrial chain and huge production capacity.

However, when the total volume expansion gradually enters the mature stage, the competition logic of the industry will inevitably change.

Steel is increasingly becoming a material industry.

What is a material industry?

It means that customers do not only care about "whether the product is available".

They care more about:

Is the strength sufficient?

Can the weight be further reduced?

Can the service life be further extended?

Can it adapt to more complex extreme environments?

Can it help the complete machine reduce energy consumption?

This means that in the future, what steel enterprises sell may no longer be just "one ton of steel".

Instead, it is a set of material solutions designed around the performance of customer equipment.

For example, if automakers want car bodies to be lighter and safer, steel enterprises need to develop higher-strength automotive steel.

If energy equipment wants longer service life and higher efficiency, materials with higher temperature resistance and corrosion resistance are needed.

As mechanical equipment develops towards high-end, the requirements for steel precision, strength and consistency will also become higher and higher.

Steel still looks like steel.

But the technical content behind it may be completely different.

This is also why the importance of high value-added sheets, stainless steel and special steel continues to rise.

What the steel industry really needs to compete for in the future is not just steelmaking capacity.

Instead, it is material R&D capability.

This also means that "steel output" is increasingly no longer the most important indicator

In the past, when evaluating a steel enterprise, people tended to first look at its output.

Producing 10 million tons a year sounds more advantageous in scale than producing 5 million tons.

But after entering the era of manufacturing steel consumption, the importance of this indicator will decline.

Take the simplest example.

Two steel mills both produce 10 million tons of steel.

One mainly produces ordinary construction steel;

A large number of products from the other are used in automobiles, ships, energy equipment and high-end machinery.

Although the two companies have the same tonnage, their product prices, profit levels, customer stickiness and technical thresholds may be completely different.

Therefore, in the future, to judge a steel enterprise, we need to look at at least more sets of data.

The first set is the product mix account.

What is the proportion of high value-added sheets and special steel?

The second set is the customer structure account.

What are the respective proportions of real estate, infrastructure and manufacturing customers?

The third set is the profit per ton of steel account.

For each ton of steel produced, how much profit can it finally generate?

The fourth set is the energy account.

Steel is a high-energy-consuming industry. In the future, energy efficiency, green production and carbon costs will directly affect competitiveness.

The fifth set is the R&D account.

Does the enterprise have the ability to continuously launch new high-end steel products and enter new manufacturing supply chains?

The most familiar logic of the steel industry in the past was:

The greater the output, the stronger the scale advantage.

In the future, it is increasingly likely to become:

The higher the value created by each ton of steel, the stronger the competitiveness.

The manufacturing sector taking over demand does not mean that steel demand will return to high growth

This point must be made clear.

The fact that manufacturing steel consumption exceeds construction steel consumption is an important signal of demand structure change.

But it does not mean that the total steel demand will grow significantly again.

Because the increase in the proportion of manufacturing steel consumption may have two reasons.

On the one hand, the manufacturing sector itself consumes more steel;

On the other hand, it may also be that the construction sector's steel consumption is declining faster.

Therefore, we cannot simply interpret "manufacturing steel consumption exceeding construction steel consumption" as the steel industry entering a new total-volume high-growth cycle.

The more accurate keyword for this round of change is:

Structural upgrading.

The real growth space of China's steel industry in the future is most likely not to continue to produce more and more steel, but to make the same ton of steel have higher value.

From ordinary steel to high-strength steel.

From construction steel to automotive steel sheets.

From standard products to customized materials.

From selling steel once to co-developing materials with manufacturing enterprises.

The source of industry profits may also change accordingly.

This is a more difficult process than simply expanding production.

But it is also a more valuable process.

The steel industry is experiencing a "customer renewal"

In the past, one of the largest customers of China's steel industry was the real estate sector.

The largest incremental customers in the future are increasingly likely to come from the manufacturing sector.

This means that steel enterprises must also re-understand their customers.

In the real estate era, customers care about:

What is the price?

Is there stock available?

When can it be delivered?

In the manufacturing era, customers will continue to ask:

Can material performance be improved?

Can the weight be reduced?

Is the yield rate stable?

Is there an R&D team to solve problems together?

Can the same quality be guaranteed for a long time?

There are more questions, and the threshold is also higher.

But once you enter this market, the product value will also be higher.

Therefore, the truly important part of "manufacturing steel consumption exceeding construction steel consumption" is not just a change in proportion.

It is more like an industry watershed.

In the past few decades, what China's steel industry has solved is:

How to meet the huge steel demand in the process of rapid industrialization and urbanization.

What needs to be solved in the next stage is:

How to provide better materials for high-end manufacturing.

From "producing more steel" to "producing better steel".

It seems to be just a change of a few words.

But behind it may determine the real gap between Chinese steel enterprises in the next decade.

In the real estate era, the most important indicator of the steel industry was tonnage.

In the manufacturing era, what really sets enterprises apart is most likely how much technical content is contained in each ton of steel.

This article is from the WeChat official account "BT Finance" (ID: btcjv1), authored by BT Finance, and authorized for release by 36Kr.