Talking about the Influence of Rising Raw Material Price on Cable Industry

In the analysis of the economic operation of the electrical industry in the first quarter of 2010 , the China Electrical Industry Association stated: " As the world economy rebounds and the demand for basic raw materials increases, the trend of long-term increases in raw material prices has been basically established and there will be no special Unusual possibility. The electrician industry is affected by raw materials to a great extent. First of all, the demand is large, especially the demand for steel, copper, aluminum and silicon steel sheet is greater ; in addition, the added value of the product is low, and the raw material price is also More sensitive. "

In the first half of this year, copper, aluminum and silicon steel sheets, the main raw materials for the power equipment manufacturing industry, were the typical representatives. The wave of price increase was higher than the surge. In addition to the recent slight decrease in the prices of individual materials such as cold-rolled non-oriented silicon steel sheets, other Such as copper, aluminum, magnet wire and other basic raw materials and boilers with large diameter tubes, special-shaped tubes, alloy tubes and other special steel prices are in a high state, adding to the company's cost pressures.

As raw materials such as copper, aluminum, and silicon steel sheets have a large proportion in the cost components of low-voltage electrical appliances , wire and cable , transformers , and small and medium-sized electric motors, such as wire and cable products, raw materials account for more than 80% of total costs. The proportion of material cost in transformer products accounts for more than 70% of the total cost. Therefore, the substantial increase in raw material prices has caused a substantial increase in the cost of these basic electrical products. Some analysts believe that a 10% increase in price of silicon steel will increase the cost of transformers by 3.8%. ; copper and aluminum prices by 15%, the cost impact on the transformer 4.2% and 4.5%, respectively, plus energy prices, transport costs and rising cost of human resources, also contributed to further increase the cost of doing business.

The pressure on upstream companies caused by rising raw material prices is very significant. Since 2005 , the overall gross profit margin of the power equipment manufacturing industry has been declining year by year. In terms of transformers, its average profit margin was 22% 10 years ago, and currently About 5% ~ 6% .

Rising raw material prices and price increases are inevitable, but the current sales price of power equipment manufacturing industry is difficult to increase reasonably. Especially in low- and medium-end product markets with low technology added value, price reduction and sales are quite common. Some of the power equipment manufacturing companies have suffered losses. The root cause of this situation is blind investment, overcapacity, and oversupply.

On the one hand, due to the low investment threshold, a large number of companies are influx, resulting in over-abundance of enterprises in the industry. It is understood that at present, only conservatively estimate that the production of power transformer companies exceeds 1,000, and the size of enterprises in the wire and cable industry has reached Nearly 10,000 homes. The production capacity of these industries exceeds the market demand and there is a serious surplus. On the other hand, due to the low threshold, not only does the concentration of the industry become lower and lower, but also a part of it does not have the ability to produce. Controls and inspections and other necessary means “quote enterprises ” can be blended into the industry, becoming fake and shoddy, shoddy, cutting corners, shoddy work, and shoddy products, and by disrupting market competition order by means of lowering sales prices and other means, intensifying The disorderly competition in the industry.

But everything has its two sides, and the impact of raw material price increases on the power equipment manufacturing industry is also the same. In the short-term, the pressure on companies will be doubled, but in the long run, under the pressure of a sharp increase in raw material costs, the power equipment Manufacturing companies will be further divided. Manufacturers with small scale of production and lagging product technology will be unable to obtain stable supply of raw materials from the market due to the lack of economies of scale and core competitiveness. Production costs will be difficult to control and corporate profits will decline sharply or even lose money. , and eventually be eliminated from the market. But with the core technology and a certain scale of power equipment companies, through the production of high value-added products, large-scale production to reduce costs, digest the rising pressure of raw material prices, and usher in better The development of space.