The wire and cable industry is facing double pressure

Statistics show that my country's copper demand has maintained a rapid growth rate in recent years, with a compound annual growth rate of 14.2% from 1998 to 2002, which is much higher than the growth rate of global copper demand. In 2002, my country's copper demand was 2.5 million tons, accounting for 17% of the total global demand, surpassing the United States and becoming the world's largest copper consumer.

As my country's economy enters a new round of growth cycle, especially the rapid development of downstream industries in the copper industry such as electricity, automobiles, and construction engineering, my country's copper demand will also enter a period of rapid growth.

From the perspective of my country's copper demand structure, the power industry accounts for the largest share, at 50%, which is mainly used for wires and cables, transformers, switches, and connectors. In the past few years, due to insufficient estimation of power demand growth, the control of new power supply projects was tight, and the growth rate of power investment was significantly lower than the growth rate of power, resulting in a nationwide power shortage. Power investment increased significantly in the second half of this year, and new power supply projects started one after another. The output of power generation equipment in July this year increased by 158%, and the cumulative increase from January to July was 67%. According to expert estimates, 25-30 million kilowatts of installed capacity will need to be added every year in the next few years, and power investment will be greatly accelerated. At the same time, with the reform of the power system, investment in the power grid will also increase substantially. The growth of the power industry, which is a major copper demander, will drive copper demand. The rise in copper prices has begun to restrict the development of the electrical industry.

In December 2003, the Shenyang Cable Factory bid for a wire bidding for a Beijing power supply company at a price of 16,800 yuan per ton. In late February 2004, it was notified that it won the bid, and the bidding party also planned to sign a contract with it. However, the Shenyang Cable Factory said that the wires cannot be taken at the price stated in the tender, otherwise they would lose money. Finally, after negotiation between the two parties, the contract was signed at a price of 18,400 yuan/ton. Wang Junkui, deputy director of Shenyang Cable Factory, behaved helplessly for this kind of "contract change." He said: "The price increase of wire and cable is a last resort. The price of raw materials has risen so sharply that enterprises cannot absorb it."

According to the survey conducted by the Wire and Cable Branch and its Price Committee on the main raw materials for the production of wires and cables (using the closing price of the Shanghai Futures Exchange as data):

Copper: The price on January 2, 2003 was 15,880 yuan/ton; the price on December 31, 2003 was 22,540 yuan/ton; the price on February 27, 2004 was 29,200 yuan/ton, compared with the beginning of the previous year Up 83.9%;

Aluminum: the price on January 2, 2003 was 13,700 yuan/ton; the price on December 31, 2003 was 15,640 yuan/ton; the price on February 27, 2004 was 17,800 yuan/ton, compared with the beginning of the previous year Up 30%;

In addition, insulating chemical materials increased by 40% compared with the same period of the previous year, and other chemical materials increased by 10-15% compared with the same period of the previous year.

According to forecasts, copper prices will continue to rise in 2004, and the annual average price will reach US$2,600/ton, an increase of about 40% compared to the average price of the previous year. The highest price for the year may reach US$3,000/ton. The domestic market price is slightly higher than the international market price, and the increase will be larger. The average domestic copper price is expected to be 25,000 yuan/ton.

The supply and demand gap in the world copper market in 2003 was 300,000 to 400,000 tons. With the continued tight supply of raw materials, the copper supply and demand gap will further expand in 2004-2005, and it is expected to reach 700,000-750,000 tons, and copper inventories will also fall sharply. Therefore, it is expected that the international copper price will continue to operate at a high level in 2005.

It can be said that the prices of the main raw materials for wire and cable production have risen across the board, which has brought great pressure to wire and cable manufacturers.

Wire and cable is a heavy industry and light industry. my country's raw materials account for about 80% of the total cost of wires and cables (69% in the United States, 62% in Europe, and 73% in Japan). It is understood that every 5% increase in raw material prices will reduce profits. 4%.

According to industry sources, it is generally believed that the increase in raw materials is generally 1%-2%, and no more than 5% at most, and manufacturers can digest it by themselves. At present, raw materials have risen by 80%, and companies simply cannot afford it. They only have to increase the price of wires and cables. The Shenyang Cable Factory’s upward price adjustment averages about 20%. Companies such as Beijing Wire and Cable General Factory, Hubei Yongding Hongqi Electric Co., Ltd., and Shenyang Guhe Cable Co., Ltd. have all begun to increase wire and cable prices, ranging from 20% to 50%.

Regarding the contracts that have been signed, many companies say that these contracts have become a hot potato. A certain company calculated an account: the company signed contracts with users for 180 kilometers and 50 kilometers in April and July 2003, the voltage levels were 110KV and 35KV, and the delivery date was 2004. At that time, the copper price was 16880 yuan/ Tons and 17,100 yuan/ton, the highest copper price in March this year rose to 29680 yuan/ton. If the copper price maintains this price, when the company fulfills the contract, the 110KV cable will lose 8.06 million yuan, and the low-voltage cable will lose 3.67 million yuan. The total loss is Will reach 11.74 million yuan. Therefore, wire and cable companies strive to negotiate with customers. Some companies get the understanding of customers, but some companies are not so lucky. This is because first, many projects have engineering budgets, and changing the contract price is equivalent to changing the budget and adding to the budget. The issues involved are very complex. Second, as Li Longfeng, vice president of TBEA Luneng Taishan Cable Co., Ltd., said: "The wire and cable industry is fiercely competitive. Compared with the buyer, the seller is at a disadvantage and basically has no bargaining power. "According to incomplete statistics, there are more than 6,000 wire and cable manufacturers in my country. The production scale of the industry is expanding disorderly and corporate profits are declining. According to industry insiders, this has led to a decline in the average profit rate of the wire and cable industry, which is currently around 5%. ; The other is serious counterfeiting. Inferior wires and cables flood the market, and repeated prohibitions are inevitable. The sharp increase in raw material prices this time gave some people a chance to take advantage of it. People cannot help worrying about the strange phenomenon of "bad money driving good money".