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Iron ore price increase butterfly effect attacks power equipment
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- Time of issue:2019-11-27 21:27
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(Summary description)The price of imported iron ore has soared, and domestic iron ore companies are booming. Iron and steel companies that use iron ore as raw materials feel pressured. In order to absorb the cost of price increases, steel companies have raised product prices and use steel as raw materials downstream. Enterprises are all rumblings. In this industry chain, power equipment manufacturers that have suffered from raw materials for a long time reacted particularly strongly.
Iron ore price increase butterfly effect attacks power equipment
(Summary description)The price of imported iron ore has soared, and domestic iron ore companies are booming. Iron and steel companies that use iron ore as raw materials feel pressured. In order to absorb the cost of price increases, steel companies have raised product prices and use steel as raw materials downstream. Enterprises are all rumblings. In this industry chain, power equipment manufacturers that have suffered from raw materials for a long time reacted particularly strongly.
- Categories:Company News
- Author:
- Origin:
- Time of issue:2019-11-27 21:27
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The price of imported iron ore has soared, and domestic iron ore companies are booming. Iron and steel companies that use iron ore as raw materials feel pressured. In order to absorb the cost of price increases, steel companies have raised product prices and use steel as raw materials downstream. Enterprises are all rumblings. In this industry chain, power equipment manufacturers that have suffered from raw materials for a long time reacted particularly strongly.
Transfer pressure
"It's simply unreasonable. A price adjustment letter is sent over, and the price will increase, and we have to accept it honestly." A buyer from a domestic power station generator manufacturer said bluntly. During the interview, almost all electrical companies complained about the upstream steel companies. The price increase of iron ore became a fuse, and new accounts brought back old accounts.
However, the grievances of these downstream companies do not seem to have repercussions in the steel companies, and it is their urgent need to deal with the increase in ore prices. Recently, the rise in the price of imported iron ore and the doubts about whether steel stocks can absorb the rising costs have shaken investors' confidence, and steel stocks have collectively declined. Investors are sensitive and intuitive. At present, China's iron ore self-sufficiency rate is between 60% and 70%, making it the world's largest iron ore importer. According to industry sources, about two-thirds of WISCO's iron ore comes from imports, while Baosteel imports almost all of its iron ore. The price of imported iron ore has soared by 71.5%, and there is no doubt that domestic iron ore has risen accordingly. From this level, investors believe that steel companies have been hit hard.
Qi Xiangdong, deputy secretary-general of the China Iron and Steel Association, has another interpretation. He believes that domestic steel prices have "both cost factors and compensation factors" because domestic steel prices are generally about 30% lower than international prices. Currently, the international composite price index is 153.0, while the domestic price index is 132.0. The rise in steel prices is to make up for this price difference. A few days ago there was news that the Indian iron ore market has also seen price increases. Qi Xiangdong said that although the Indian market is also expected to rise, "its price will not grow any longer." The reason is that in 2004 due to domestic importers Bidding up prices, iron ore imported from India hit a high price of US$90 per ton. The ton price imported from Australia is only US$24 (FOB), even if it is increased by 71%, it is only US$43.
"The iron ore price increase will have a greater impact on steel products with less added value, such as rebar. Products with more deep processing links and high technical added value, such as oriented silicon steel sheets, have a much smaller impact." Liu Changsheng, a researcher in the steel market, said that the current domestic steel mills have different manufacturing costs. Large steel mills purchase large quantities and cooperate closely with foreign companies. ."
But for many small and medium steel mills, life is not so easy. According to industry insiders, since last year, the state's macro-control of investment in steel enterprises has been vigorous, and this year's macro-control has also focused on the steel industry. The country is likely to use this iron ore price increase to strengthen macro-control and concentrate state-owned superior capital into resource monopoly areas. The life of some small businesses will become more and more difficult, and it is very likely that a batch of them will fall.
In this price increase, the largest increase in steel products is undoubtedly the silicon steel sheet, which is the most important raw material for motors and transformers, accounting for between 70% and 80% of the cost. At present, the supply of silicon steel sheets is mainly controlled in the hands of Wuhan Iron and Steel, Baosteel, Taiyuan Iron and Steel, and Anshan Iron and Steel. At present, several major steel mills have raised their prices. A simple price adjustment letter from a big steel mill has overwhelmed electrical equipment manufacturers.
In fact, the right to speak for the price increase of iron ore is in the hands of powerful steel companies, and they have chosen to increase the price. "We have already transferred the cost to downstream companies. Is there a demand in the domestic market!" A staff member of the Securities Department of Wuhan Iron and Steel Group said outspokenly. WISCO exclusively produces cold-rolled oriented silicon steel sheets and high-grade cold-rolled non-oriented silicon steel sheets in China. The contribution of cold-rolled silicon steel sheets to WISCO’s main business profits has been more than 50%. From January to March this year, WISCO has been improving its products. price. According to insiders, the April price adjustment notice has been released, and the average price has been raised by about 1,000 yuan. The staff said: The direct supply price of the representative varieties of oriented silicon steel sheet has reached 26,000~27,000 yuan/ton (including tax), and the non-oriented silicon steel sheet has also reached 11,000 yuan/ton. "The cost of iron ore price increase has increased by more than 200 yuan. Go in."
A sigh of power equipment manufacturing
"26,000~27,000 yuan? Impossible!" Peng Hao, director of the procurement department of TBEA Shenyang Transformer Group, heard from reporters that WISCO had only adjusted the price, and said affirmatively: "It is far more than this price, at least 37,000 yuan per ton. If it continues like this, the impact will be greater. Our company will not be profitable, and it will be enough to guarantee no compensation."
Zeng Qinggan, deputy general manager and chief engineer of Guangdong Shunte Group, a leading domestic manufacturer of dry-type special transformers, told reporters that the production cycle of a dry-type transformer is 3 to 4 months. The cargo contract is not a big problem. But for a large project like the Three Gorges project, the production cycle is long, and the original contract signed will definitely be greatly affected when the price of such raw materials explodes. "Even if you don't make money, you can do it for nothing! The price of silicon steel sheets has risen so much, I really can't think of a solution, there is no way." Zeng Qinggan smiled bitterly.
The person in charge of the enterprise management office of a power equipment manufacturer said more clearly: "Most domestic steel mills have their own individual products, and they obtain monopoly profits. Motor and transformer companies have no choice. Imported iron ore prices increase and these steel mills increase their prices. In fact, it is transferring risks downstream. In front of them, our equipment manufacturing companies have become vulnerable groups."
The general manager of a large domestic power generation equipment group lamented: "The profits of steel companies are too high. Take Baosteel as an example. In 2004, the gross profit reached 29.34%. The profits of power generation equipment manufacturers are only about 10% at most. Only a few percent. Even so, the workers in the company have to work overtime. This is largely due to economies of scale. This year, I am afraid that there will be no benefits. Nowadays, the supply of steel mills is almost in short supply. A few days later, I went to Baosteel to beg others to sell us steel." His tone was a little helpless: "Now, the export price of our power generation equipment is almost the same as that of Japanese products, and the original export price advantage has been slowly lost. "
For the power equipment manufacturing industry, the past two years have just passed some comfortable days. The shortage of domestic power has created a number of manufacturing companies. This year, the country’s newly started power projects of 65 million kilowatts, plus the State Grid Corporation of China to build UHV power grids The good news of the company has made many companies full of longing for a good year this year. However, the price increase of raw materials from the source suddenly plunged the company into distress.
This kind of distress caused the stock market, which was supposed to be rejuvenated, to fall into a mess. Tianwei Baobian, Xu Ji Electric, and Pinggao Electric are all the way down. The annual report of Xu Ji Electric shows that in 2004, its main business income increased by 11.49% over the same period last year, but its net profit fell by 14.66%, and it was sought after by the outside world. The decline in electrician stocks can be described as miserable. Its annual report shows that in 2004, the gross profit margin of the company's transformers and wires and cables fell by 2.89% and 0.77% respectively from the previous year.
Siyuan Electric on the board of small and medium-sized enterprises also failed to escape. According to them, if the raw materials continue to maintain the current high level and the company's products still maintain the 2004 sales price, the company's product gross profit margin is expected to drop by 12 to 18 percentage points. It is expected that 2005 The annual production cost of the company has increased by 30-40 million yuan due to this factor. In fact, the company's net profit in 2004 was only 49.23 million yuan. The declining stock market is really fortunate to have such a bright color from Dongfang Boiler.
The raw materials used in Dongfang Boiler's products account for two-thirds of the raw materials, and the steam drums and steel frames also use plates. Why can he stand out in the gray stock market? The reporter learned that one of the reasons lies in the product raw materials put into production this year. 70% of steel products have been put in place, avoiding the risk of rising steel prices. However, due to the long production cycle of power station boilers, some large-diameter pipes for boilers that have been put into production will still have to be ordered from abroad one and a half years in advance this year.
Solving the splint dilemma
The power equipment manufacturing industry produces products with a large task volume and a long production cycle, which determines that it is difficult to avoid the attack of the risk of rising prices of raw materials. In fact, the price of raw materials has always been a bottleneck that plagued the power equipment manufacturing industry. In 2004, the "rolling" rise of silicon steel sheets and other raw materials has severely squeezed profit margins. The price increase of raw materials this time is only worse. In order to reduce the cost pressure, the China Electrical Equipment Industry Association and the Transformer Branch have also suggested that manufacturing companies negotiate with their owners to give them appropriate care. What is the final effect? A large-scale power equipment manufacturing company issued more than 50 consultation letters to the owners, but none of them responded with a sigh. "You ask for the understanding and support of others, but if they don't understand or support, what to do, you have to do it at a loss." A related person in an equipment manufacturing company said.
The upstream raw material market has been rising all the way, power companies are unwilling to understand and support, and the power equipment manufacturing industry is caught in the middle, living in the midst of suffering. In order to survive, for some time, many small and medium-sized enterprises have come up with a "shortcut" to deal with the price increase of raw materials, substituting low grades for high grades. The practice of substituting hot rolling for cold rolling has almost become an open secret. Obviously, the hidden danger of product quality will become a potential risk faced by the electric power enterprise as the owner.
Qi Xiangdong, deputy secretary-general of the China Iron and Steel Association, revealed that he will explain the iron ore price increase on behalf of the China Iron and Steel Association through the media to calm the panic in the industry. "We will also consider the endurance of the downstream, so that all links will bear some costs, and will never let this iron ore price increase have too much impact." He said firmly.
However, for electrical companies, the fundamental problem is not the iron ore price increase itself. This "butterfly effect" will force power equipment companies to take two paths. Like the steel industry, the power equipment manufacturing industry has entered a critical period of resource integration. The original low-value-added, low-tech path of winning at price has come to an end, and companies that take this deadly road will be eliminated sooner or later; Use the invisible hand of the market to develop new technologies and new products, to blaze a path of independent innovation, and to become a new path for a group of competitive companies. Perhaps this iron ore price increase will really become two trends in the industry. The dividing line is also unknown.
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