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China’s wire and cable industy situation is grim

2016/05/11 10:39
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At present China's wire and cable industry for more than 99.6% of the companies are small and medium enterprises, large excess industry capacity, the market is very confusing, industry profits plummeted, some small businesses have been discontinued collapse, the industry reshuffle is inevitable.

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A lot of excess production capacity, product quality is not guaranteed. In the world, China's wire and cable output has surpassed Japan after the United States, the world's second-largest cable producer. However, as China's major basic industries, regardless of the extent of regulation in the market or by the degree of attention, the cable industry did not get the attention they deserve.

Although the cable market capacity increased rapidly, but the increase in production has far exceeded the demand. At present there are size wire, cable, fiber optic cable and electrical equipment manufacturing enterprises 3967, 99.647% of which are SMEs, these small enterprise product without quality assurance, there is no guaranteed funding, and no credit guarantee, mostly by virtue of malicious depress prices to snatch market.

Raw material prices continued to run high, businesses overwhelmed. As expected heavy and light industries, copper, aluminum, plastic and other raw material costs in the form of wire and cable products accounted for over 80% of the full cost. Since 2007, energy prices, transport costs and the rising cost of human resources, to further increase the cost of doing business, industry profit margins plummeted, reaching the edge of loss. In particular, copper prices run high, making its production costs increased significantly, the most affected is the small and medium enterprises, these enterprises widespread liquidity shortage, the market less competitive and other disadvantages, production and management more difficult. Some smaller businesses unbearable pressure on copper prices soaring, have discontinued collapse, looking for new business opportunities, but also in the few remaining alive unprofitable state.

Serious impact on the market is very chaotic development of the industry. First, the local protection seriously. At present, a large cable companies have 14, mainly in Jiangsu, Guangdong, Shandong and other places. Nationwide, the current basic formation of a unified market, but the invisible barriers between different parts did not break, the cable industry is very serious local protectionism. Foreign cable companies if you want to enter the local market, often face many barriers, unreasonable and even illegal barriers to substantially hinder the cable industry's healthy development. Second, the sales approach confusion. Bidding is the cable industry, the most common way of selling, while domestic current bidding mechanism is very confusing. In bidding companies, more than 80% of the lowest bid standards. As many bids there is no uniform standard, vicious competition and unfair competitive bidding situation is more serious, many companies rely on relationships without a permit to participate in bidding. Blind pursuit of low-cost approach has led to poor quality cable products crowding formal situations. Third, the payment is unreasonable. At present, the general is still 1-8-1 method of payment, and even 1-4-4-1, and which gives the producers and the cash flow adds an extra degree of difficulty. In fact, the payment is unreasonable, coupled with price increases of raw materials, has made a lot of industries and enterprises greatly diminished liquidity, corporate financial management more difficult. Therefore, China's wire and cable overcapacity, increased production costs, liquidity shortage, its solvency is bound to decline.

In gold billion Analysis: At present, China is already the world's second largest producer of wire and cable, but because the whole industry more than 99.6% of the enterprises are small and medium enterprises, resulting in a lot of excess capacity in the industry, product quality is not guaranteed, and because copper, aluminum, plastic and other raw material prices continued to run high, resulting in a substantial increase in production costs, industry profits plummet.