Steel Prices, Leather Machinery Enterprises Worry About "Indigestion"

Following the increase in the price of refined oil and electricity prices, the import of iron ore has increased to a new high in recent days, which has greatly increased the production cost of domestic iron and steel enterprises, and has also become inevitable to shift costs to downstream industries.

For the light industry machinery, household appliances, bicycles, sewing machines and other industries with huge demand for iron and steel, they also have to accept the fact that rations have risen sharply.

Recently, Baosteel represented the Chinese iron and steel company and Australia Rio Tinto, one of the world's major iron ore producers, reached the 2008 iron ore price agreement.

According to the agreement, Rio Tinto PB powder, Yang Di powder and PB block will rise by 79.88%, 79.88% and 96.5% respectively on the basis of 2007.

Iron ore rose to a new high.

In recent years, as an important pillar of economic development, the steel industry in China is growing very fast, which also makes China's demand for iron ore significantly increased.

Statistics show that in the past 5 years, China imported 13.4 million tons of iron ore, accounting for 42% of the total global shipping volume. Last year, China imported 3.8 billion tons, more than half of the total global shipping volume.

Iron ore is the most upstream raw material in the steel industry. Therefore, the rising price of iron ore directly raises the manufacturing cost of iron and steel enterprises.

According to estimates, the price of powdered ore has increased by 79.88%, which will increase the purchasing cost per ton of Chinese steel mills by 41.8 US dollars over last year, and the cost of smelting a ton of pig iron will increase by 65 US dollars accordingly.

Under normal circumstances, 1.6 tons of iron ore Shi Ke production of a ton of pig iron, according to last year's price of iron ore, if the increase of 71.5%, then the cost per ton of pig iron will increase by about 270 yuan.

And from pig iron to steel, generally a ton of pig iron can produce 0.95 tons of steel. If other conditions remain unchanged, to the steel link, the cost of iron ore prices will increase by about 280 yuan.

Faced with increased costs, iron and steel enterprises can only digest the pressure of rising costs through shifting.

As a weathervane of China's steel price trend, Baosteel Group has clearly proposed that the price adjustment of products in August will be raised by 200 to 400 yuan per ton.

The China Iron and Steel Industry Association said in an interview with reporters that China's steel price trend will continue to run at a high level this year, and the sharp rise of raw materials in the upstream of the steel industry will be pmitted to the downstream industries concerned.

In 2007, China's large and medium-sized steel production enterprises achieved sales income of nearly 2 trillion yuan, and from January 2008, steel prices continued to rise, the cumulative growth rate of more than 40%%.

This also means that the sales revenue of China's large and medium-sized steel producers will increase by 800 billion yuan over the previous year.

There is no doubt that the sales revenue of iron and steel enterprises is the purchasing cost of downstream enterprises.

The rising price of steel will bring huge cost pressure to the industries with larger steel consumption.

Iron and steel are known as "grains" in other industries.

In China's light industry, light industry machinery, household appliances, bicycles, sewing machines and other industries are mainly steel producers.

In the face of the rising steel prices, most enterprises tend to digest the pressure brought by the rising cost, but this time they worry about their "indigestion".

China Light Industry Machinery Import and export company told reporters that iron ore price rise to promote steel prices to light industry machinery industry is mainly about cost, it will promote the cost of machinery products rise.

Because of the fierce market competition in most of the light industry machinery industry, it is difficult to shift part of the cost increase through product pricing, especially for some low technology products, such as ordinary machine tools, general machinery products, etc.

According to some enterprises, some light machinery products began to go down since the second half of last year. Therefore, it is almost impossible to pfer costs by raising prices.

As the manufacturing base of the global household electrical appliance industry, the demand for home appliances is huge.

In 2007, China's major household electrical appliances consumed more than 5 million 700 thousand tons of steel. It is estimated that the demand for steel for major household appliances increased by more than 10% in 2008.

In the coming period, the growth rate of refrigerators and automatic washing machines will exceed 20%, and the growth of air conditioners and microwave ovens will exceed 10%. Refrigeration compressors and motors will also increase substantially, all of which will increase the demand for high performance thin sheets, cold rolled electrical steel sheets and hot rolled pickling boards.

The price of iron ore is rising again. After the digestion of the upstream industry chain, it will undoubtedly reflect the cost of household electrical appliances, especially the cost pressure of white household appliances will further increase.

"Although this year's home appliance steel has risen a lot, but the cost of iron ore price increases to the downstream is still very large, the pressure of the household electrical appliance industry is also relatively large."

Xu Dongsheng, Deputy Secretary General of the China household electrical appliances association, said: "although the time has come into the summer, the sales of refrigerators and air conditioners are not very good this year. In this market situation, the household electrical appliance industry has a great pressure to pass on the cost."

Iron ore prices have doubled over the past three years, and the rise of production data has greatly engulfed the profits of downstream enterprises.

There are two ways for enterprises to digest their costs, one is to save expenses, and the other is to raise the price of products. The two is to increase the prices of products.

Under the circumstance that the price of products is not up to much, raw materials will compress the profits of the enterprises and bring down the normal production profits.

Insiders say that in competitive and price sensitive household appliances, bicycles and other industries, the possibility of pferring costs through price increases is less likely.