Manufacturing Industry Under Crazy Steel Price

"From tomorrow, due to the rise of upstream steel prices, our product prices will also be increased by 5%." On May 14, Wei Shiyou, the person in charge of Shandong Linyi Sanwei Precision Casting Co., Ltd., told the reporter of the 21st century economic report.

This year, the soaring steel prices have made Wei Shiyou feel more pressure. There are not a few small and medium-sized business owners like Wei Shiyou. They are also suffering.

In May, the domestic steel market continues to rise, and the steel price has broken through the previous high point in 2008 and set a record high.

According to the data of the National Bureau of statistics, domestic industrial production recovered steadily in April, the prices of iron ore, non-ferrous metals and other international bulk commodities went up, and the prices of production fields continued to rise. On a month on month basis, PPI rose 0.9%, down 0.7 percentage points from the previous month. Affected by the increase in demand and the cost of raw materials such as iron ore, the price of ferrous metal smelting and calendering industry increased by 5.6% and 0.9% respectively.

Iron and steel industry is one of the important raw material industries in China. Real estate, automobile, household appliances, machinery, shipbuilding and so on are important downstream industries of iron and steel industry. The soaring price of steel has made downstream enterprises suffer a severe impact. Under the transmission layer by layer, the terminal market of some industries began to bear pressure.

"Regret receiving orders"

Wei Shiyou has been working hard in the foundry industry for many years, and he thinks he has understood the price trend of raw materials. But this year's steel prices strange market, let him also difficult to understand.

"In the past years, steel prices are usually relatively stable after the new year. I didn't expect that this year's prices have risen so much. For example, the stainless steel we used increased by 30% in half a month." Wei Shiyou said that a year ago, he had thought of hoarding some raw materials, but it was just a slip of his mind. When he ordered again after the new year, the price had skyrocketed“ There was a time when the price was one price a day. Now I think about it. I regret that I didn't stock up on the goods a year ago. "

On April 27, the latest data released by the China Iron and Steel Industry Association showed that the actual steel consumption in the main steel industry increased by 47% in the first quarter. Under the influence of steel output growth, domestic and foreign demand growth and other factors, the steel price rose sharply, driving the steel industry profit level to increase greatly, steel enterprise profit is expected to continue to rise in the second quarter.

The upstream steel enterprises maintain a high profit level, while the downstream enterprises have a difficult time.

Take the mechanical equipment industry as an example, the mechanical equipment industry mainly uses non-ferrous metals such as upstream and midstream steel, copper and aluminum, rubber, plastics and various parts. Among the operating costs of machinery enterprises, the cost of raw materials accounts for about 60% - 80%, of which steel accounts for about 15% - 20% as a direct input of raw materials. Therefore, the rising prices of raw materials in the upstream have a great impact on the machinery industry.

A person in charge of a machinery enterprise in Suzhou said that since this year, the prices of raw materials such as steel, copper and aluminum have continued to rise, and the enterprise has been operating at a low profit“ Orders received before, because the contract has been signed, can only be executed at the original price, which means that we have to make a loss

Household appliance enterprises are also under great pressure. In a recent survey of institutional investors, bear electric appliance, a household appliance enterprise, said, "the top priority is to deal with the sharp rise in raw material prices."

The foundry industry is facing more severe challenges. The reporter of 21st century economic report interviewed a number of foundry enterprises. The person in charge of the enterprises said that at present, the enterprises are operating at a low profit state, and some orders are being made at a loss.

"We have to settle accounts in cash when we purchase raw materials, but we usually make monthly payments with our customers. Now, we not only have a small profit, but also have great pressure on capital." Wei Shiyou said helplessly.

Foundry industry starts to raise prices

Due to the continuous rise of upstream raw materials, it is difficult for downstream enterprises to make profits or even make losses in their orders. Many enterprises have significantly reduced their willingness to accept orders. In addition, due to the drastic fluctuations in the prices of raw materials, some industries have frequent defaults. In such a dilemma, some industries began to group heating.

Mr. Xiao, the person in charge of Shenzhen Hongchang metal foundry, learned from the exchange with peers that under the pressure of soaring raw material prices, some enterprises have suspended production, "some factories have given employees a holiday."

On May 11, the Guangdong Modern Foundry Co., Ltd., located in Jiangmen City, issued a notice to suspend production and supply. The notice mentioned that, due to the "life-threatening" price increase of raw materials in the foundry industry and the extremely tight supply, the cost of casting materials has far exceeded the gross profit of the enterprise, and the enterprise has reached a situation where it can not afford to lose money.

"At present, in addition to the high prices of all raw materials, cash settlement is also required. However, our company and our customers settle accounts on a monthly basis, which makes it extremely difficult for us to cash flow. The price difference of single raw materials has led to our inability to continue production and delivery of all orders that have been received but not delivered." Guangdong modern casting company said.

Zhao Yongjun, a researcher at the steel mine of China Securities construction investment Futures Co., Ltd., told the 21st century economic report that recently, they have contacted many manufacturing enterprises, including terminal construction machinery manufacturing, container processing, household appliance enterprises, steel structure processing and copper pipe processing in the middle end. On the whole, the prices of industries involving metal demand are generally rising.

Under the impact of raw material price rise, casting price rise has become a survival measure that foundry has to take. In some areas, the Foundry Association issued a notice to increase the price to increase the bargaining power.

On May 10, the notice of price adjustment issued by Nanping Municipal and County foundry industry association said that since the beginning of 2020, the raw materials of casting enterprises have increased significantly, resulting in a substantial increase in the cost of casting enterprises, and the loss area of enterprises continues to increase. In order to enable the foundry enterprises to survive and develop healthily, the association has decided to adjust the casting price from May 11, 2021, among which the increase range is between 1000 yuan and 1200 yuan per ton.

On May 11, Wenzhou Longwan District Foundry Association also issued a notice on casting price adjustment. According to the notice, in order to maintain the healthy development of the casting industry, it is decided through consultation that the casting price will be adjusted from May 12, 2021. Among them, the carbon steel casting will be increased by 1500 yuan per ton on the basis of the original price, and the stainless steel casting with various processes will also be increased by 1500 yuan per ton on the basis of the original price.

Analysts said that at present, it is easier for the upstream to raise prices, while it is more difficult for the downstream. The difference in industry concentration and demand side customer structure is the two important reasons for the huge difference in pricing power between upstream and downstream. In the transmission process of price rise, the low-end manufacturing industry with extremely scattered industries may eliminate some backward production capacity due to the lack of bargaining power.

"Follow the market" in the terminal market

What is the impact of the soaring prices of upstream raw materials on the end consumer market? The reporter of 21st century economic report investigates and understands that the price of raw materials has risen sharply, and some industries have already transmitted to the terminal market.

Home appliances, furniture and other industries closely related to consumers are also greatly affected by the rising prices of raw materials such as steel. Under a series of chain reactions, the terminal market of these industries has gone through several rounds of price increases.

Since January this year, the home appliance industry has started to raise the price tide. Midea, Hisense, oaks and other household appliance leaders have successively issued price adjustment sheets, the contents of which are similar to each other: due to the rising prices of raw materials upstream, they have to raise the prices of their products.

According to the data from Aowei cloud, the prices of various categories in the home appliance market have increased this year. According to the monitoring data in April, the average offline price of color TV sets increased by 31.3%, the average offline price of washing machine industry increased by 5.5%, and the average offline price of air conditioning increased by 7.9%.

The reporter of 21st century economic report learned that recently, many domestic electric tricycle enterprises have also started to raise prices.

Recently, Jiangsu Zongshen Automobile Industry Co., Ltd. said in the price adjustment notice to dealers that due to the continuous rise of raw material market supply and price trend, the company's normal production and operation has been under great pressure. In order to relieve the operating pressure, the prices of all motorcycle and electric vehicle series products will be gradually adjusted from May 1, 2021.

Tianjin Da'an Electric Vehicle Co., Ltd. recently issued a price adjustment notice to the dealers, which mentioned that since May, the steel price has been soaring continuously, which has intensified the pressure on the company's cost rise and can no longer support it. The company decided to adjust the price of all products on May 11. The 21st century economic reporter has learned that the price adjustment range of Daan electric vehicles ranges from 100 yuan to 300 yuan.

Some enterprises have begun to implement the "go with the market" initiative. As a leading enterprise in the field of electric tricycles, Jinpeng group recently sent a notice to the dealers that according to the changes in the prices of raw materials, the original prices of the three electric products follow the market mechanism, which is adjusted once every 10 days and implement the "one product, one price".

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