China's manufacturing industry encounters raw material "cost looting"

“This year, the price of steel has risen by 30% and has negotiated many times with suppliers. Now the price of suppliers has increased by 25%, and the ex-factory price for customers has also been increased by 20% accordingly. This will partially offset the increase in raw material prices.” Mr. Liao, a steel procurement manager at a car steel plant, was struggling. Under the current situation of rising raw materials this year, he felt both sides of raw material suppliers and business owners attack.

According to the purchasing managers' index released by HSBC in early September, the average input cost of China's manufacturing industry rebounded in August after falling for two consecutive months, rising from a previous 49.4 to a maximum of 51.9 in March. The increase in input prices was significant. According to a survey conducted by this reporter, prices of raw materials such as steel, copper, cotton, and rubber in the domestic market have both increased.

Upstream and downstream hits

"The price increase does not say, and sometimes there are still concerns that there is no way to purchase." For many years as purchasing manager, Liao manager obviously felt the pressure of purchasing this year. According to the rules and regulations, the general purchase of raw materials is 50% after remittance and then delivery, and in April this year appeared because of fear of getting goods, using cash to buy steel.

Manager Liao needs to purchase hundreds of tons of steel per month. The largest traders and steel mills deal with most of the time. If there is more cooperation, there will be more room for negotiation. The market price will rise by 10% or fall by 10%. Both parties do not make price adjustments. "However, there has been a situation of more than 20% increase this year, and the previous agreement did not apply."

In terms of rebar prices, prices at the end of last year were oscillating at around RMB 3,500/ton, and by the end of April and May of this year, prices were around RMB 4,600/ton.

Manager Liao told the reporter: “The company requires 'zero inventory' operations, generally it will not be hoarding the goods on a large scale, but will only purchase a few raw materials outside the quota limit according to the company’s production and operation needs.” The reporter interviewed the “Purchasing House”. The professional group learned that a number of senior procurement professionals said that when raw materials are rapidly rising, they are also the most stressful time.

"Intensified competition in the industry, a price increase, the product is certainly lack of competition, can only find ways in the upper reaches, hoping to improve the company's profitability in this way." This is Liao manager understands the existence of the enterprise, the industry chain It takes a layer of pressure to digest the rising raw materials, and the entire industry chain can survive.

According to data released by China United Iron and Steel Network, a 10% increase in steel prices will increase the cost of home appliances companies by 3%, of which the impact on the cost of washing machines will reach 3.8%, and the impact on the cost of air conditioners and refrigerators will be 1.5% - 3.0%. Obviously, with the continuous rise in steel prices, the cost of production in the highly competitive home appliance industry with a meagre profit has increased significantly.

The Zhiga Group knows its way. With the introduction of the company's strategic goal of “20 Million Units of Production, Marketing and Ten Years of Ten Thousand Billion Strong Enterprise Planning,” Chigo strives to build a stronger upstream and downstream industry chain from a higher level of strategic cooperation. The company recently signed strategic cooperation agreements with strategic partners such as the International Copper Industry Association, Meizhi, Highly and Panasonic. This is an important measure taken by the Chigo Group to achieve new strategic goals.

“We will further introduce market-oriented competition mechanisms in the management of core suppliers and core dealers, and create a competitive integrated production, supply and sales value chain,” said a person familiar with the Chigo Group.

Cotton prices skyrocketing textile enterprises cut production

Since the beginning of September, the acquisition of cotton will start gradually. However, this year, Wang, the manager of cotton procurement, went to Xinjiang early in August to explore the bottom: “This year's cotton prices have soared. Many customers are worried that prices will continue to rise. I hope I can make up my position early on.”

Mr. Wang is the head of cotton procurement for a cotton yarn company in China and supplies raw materials to large-scale textile companies.

Since the beginning of this year, cotton spinning companies have shown signs of market recovery. A number of textile companies said that their orders have risen significantly in an interview with this reporter, but they have encountered the problem of shortage of raw materials.

At the end of August this year, some textile companies started the work of cotton purchase. A garment company in Jiangsu purchased a new 1,000 tons of cotton in early September to ensure that it will take two or three months. According to reports, this company had accumulated 2,000 tons of cotton last year. When the raw material rose sharply, it took the initiative. The relevant person in charge of the company told reporters: “Last year’s prices were much different from this year, and we’re afraid to go further and guarantee a period of time. The amount of time can be used, and the amount of purchases in the future will wait for some time to see how the prices are.” In previous years when new cotton was shipped, prices had a certain drop, but this year it was different. This has some natural disasters. : Xinjiang's cotton production accounts for almost 40% of the country's total production. However, the region suffers from frost and heavy rainstorms, and the area affected by cotton seedlings is relatively large. This year, cotton is also affected by rainy weather in the main cotton areas of the Yellow River Basin and parts of the Yangtze River Basin. Not mature yet.

New cotton production is limited, and many textile companies hope that when the country sells its cotton, it can change the situation that cotton has been rising this year to a certain extent, but the announcement results have disappointed the textile companies.

On September 8, China National Reserve Cotton Management Corporation planned to bid 15081.04 tons of reserved cotton, and completed nearly all the auctions in the auction with nearly six hours. The weighted average transaction price of all transaction lint was 18,827 yuan/ton, and that of 328 cotton was 19,260 yuan/ton. As of September 8, the country has deposited 319,696 tons of accumulated turnover, completing 53.28% of the total planned volume.

"18,000 yuan / ton is the bottom line of the cost of the enterprise, if it exceeds this price, the company will be difficult to do." Cheng Fei, Jiangsu Xinchangchang International Trade Co., Ltd. is responsible for cotton procurement, said the company bought cotton for production, and now acquired The high price of cotton can only be digested internally. Once the market is biased, the pressure on the company will be even greater.

However, the pressure from textile companies did not curb the momentum of the rise in cotton. The industry has predicted that in the face of reduced production expectations and a larger supply and demand gap, cotton prices will remain strong in the afternoon. The data shows that since September, high-end cotton yarns such as J40S and J60S have exceeded 31,000 yuan/ton and 36,500 yuan/ton respectively.

"The company's raw materials have risen sharply, and product quality is likely to be a problem." A clothing company marketing manager revealed to reporters, "Some cotton yarns that have been backlog for several years are now entering the garment market in Guangzhou, Hangzhou, Beijing and Shenzhen. Cotton After washing water and smashing the velvet, it is difficult for consumers to identify it. Some influential brands in the market have begun to change their fabrics and raw materials. Even some well-known children's wear brands use sub-charging methods in this way. it is good."

At the same time, the rise in raw material prices also caused some companies to stop production. According to reports, after this soaring cotton price, in Binzhou, Shandong Province, the largest textile base in the north of China, 400 textile companies, large and small, can continue to maintain normal production. In %, most of the others have experienced underemployment. Many smaller textile companies have already stopped production or even closed down.

Tire company's gross profit rate decreased significantly

Like cotton, natural rubber has also encountered a disaster year. As the second largest natural rubber producing area in China, Yunnan has suffered a devastating drought of up to six months and a hundred years, including a natural rubber planting area of ​​more than 600 million mu.

"Rubber is generally harvested in March and prices will gradually decline. Usually July and August are the lowest prices for rubber." Wang Jing, head of rubber procurement at Jingdong Rubber Co., Ltd., told reporters that the price of rubber has been stubbornly high this year.

Since the fourth quarter of last year, natural rubber prices have soared. At present, the price of rubber has risen to around 25,900 yuan/ton, which is a year-on-year increase of more than 100%.

As an important chemical raw material, rubber prices have a significant impact on the tire industry, and tire consumption of rubber accounts for more than 70% of total rubber consumption. The reporter saw the mid-year report of the three major listed tire companies also reflected the pressure on enterprises to face rising raw materials.

According to the report of Qingdao Shuangxing's mid-year report, the company's sales gross margin was 6.98%, while the sales gross margin at the end of last year was 14.42%; the sales margin of Fengshen's shares was 12.31% in the middle of the year, and it was 23.75% at the end of last year; The mid-year sales gross profit margin of Qiangshan was 10.72%, while the gross profit margin at the end of last year was 20.02%.

Shuangqian shares explained the meaning of the data in the statement. Due to the material price increase during the reporting period, the increase in main business costs was greater than the increase in main business income, with an increase rate of 35.45%, an increase in cost of 1,059,625,800, and a decrease in gross profit of 13,724.12 Ten thousand yuan, which led to a year-on-year increase in main business revenue but a drop in gross profit margin. The gross profit rate of tires dropped from 12.56% last year to 9.60%, a drop of 2.96 percentage points, which made the profitability of main business more certain than that of the same period of last year.

“In the case of limited rubber production and strong market demand, the price of rubber in the future will likely continue to rise.” Chang Yingzhi, a research fellow of China Investment Advisor Chemical Industry, told reporters that China’s tire industry has low concentration and structural overcapacity. With the weak competitiveness of foreign brands and other tires, domestic tire companies have limited ability to transmit downward pressure on costs, making the gross profit margin of related tire companies fall in different ranges. Therefore, the rise in raw material costs and the harsh environment in which the industry competes have become major problems and difficulties in the operation of tire companies in China. Coupled with the increasing frequency of trade barriers in China's tire exports, it is expected that the operating environment of China's tire companies will become more difficult in the future.