We have become accustomed to the ups and downs of copper prices, and have focused more on how to generate orders, research production, and expand development. Unexpectedly, in 2019, copper prices took advantage of the lack of preparation and launched attacks, falling again and again. Compared to various industries that are not doing well, wire and cable appear even more desolate. According to statistics from Shanghai Nonferrous Metals Network, due to the downward pressure on China's economy and the China US trade war, copper prices have suffered a "Waterloo". As of 10:29 on May 31, the Shanghai copper index fell nearly 5%, and the long-awaited peak season for businesses has not changed the sluggish state of terminal consumption.
On a macro level, the GDP growth rate in the first quarter of this year was 6.4%, far exceeding expectations. And with the support of a series of loose monetary policies by the central bank, the financing costs of domestic small and medium-sized enterprises have been reduced. Nevertheless, the sudden escalation of the US China trade war has resulted in the imposition of 200 billion yuan in tariffs on Chinese goods exported to the US, including products related to the copper industry chain. If tariffs on another 300 billion yuan of goods exported to the US are eventually implemented in the future, the copper industry chain will still face considerable pressure.
From the perspective of copper terminal demand, there has not been a significant improvement yet, and the related industries are showing a "sluggish peak season". The World Bureau of Metal Statistics (WBMS) announced on May 22 that copper consumption from January to March 2019 was 5.29 million tons, compared to 5.72 million tons in the same period last year. The apparent demand in China from January to March was 2.653 million tons, a decrease of 6% compared to the same period last year. The operating rate of refined copper rod enterprises continues to decline year-on-year, mainly reflected in the wire and cable industry. Wire and cable are mainly used in fields such as power grid engineering, real estate, and automobiles. Due to a significant decline in downstream demand, the overall sales of cables have plummeted.
According to statistics, the national power grid projects completed an investment of 80.3 billion yuan from January to April this year, a year-on-year decrease of 19.1%, becoming a sales target for major cable enterprisesThe main reason for the decline in volume. Although the real estate market has shown a "little spring" trend in this quarter, there is no sign of the government relaxing its control over the housing market. The quarterly completion area of houses decreased by 10.8% year-on-year, with a significant decrease of 30.8% in the completion area of office buildings, continuing the decline in the completion area of the real estate market last year.
After experiencing a cold winter in 2018, the automotive market still did not improve in 2019. According to statistics from the China Association of Automobile Manufacturers, 4The monthly passenger car sales were 1.5749 million units, a decrease of 22.01% month on month and 17.73% year-on-year. The reason for organizing the above content is not to be shocking. These data are objective and reflect the facts that have already been caused to us behind these numbers. But it has become a consensus that the cable business is not doing well this year. Regardless of the size of the enterprise, it has been affected to varying degrees. Many friends in the group have revealed that there have been varying degrees of price wars in the spot markets of multiple provinces, such as Beijing, Jinan, and Hefei. Some specifications and models have experienced astonishing price reductions, leading to the withdrawal of many small and medium-sized players and seriously dragging down supply companies.
The downward pressure on China's economy is high, the real estate market is sluggish, and the situation is severe In addition to these macro factors that affect various industries, the cable industry has also been further affected by the severe impact of the Okey incident, and the industry has begun to enter a period of transformation; Copper prices are sluggish and inventory is depreciating; The price war is intensifying, and the gross profit margin continues to decline; The issue of payment terms is serious, and the financial cost pressure has increased After the millennium, the cable industry may face a severe period, which is both a challenge and an opportunity.