The trend of profit level change in the wire and cable industry in 2017 and the reasons for the change.

Up to now, some cable listed companies have issued 2017 annual performance forecasts, and many institutions have made forecasts. According to the statistics of existing public information, about 2/3 of the listed cable companies have increased their profits in advance, while the other 1/3 is not very optimistic. Among them, there is no lack of those who are expected to rise sharply year-on-year, or even quadruple; there are also those who turn losses into profits; there are those who increase income but not increase profits, and there are even some who continue to lose money. It can be said that several companies are happy and several are sad.

 

1, Industry competition pattern and degree of marketization

 

(1) From the perspective of market competition, in the competition pattern of China's wire and cable industry, the enterprises participating in the competition have formed three levels of obvious echelons. The first echelon is large foreign-funded factories and their domestic joint ventures, which have advanced production technology and equipment, strong R & D strength, and occupy the high-end product market for a long time; the second echelon is enterprises with bidding qualification and supply record of State Grid and some special cable advantage enterprises, which are the leading enterprises among domestic enterprises, Through independent research and development, equipment introduction and other ways to rapidly improve their technical strength, they have become the most important suppliers of power system. Enterprises other than the first and second echelons are divided into the third echelon. There are a large number of such enterprises, mainly concentrated in the fields of civil products and medium and low voltage products, with price competition as the main mode of competition.

 

(2) From the perspective of product structure, low-voltage products have overcapacity and fierce competition, medium-voltage products have a moderate degree of competition, and high-voltage and ultra-high-voltage products are oligopolistic. Low-voltage wires and cables have low technical content, simple equipment and technology, and a large amount of capital has entered the field of low-voltage wires and cables and formed a huge production capacity, which has exceeded market demand. In the case of overcapacity and increasingly fierce competition in the domestic market, the low-end cable product market has shown a fully competitive pattern with low profit margins. High-pressure and ultra-high-pressure products have high technical content, complex production processes, and high barriers to entry. At present, the market is mainly monopolized by a small number of foreign manufacturers, joint ventures and leading domestic enterprises. The entry barriers, competitive intensity and profit margins of medium-pressure products are intermediate between low-pressure and high-pressure products.

 

(3) From the perspective of regional distribution, enterprises are concentrated in coastal and economically developed areas, and the proportion of the central and western regions is relatively small. East China wire and cable enterprises are the most concentrated, the number of more than half of the total number of enterprises in the industry. There are many wire and cable enterprises in economically developed and coastal provinces. The total number of Guangdong, Zhejiang and Jiangsu provinces exceeds 50% of the national total. The total output value of wire and cable industry in Zhejiang, Jiangsu, Guangdong, Shanghai and Shandong regions accounts for about 70% of the total output value of the industry.

 

2, the main enterprises in the industry.

 

There are many listed companies in the domestic wire and cable manufacturing industry.

 

3, market supply and demand situation and change analysis.

 

(1) Analysis of the overall supply and demand situation

 

Wire and cable manufacturing industry has the characteristics of heavy industry light, due to the high unit price of raw materials copper and aluminum and price fluctuations faster, the inventory is too high on the one hand, the enterprise capital occupation is larger, on the other hand, the product sales price will also be affected by the fluctuation of raw material prices, there is a risk of a sharp decline in inventory prices. Therefore, most of the wire and cable manufacturers in the industry adopt the mode of production to order, so that the whole industry will not have a serious oversupply phenomenon.

 

In terms of import and export trade, China's total import and export trade of wire and cable reached 24.406 billion billion US dollars in 2016, down 3.74 percent from the same period in 2015. Among them, the import amount was 4.79 billion US dollars, accounting for 19.63 per cent of the total import and export trade of wires and cables that year; the export amount was 19.616 billion US dollars, accounting for 80.37 per cent of the total import and export trade of wires and cables that year.

 

(2) Market demand analysis

 

① The overall impact of urbanization and industrialization on market demand

 

Urbanization and industrialization are the long-term driving factors to promote the rapid growth of the wire and cable industry. In the past few years, China has experienced a period of rapid development of urban infrastructure construction and national economy, and the wire and cable industry has also developed rapidly. At present, China's urbanization rate and industrialization rate compared with the western developed countries there is still a big gap, is expected in the next 30 years, urbanization and industrialization process will continue to advance, which will bring long-term rigid demand for the wire and cable industry, to ensure the sustainable development and growth of the industry.

 

In 1978, China's urbanization rate was only 17.92 per cent, and by the end of 2016, the urbanization rate of China's resident population had reached 57.35 per cent. However, there is huge room for improvement in China's urbanization level compared with 78% in high-income countries. If the average annual growth rate of China's GDP in the next 20 years is 6%, China's per capita GDP will reach 13,000 US dollars by 2030. If we can comply with the development trend of market economy and gradually eliminate the institutional factors and other obstacles hindering the development of urbanization, China's urbanization rate should reach 65% by 2030. With the steady improvement of the level of urbanization, the demand for transmission and distribution wires and cables and rail transit cables in urban construction will continue to grow.

 

② Market demand for power cable and overhead conductor industry

 

The main difference between power cables and overhead conductors is whether the conductors are outsourced with insulating materials and the resulting laying methods are different: power cables have outsourced insulating materials, usually buried in the ground; overhead conductors generally have no outsourced insulating materials, usually overhead laying. The main functions of power cables and overhead conductors are basically the same, that is, as the carrier of transmission and distribution of large-capacity electric energy in the power system, the power system is the first major application field of power cables and overhead conductors.

 

During the "Twelfth Five-Year Plan" period, with the country's strong investment in power grid construction and power supply construction, it has brought greater market opportunities to the power cable and overhead conductor manufacturing industry. The State Grid has vigorously strengthened the construction of the power grid, so that the development speed of the power grid matches the power demand and the installed capacity, and basically meets the requirements of economic and social development. In May 2009, the State Grid put forward the development plan of "strong smart grid". The plan proposed that the construction of "strong smart grid" would be promoted in three stages, with a total investment of 4.25 trillion billion yuan, of which the "12th Five-Year Plan" was the second stage, with an estimated investment of 2 trillion billion yuan, and a unified "strong smart grid" would eventually be built by 2020 ". As the most important supporting industry in power grid construction, the market development of power cables and overhead conductors will usher in a new round of rapid development with the "Twelfth Five-Year Plan" and "Thirteenth Five-Year Plan" smart grid planning, the upgrading of power transmission and transformation equipment, and the construction of UHV transmission lines.

 

③ Construction demand of electrified railway and rail transit

 

As an important national infrastructure, railway has an important strategic position in China's transportation system. The State Railway Administration of China stated in the "Thirteenth Five-Year Railway Development Plan (Draft for Comment)" that from 2016 to 2020, the scale of railway fixed asset investment may reach 3.5 trillion -3.8 trillion yuan, of which the capital construction investment is about 3 trillion yuan. The new line is 30000 kilometers. By 2020, the national railway mileage will reach 150000 kilometers, including 30000 kilometers of high-speed railway.

 

By the end of 2015, the national railway operating mileage exceeded 120000 kilometers, ranking second in the world, of which 19000 kilometers of high-speed railways accounted for more than 60% of the world's total high-speed railway mileage. In 2016, 3,281 kilometers of new railways were put into operation nationwide, including 1,903 kilometers of high-speed railways. At the same time, China is preparing to build a "Trans-Asian Railway Network" with a total length of about 15000 kilometers. The increase in railway investment is bound to increase the demand for cables for rail transit vehicles and railway signal cables.

 

④ Nuclear power plant cable market demand

 

my country plans to put nuclear power into production with an installed capacity of 40 million kilowatts by 2020. To achieve this goal, the country will need to start construction of a million-kilowatt nuclear power unit every year with a total investment of more than 400 billion million yuan. Thermal reactor nuclear power plants, mainly pressurized water reactors, are the dominant reactor type of nuclear power in China in the near and medium term. According to the existing reactor type estimation of nuclear power plants, about 1.2-0.15 billion yuan of wires and cables are required for every 1 million kilowatts of nuclear power plants. According to this estimation, the planned installed capacity of nuclear power plants will need about 3 billion yuan of wires and cables by 2020.

 

Since my country's goal is to strive for the localization rate of nuclear power plant cables to reach more than 95%, among them, the 1E series of power cables and electrical equipment cable products have been successfully developed and widely used by nuclear power plants, laying a solid foundation for the rapid development of my country's nuclear power industry.

 

⑤ Petrochemical market demand

 

The operating rate of petrochemical construction projects has been rising steadily. In addition to a large number of general-purpose cables, there will also be a large market for special cables used in the petroleum industry. At present, the global oil and natural gas energy is becoming increasingly tense, and land mining is turning to the marine field on a large scale, which makes the transmission of power and communication between land control center and offshore oil platform, platform and platform, as well as the feedback and control requirements of technical data increasing day by day. At the same time, offshore wind power generation is also rising day by day, The demand for marine cable products such as optical fiber integrated submarine cable and oil platform cable is increasing.

 

The new energy cable demand

 

With the global energy shortage, rising oil prices, environmental pollution and climate warming have become increasingly prominent, actively promoting the energy revolution and vigorously developing renewable energy has become a major strategic choice for countries around the world to find ways of sustainable development and cultivate new economic growth points. At present, more than 100 countries have formulated targets or policies related to the development of renewable energy, and many countries have issued targets for the proportion of renewable energy to reach 15% to 25% by 2020.

 

The Chinese government has set a large-scale renewable energy development target: the development target of wind power by 2020 is 200 GW. In order to support this target, China has planned the construction of eight 10 million kilowatt wind farms. Solar photovoltaic power generation will exceed 30 GW by 2020, of which Qinghai Province has planned more than 300 MW of solar photovoltaic power stations and the construction scale of photovoltaic power stations in Qaidam Basin will exceed 10 GW. June 2012, the State Council has also issued a new energy vehicle industry development plan, proposing that by 2020, the production capacity of pure electric vehicles and plug-in hybrid vehicles will reach 2 million, and the cumulative production and sales volume will exceed 5 million. The fuel cell vehicle and vehicle hydrogen energy industry will be in line with international development. Wind power generation cable, solar photovoltaic power generation cable, new energy vehicle cable manufacturing and application technology is the inevitable trend of industry development.

 

4. Trends in industry profit levels and reasons for changes

 

(1) Profit trends in China's wire and cable industry

 

In 2014, the sales revenue of China's wire, cable, optical cable and electrical equipment manufacturing industry reached 1,509.84 billion billion yuan, up 4.72 percent year on year. From January to October 2015, the sales revenue of China's wire, cable, optical cable and electrical equipment manufacturing industry was 1,252.441 billion billion yuan, up 2.44 percent year on year.

 

Data show that since 2010, the overall revenue of China's wire, cable, optical cable and electrical equipment manufacturing industry has shown a rising trend, and the total sales revenue of the wire, cable, optical cable and electrical equipment manufacturing industry in 2014 was the highest in recent years. From 2010 to 2014, the average growth rate of total sales revenue of China's wire, cable, optical cable and electrical equipment manufacturing industry was 15%.

 

In 2014, the total profit of China's wire, cable, optical cable and electrical equipment manufacturing industry was as high as 80.187 billion yuan, the highest in recent years, but the growth rate was only 4.5 percent over the previous year, the lowest in recent years.

 

From January to October 2015, the total profit of China's wire, cable, optical cable and electrical equipment manufacturing industry was 60.868 billion billion yuan, an increase of 6.85 percent over the same period last year.

 

From 2010 to 2014, although the total profit of China's wire, cable, optical cable and electrical equipment manufacturing industry is rising, its growth rate is declining, and the growth rate of industry profits is slowing down.

 

In 2014, the gross profit margin of China's wire, cable, optical cable and electrical equipment manufacturing industry decreased slightly by 0.38 compared with the same period last year. From 2010 to 2012, the gross profit margin showed a continuous upward trend. Since 2012, there has been a slight decline. Its gross profit margin in 2014 was 13.41. Its gross margin has been stable between 12%-15%.

 

(2) Reasons for changes in profit levels

 

In the wire and cable industry, the changes in profit levels are mainly due to: ① Under the background of the macroeconomic downturn and the continuous adjustment of the national economic structure, for the ordinary cable market, the increase in market demand cannot keep up with the industry's capacity increase in recent years. As of the end of the 12th Five-Year Plan, my country has more than 4,000 large and small wire and cable companies, and more than 90% are private small and medium-sized enterprises, and some of them do not have the ability of quality control and testing at all, coupled with the concentration of low-end products, serious overcapacity, enterprises in order to obtain short-term benefits, have to low price for the market, which is the direct cause of the difficulties in the operation of the industry; ③ in the case of economic restructuring, wire and cable enterprises to adjust the market speed can not keep up with the adjustment speed of market demand; ④ Special cable companies in the wire and cable industry can still obtain higher profits, and such companies share most of the profits of the entire industry. ⑤ Although the profits of ordinary wire and cable enterprises have declined, the average sales profit margin of the wire and cable industry is less than 5%, and many manufacturers are even less than 3%, but there are still many high-end special cable enterprises to obtain high profits, pulling up the profit level of the whole industry.

 

5. Factors affecting the development of the industry

 

(I) the favorable factors affecting the development of the industry

 

As the "artery" and "nerve" of the national economy, the wire and cable industry is required to develop in the process of economic construction, which determines that its development speed is at least synchronized with the development speed of the national economy or faster. Wire and cable products are widely used. The development of the wire and cable industry is closely related to the development of various industries in the national economy, especially the development of basic industries. The development of my country's electric power, transportation, energy, information and communication, construction, automobile and other industries provides a broad market space for it.

 

(1) Support of national policies

 

The power industry is the lifeblood of modern industry, the development of the national economy, the improvement of people's lives and the development of the power industry is closely related. The optimal development of the wire and cable industry, which is called the "artery" and "nerve" of the national economy, is an important guarantee for the sustainable development of the national economy. In recent years, the state encourages the priority use of domestic independent brand wire and cable products, supports wire and cable enterprises to improve product structure through the development of high-end products, improves industrial structure through mergers and acquisitions, and promotes regional agglomeration and industrial upgrading with regional leading enterprises. At the same time, the state implements license management for wire and cable products and controls the entry of new enterprises into the industry, which is conducive to promoting the integration of the industry and protecting the original enterprises.

 

In addition, the state has issued a series of policies related to the wire and cable industry to promote the integration of the wire and cable industry, master key technologies, and increase industry concentration. The introduction of this series of policies is conducive to the improvement of the technical level and competitive strength of my country's wire and cable industry.

 

(2) Increasing investment in the power industry

 

As the basic industry of the national economy, the development of the power industry has a strong role in promoting economic growth, and economic growth will also drive the growth of electricity demand. In recent years, the demand for electricity in my country has continued to grow. In 2016, the electricity consumption of the whole society in my country was 5,919.8 billion kWh. Compared with 5,550 billion kWh in 2015, the average annual compound growth rate reached 6.66.

 

In order to meet the growing demand for electricity consumption and alleviate the contradiction between power supply and demand, China has always attached great importance to the investment in the power industry.

 

In 2016, China's major power enterprises completed an investment of 885.5 billion billion yuan in power engineering construction, up 1.85 percent year-on-year. Among them, the investment for power supply project construction is 342.9 billion yuan, and the investment for power grid project construction is 542.6 billion yuan. Since the "Twelfth Five-Year Plan", the investment in power grid construction has been improved to varying degrees every year. Among them, 368.2 billion yuan was completed in 2011, an increase of 6.77 percent over the same period last year; 369.3 billion yuan was completed in 2012, an increase of 0.2 percent over the same period last year; 389.4 billion yuan was completed in 2013, an increase of 5.44 percent over the same period last year; it broke through the 400 billion yuan mark in 2014, reaching 411.8 billion yuan, an increase of 6.8 percent over the same period last year; and 460.3 billion yuan was completed in 2015, with a double-digit growth rate for the first time.

 

In August 2015, the State Energy Administration issued the Action Plan for the Construction and Transformation of Distribution Networks (2015-2020), which made it clear that from 2015 to 2020, the investment in the construction and transformation of distribution networks planned by the state shall not be less than 2 trillion yuan, of which the investment in 2015 shall not be less than 300 billion yuan and the cumulative investment during the 13th five-year Plan period shall not be less than 1.7 trillion yuan.

 

Although China's power investment has been increasing in recent years, China's power construction still has a large space for development compared with developed countries. According to the calculation of my country's total population of 1,360.72 million at the end of 2013, when my country's per capita electricity consumption is 3,911 kW, the per capita installed capacity is 0.9167 kW. Compared with the per capita electricity consumption of 13,000 and 8,000 kW in developed countries such as the United States and Japan, the per capita installed capacity is 1.2-3.8 kW. There is a certain gap in other indicators. In the future, my country will continue to increase investment in electric power. During the "13th Five-Year Plan" period, my country's electric power industry investment will reach 7,100 billion billion yuan, an increase of 16.40 percent over the "Twelfth Five-Year Plan.

 

(3) The rapid development of new energy and environmental protection cables

 

Under the background of resource shortage and increasingly prominent environmental protection problems, new energy and environmental protection, as an important focus of adjusting the economic structure and transforming the development mode, have risen to the national strategic level. In order to strengthen environmental protection, key cities such as Beijing and Shanghai have clearly stipulated that large and medium-sized buildings or public places are prohibited from using non-environmentally friendly wires and cables such as PVC. In the future, China's construction, transportation, communications departments and all large and medium-sized cities of the power supply sector, will gradually ban the use of non-environmentally friendly wire and cable, safe, environmentally friendly wire and cable future development space is huge.

 

(4) Industry competition began to develop healthily

 

On November 1, 2011, the State Administration of quality Supervision, the Ministry of Industry and Information Technology, the Machinery Industry Federation, the State Grid and other units held a working conference on improving the quality of China's wire and cable products in Wuwei County, Anhui Province, and issued the guidance on promoting the quality of wire and cable products, proposing to strengthen the standardization of market behavior, promote fair competition, stop low-price sales, and standardize the order of the industry. The state has strengthened the supervision and rectification of the quality of wire and cable products, prompting a large number of small-scale wire and cable companies lacking core competitiveness to withdraw from the market, and industry competition has begun to develop in the direction of branding, quality, and service. At the same time, differentiated development has produced a number of competitive cable companies. These companies have the core competitiveness of the brand and have achieved good economic benefits. They have had a profound impact on the wire and cable industry, thereby driving the competition in the entire industry from products. The technical content is low, and the vicious price competition turns to quality, service, and brand competition, which promotes the healthy development of the industry.

 

2. Adverse factors affecting the development of the industry

 

(1) Fluctuations in raw material prices

 

Copper and aluminum are one of the most important raw materials in the wire and cable industry, and their price fluctuations will affect the profits of cable companies, and in extreme cases even lead to a survival crisis. Since 2005, with the rapid development of China's economy, the wire and cable industry has achieved steady growth in total profits, with a compound growth rate of 21.05 per cent from 2005 to 2014. However, with the intensification of competition within the industry, the price competition of low-end products has gradually spread to high-end products, and the overall gross profit margin of the industry has remained at a low level in recent years. Since 2011, with the gradual recovery of the domestic economy and the decline in raw material prices, the gross profit margin of the wire and cable industry has gradually recovered.

 

(2) Tight liquidity

 

As a typical "material heavy industry light" industry, wire and cable manufacturers have a greater demand for working capital, especially when the prices of major raw materials such as copper and aluminum rise rapidly, many domestic wire and cable manufacturers have tight capital turnover and working capital The demand is greater. In the event of a shortage of liquidity or inefficient operation of funds, it will have a significant adverse impact on the operation of the enterprise.

 

(3) Low industrial concentration and uneven development of the industry

 

The large number of domestic cable companies and the lack of independent innovation capabilities have led to prominent structural contradictions in products, which has led to a situation where the overall supply of my country's wire and cable market is far in excess of demand and structural supply exceeds demand: in the medium and low voltage product market, my country's cable companies Overproduction capacity and fierce competition.

 

(4) The impact of policy adjustments on the balance of supply and demand

 

The formulation and adjustment of national industrial policies will have a significant impact on the development of related industries. At present, the industrial policies related to the cable industry mainly include power grid construction related planning, railway network construction related planning, automobile and advanced equipment manufacturing and new energy and other strategic emerging industry planning, energy conservation and emission reduction planning, the development of these industries will directly affect the market size of wire and cable. Since the formulation and implementation of policies will often be adjusted according to the actual development of the national economy and the industry, this adjustment will make the expected supply and demand of the market change, thus affecting the development of the cable industry to a certain extent.

 

The correlation between the (VI) industry and upstream and downstream industries and its impact.

 

The wire and cable industry is a supporting industry, which is located in the middle of the entire industrial chain of the national economy.

 

1. Relevance to the upstream industry

 

The upstream of the wire and cable industry is raw materials, equipment suppliers, the main raw materials copper, aluminum, insulation plastics, rubber and other accessories. The wire and cable industry is a typical "material heavy industry light" industry, copper and aluminum are the most important basic materials, accounting for about 80% to 90% of the cost of wire and cable. Copper and aluminum are commodities with ample supply, but prices are volatile. Due to the large fluctuations in upstream raw material prices, companies with strong financial strength can hedge the risk of raw material price fluctuations by hedging operations on copper and aluminum.

 

2. Relevance to downstream industries

 

The downstream industries of the wire and cable industry are important national economic fields such as electric power, communications, railways, petrochemicals, mining, and ships. As an indispensable supporting industry in the national economy, the wire and cable industry is greatly influenced by the development of these downstream industries. In the future, China will make large-scale investment in these industries, which will bring huge market space for the wire and cable industry.

Article link: China Security Exhibition Network http://www.afzhan.com/news/detail/64204.html