Wire and cable industry's "low price pain"

Over the years, although wire and cable industry organizations have repeatedly urged product prices to be self-disciplined, the price of wire and cable products on the market remains utterly chaotic, and the proliferation of counterfeit and shoddy products has led to a sharp drop in product profits, which has caused cable companies to be injured. The price situation of wire and cable products has indeed reached the point where non-reorganization is not possible.

Irrational "low price competition sales"

China already has more than 7,000 small and large wire and cable companies, and 97% of them are privately-owned small and medium-sized enterprises. Some of these companies do not have the capacity for production, quality control and inspection, and they concentrate on low-end products and overcapacity. In front of the immediate interests, they have changed their markets at low prices, and there has been a farce in which "prices are not worth it". In addition, the existence of low-price winning bids and unscrupulous business ethics have exacerbated the trend of low-price competition in the industry. The profitability of enterprises is weakened due to widespread low-price competition in the industry. Wei Dong, director of the Shanghai Cable Institute, said at the 2012 China Wire & Cable Expo and Product Quality Summit that the average net profit margin of the wire and cable industry is less than 5%, and many manufacturers even less than 3%.

Some experts pointed out that in the “low-cost” situation of the wire and cable industry, prices have not returned to a reasonable range of profits, which affects not only the industry companies, and even wire and cable end users.

Various factors squeeze profits

In 2011, the total sales, management, and financial expenses of the industry increased by 25.4%. At the same time, with the increase of raw materials, electricity charges, logistics fees, environmental protection costs, and land prices, the operating costs of enterprises continued to rise. It is understood that China's wire and cable industry, the cost of raw materials accounted for more than 80% of the total cost, the main cost of its expenditure on copper and aluminum in the two major metal materials. In general, for every 5% rise in raw material prices, the gross profit of the product is reduced by 4%.

In addition, the total amount of funds for accounts receivable and finished goods inventory in 2012 was 226.1 billion yuan, an increase of 10.6% over 2011, accounting for 47.9% of the current assets. Account receivables remained high, with industry receivables of 183.2 billion yuan from January to July 2012, a year-on-year increase of 12%; the growth rate of receivables was higher than 3.58% of sales growth.

In the case of high financing costs for enterprises, the rapid increase in the occupation of the two funds has precipitated the capital of the company and caused the company to operate poorly. The profits of wire and cable companies have been eroded by many parties.

The "low price" reaction

In fact, wire and cable falsification is a chain reaction brought about by the industry's "low prices." In the low-price market competition environment, if the enterprise produces according to the national standard and strictly implements the technology, it will inevitably lose a lot.

In addition, corporate profits have been squeezed, the average profit rate of the industry has been declining, and it is difficult for enterprises to ensure reasonable profits. Some unscrupulous enterprises have taken the risk and eventually gained profits through shabby means such as "stealing work cuts," "reducing cable cross-sections," and "shrinking inferiorly," and the quality of wire and cable products is difficult to guarantee.

It is understood that more than half of the fires that occur each year in the country are electrical fires, and more than 50% of them are caused by short-circuit of wires and cables. Poor wire and cable into the market and major engineering projects, can easily lead to fire accidents, resulting in economic losses, but also easily lead to adverse social impact. Although price is not the sole criterion for measuring product quality, price must be an important manifestation of product quality. If "price is not worth it," then what about quality?