What impact will the soaring copper price have on the home appliance industry?
After the resumption of work in the Year of the Ox, the prices of raw materials such as copper and aluminum soared by more than 30% year-on-year, and home appliance companies faced severe cost pressures. The export price of air conditioners has been raised by about 10%. It is expected that China's domestic prices will also rise in the peak season in March. There are forecasts that China's domestic air conditioners will increase by 20%.
The solution is to digest costs with suppliers, negotiate price increases with sellers, and reduce costs and increase efficiency through technology research and development. In this process, the life of large companies will be better than that of small companies. In view of the soaring cost, air-conditioning companies are cautious in production, and there may be structural shortages in peak seasons.
The capital market is like a panic
The price of copper has risen terribly in the past two days , starting from 59,000 yuan/ton, and breaking the rhythm of 70,000 yuan/ton every minute.
Plastics are also rising in price. Before the end of the Chinese New Year, the United States on the other side of the ocean suffered a once-in-a-hundred-year extreme cold weather, which caused large-scale power outages. Many crude oil companies were forced to shut down. The United States has suspended production of more than 4 million barrels per day, which is close to the US crude oil output 40%. The production of downstream petrochemical plants such as PE and PP has also been severely impacted. This increases the price of ABS and PS plastics by 1,500 yuan per ton.
In February of this year, after the Spring Festival, copper prices rose by 38%, alloys rose by 48%, aluminum prices by 37%, iron ore by 30%, stainless steel by 45%, and glass by 30%. , Cartons have risen by 20%, foam packaging has risen by 15%, and plastic has risen by 35%...
Profits are already thin, and the increase in the RMB exchange rate has put pressure on the export of home appliances. It is estimated that the cost of its home appliance manufacturing business increased by 3.5% month-on-month in February this year, and there is no way to deal with the orders it has received.
The capital market is like a panic. Midea Group (000333.SZ), a leading home appliance company with the largest domestic market value, experienced a deep correction on February 22, falling 7.7% to close at 90.44 yuan. On that day, the prices of copper and aluminum, the bulk raw materials for home appliances, rose sharply. The price of copper rose by RMB 3,760/ton to RMB 67,060/ton, and the price of aluminum rose by RMB 320/ton to RMB 16,730/ton. The outside world worried that this would put pressure on Midea’s gross profit in the first quarter. .
Before the Spring Festival, Midea Group's stock price hit a new high of 108 yuan. Regarding the post-holiday stock price plummet, a person from Midea told the China Business News reporter on the 22nd that the company's current production and operation conditions are normal, and stock price fluctuations may be a problem of raw material prices and the general environment. On the evening of February 23, Midea Group announced that it would spend no more than 14 billion yuan to repurchase 50 million to 100 million shares at a repurchase price of no more than 140 yuan per share.
The logic behind the skyrocketing copper price
During the Spring Festival, the overseas bulk commodity market was turbulent, oil prices rose to a 13-month high, copper prices hit their highs since 2012, and copper prices received strong macro support.
On the first trading day after the Spring Festival this year, Shanghai Copper broke a nearly 10-year high and Lun Copper hit a 9-year high. Shanghai Copper's holdings increased substantially, and the large-scale entry of speculative funds also amplified price fluctuations. Recently, investors have given optimistic expectations for new demand points for copper in the “carbon neutral” and “new energy” sectors. At the same time, on the supply side, Chile’s shipping delays and Peru’s shipping capacity are blocked, and the circulation of copper products will also be affected in the short term. interference. In addition, the accumulation of warehouses during the Spring Festival was not as good as in previous years, which played an important role in promoting copper prices.
In 2021, the global epidemic will be gradually brought under control, the output of copper mines in Peru will resume growth, the production of Zijin's Camoa copper mine in Africa, the new copper mine project in Chile, China's Yulong copper mine, and Tongling's Mirador copper mine in Ecuador, etc. As a result, global copper production increased by 4.6% to 21.13 million tons.
After the Spring Festival this year, the price of copper rose sharply. The price difference between refined copper and copper scrap expanded to 4,300 yuan/ton a few days ago, reaching a record high in the past eight years. The advantage of scrap copper substitution is obvious. After the holiday, imported copper scraps due to delays in shipping schedules gradually arrived in Hong Kong, and the source of scrap copper was relatively sufficient. Scrap merchants sold their stockpiled before the holiday to get the spread. The downstream enterprises that use copper scrap will gradually consume their stocks after the start of construction, and the new production capacity will be gradually released, and the "fine waste" will return to a reasonable range.
From the perspective of China's refined copper situation, in January 2021, China's electrolytic copper output was 829,600 tons, an increase of 15.4% year-on-year, and an increase of 0.7% from the previous year in December; in February, the output is expected to be 816,100 tons, an increase of 23.7% year-on-year, month-on-month. A decrease of 1.6%. China's refined copper output in 2020 will be about 8.89 million tons, an increase of 1.98% year-on-year; it is expected that the output in 2021 will be 9.25 million tons, an increase of 4.04% year-on-year, and the consumption growth rate will be 3.59%.
On February 18th after the holiday, China’s spot stock of electrolytic copper was 235,300 tons, an increase of 70,200 tons from before the holiday; copper stocks in the bonded area were 418,000 tons, an increase of 5,000 tons from before the holiday. The subsequent consumer end is expected to recover quickly, inventory is expected to be difficult to increase significantly, and inventory in the bonded area is expected to remain high.
From the downstream situation, according to the information collected by my nonferrous network in January this year, the operating rate of 50 domestic refined copper rod enterprises was 58.3%, a month-on-month decrease of 3.85%; the operating rate of 35 scrap copper rod enterprises in January this year was 67.3 %, a month-on-month decrease of 0.87%; the utilization rate of copper strip production was slightly adjusted; and the air conditioning copper pipe production schedule was better than last year.
In January 2021, the overall capacity utilization rate of Chinese copper pipe processing enterprises was 78.95%, a decrease of 4.5 percentage points from the previous month and a year-on-year increase of 21.73 percentage points. In January of this year, domestic air-conditioning exhaust output increased by 7.85% month-on-month. In February, the production of air-conditioning exhaust decreased significantly from the previous month due to the Spring Festival holiday, but it increased by 20.97% year-on-year.
The short-term copper price has risen rapidly from the fundamentals, restraining demand for further repair.
Export air conditioners have risen by 10%
Xiao Youyuan, former general manager of Gree Overseas and current chairman of Zhuhai Sanyou Environmental Technology Co., Ltd., told China Business News that the price of raw materials for home appliances has risen sharply due to two main reasons. On the one hand, there is a shortage of imported raw materials abroad, and on the other hand, China's alternative demand is growing. .
From the perspective of supply, the bulk of raw materials and core electronic components such as iron ore, copper, plastics, and petroleum required for manufacturing in China currently rely mainly on imports, while related foreign companies are under-operating due to factors such as the epidemic, increasing procurement costs. This also shows that the global supply chain is a whole, and no country can stand alone.
In February of this year, the price of electronic components increased by about 10% to 15% year-on-year. Import prices for chips, IGBT modules, and IPM modules increased, and the delivery time was extended. The cost of a single air conditioner was about 100 yuan; and the price of bulk raw materials It has risen by 30% to 40% over the same period last year. The price of copper has risen the most, from about 50,000 yuan/ton last year to 68,000 yuan/ton. These are directly reflected in the cost of air conditioning.
From the perspective of demand, foreign companies are under-operating due to the impact of the epidemic, while Chinese companies are operating normally, the global demand for Chinese manufacturing is strong, and the alternative demand of Chinese companies is growing. The shortage of upstream supply and the growth of demand from downstream Chinese companies have caused the overall market price to rise.
In terms of impact, in January and February this year, the price of exported air conditioners has risen by 10%. Xiao Youyuan said that materials such as copper and aluminum account for about 15% to 20% of the cost of air-conditioning. Copper is mainly used in air-conditioning evaporators and condensers (commonly known as "two devices"). Although the technology of replacing copper with aluminum is mature, But it does not apply to all products. In addition, in February this year, the exchange rate of the renminbi to the US dollar has risen by nearly 8% year-on-year.
For home appliance manufacturers, big companies have better lives than small companies. Large companies have more say in raw material procurement and product prices, and can absorb some cost pressures. At present, manufacturers mainly solve cost problems by digesting costs together with suppliers, negotiating price increases with sellers, and reducing costs and increasing efficiency through technology research and development.
"This high cost situation will continue into the first and second quarters of this year, and cost pressures will not improve until at least the third quarter." Xiao Youyuan said that the current domestic air-conditioning sales terminal prices have not changed. "No one dares to mention. Afraid of affecting the peak season." It is expected that prices will increase in the peak season in March, because air-conditioning plants can hardly absorb all costs. In the future, the air-conditioning industry will be "big ones" and it will be more difficult for the weak to survive.
Gan Jianguo, general manager of Philips Air Conditioning (China) Operations Headquarters, analyzed to CBN reporters that the current situation is mainly affected by the US$2.2 trillion in national debt issued by the United States for the epidemic relief plan, which has caused global inflation, currency devaluation, and bulk raw materials. Price increase. Air-conditioning companies that use more copper and aluminum have seen their costs rise sharply, with costs expected to rise 10% to 15% year-on-year.
Gan Jianguo predicts that the terminal retail price of household air conditioners in the domestic market will rise by 20% to 30% this year. Under the pressure of rising costs in the first half of the year, corporate profits will be greatly reduced. In addition, air conditioners are in the peak season and there is a large rigid demand. In view of the sharp increase in costs, enterprises will be more cautious in production. There may be a structural shortage of air conditioners in the peak season.
