Raw materials "price surge" or the driving force for industry change

Abstract Various raw materials “holding up the price” have spread to many industries and entered 2017. Most of the domestic industries have been entangled in the price increase army, and the price increase has already become the “main theme” of most industries. According to market monitoring, the current natural rubber, iron ore, paper, home building materials and other raw materials...
Various raw materials "holding the price increase" spread to many industries
In 2017, most of the domestic industries have been entangled in the price increase army, and the price increase has already become the "main theme" of most industries. According to market monitoring, raw materials such as natural rubber, iron ore, paper, and household building materials have risen considerably, and have been stirred up to the stability of the terminal market, causing many concerns. Then, how much of these raw materials have risen, causing many small and medium-sized enterprises to “complain” the profit margins squeezed?
It is reported that in 2017, the price of natural rubber continued to rise in 2016, and the price climbed from 9000 yuan/ton at the beginning of 2016 to 20,000 yuan/ton, an increase of 122.2%. In January 2017, the futures price of natural rubber rose by 26%, a record high since 1990. This is reflected in the tire manufacturing enterprises, which is a skyrocketing price increase notice.
“From the end of last year, the price of tires has risen. So far, some tire manufacturers have completed two or three rounds of price increases.” Some insiders believe that although manufacturers have raised their tire prices, the adjustment is far lower than the increase in raw material prices. And mainly for the replacement tire market.
According to the official website, since November last year, Goodyear, Michelin, Pirelli, Zhongce, etc. have announced price increases, and in January and February of 2017, tire price increases have appeared. The reporter learned from the marketing department of Henan Fengshen Tire Co., Ltd. (hereinafter referred to as Fengshen Tire) that Fengshen Tire has also joined the price surge at the beginning of this year. Since January 1, 2017, the price of all-steel radial tires has increased by 2%~3. %, up to now, the main sales of passenger car tires, truck and bus tires, construction machinery tires, etc. have completed at least two rounds of price increases, of which car tires rose by about 10%.
Coincidentally, the crazy rise in iron ore prices has also ushered in the “Xiaoyangchun” in the steel industry. According to the statistics of the Ministry of Commerce, since 2017, iron ore prices have risen by about 20% in the past two months, far exceeding Goldman Sachs. Originally forecast price range of $50 to $60 per ton. As we all know, iron ore is one of the most important raw materials for steel production, and the increase in ore prices comes from the support of steel prices. The reality is also the case. The reporter learned from the Henan Iron and Steel Industry Association that from the current demand point of view, iron ore is mainly used for real estate infrastructure, and March and April are the peak demand season for real estate infrastructure, coupled with steel “de-capacity”. "Policy advancement, steel prices have become possible in the near future. As for how long it can last, there is no clear answer.
"Prices have risen, and stocks have also risen. This is a bit unreasonable." It is reported that as of February 17, China's ports of iron ore stocks rose for the seventh consecutive week, totaling over 129 million tons, a record high. According to some market participants, according to the conventional law of economics, inventory backlogs mean that market demand is weak and supply exceeds demand. However, rising prices mean that the market is hot and the supply is in short supply. The two indicators that should have changed in the opposite direction suddenly were at the same high level, meaning that the market was in some abnormal situation.
In addition to natural rubber, iron ore, carton packaging, home appliances, raw materials, etc., which are closest to the civilian population, are also like chicken blood, and they are welcoming price increases. According to Jiang Feng, chairman of the China Household Electrical Appliances Association, starting from December last year, home appliance companies began to temper product price adjustments. From the current point of view, the overall price adjustment range is about 10%. The main reason is that the prices of various raw materials have increased recently, especially the copper, steel, plastics, aluminum and other raw materials closely related to the home appliance industry.
“The cost of raw materials is a major component of home appliance prices. For white goods such as refrigerators and air conditioners, the cost is steel and plastic hardware; while panels and LCD screens account for 70% to 80% of the cost of a TV. The rise in the price of this part of raw materials eventually led to an increase in the price of finished products." A salesperson at a home appliance store in Zhengzhou said.

“It’s not easy to raise prices, it’s harder to make money.”
When the raw material "price surge" strikes, enterprises must bear the brunt. In theory, the rise in raw material prices is a challenge for SMEs, production costs increase, and profit margins are bound to become smaller. At this time, if companies raise prices to weather the storm, they may lose their original price competitive advantage; If you increase the price of the product and maintain the original price, you will face an increase in costs and a squeeze in profits. Therefore, the rising prices of raw materials have made some SMEs have a dilemma. They lament that “price increases are not easy and making money is more difficult”.
"The current situation is like playing cards. It is difficult to ride a tiger. No one knows who is the next to be shuffled by the market." According to relevant industry insiders, the rise in raw materials is a challenge for SMEs.
As the prices of raw materials continue to rise, companies need to pay more for the same raw materials. Some small and medium-sized enterprises have been relying on bank loans to survive. The company’s liquidity is insufficient, and it is difficult to borrow from banks because of its lack of credit. Difficulties in funding are the key factors leading to the collapse of enterprises.
For a long time, most small and medium-sized enterprises have occupied a place in the market by virtue of price advantage, so as to compete with large enterprises. Now the rising price of raw materials will inevitably lead to the rise of finished product prices, which will greatly reduce the price difference between low-end products and mid-to-high-end products. When choosing a product, it will naturally give up small brand products without price advantage and choose big brand products, which will undoubtedly reduce the sales of SME products.
This phenomenon is particularly outstanding in the tire production industry. According to the internal sales staff of Fengshen Tire, the price adjustment is more frequent mainly for small and medium-sized tire companies, and the large tire companies have now undergone several price adjustments. Basically it tends to be stable. This is mainly because of the different procurement methods of the two. Many small and medium-sized tire companies use the form of “sales and purchase” because of their financial constraints, so they are more affected by the changes in raw materials. The procurement of large tire companies will basically adopt the futures method, which is a purchase cycle on a quarterly or semi-annual basis. Therefore, when the price of raw materials changes, the impact on them will be delayed by several months, and when the products are sold, the price of small and medium-sized tires will be lost. The war is obviously not a big business.
Whether it is tire manufacturing enterprises, steel industry, paper industry or home appliance industry, in this price hike, the competitiveness of small and medium-sized enterprises that win by low cost will be significantly reduced in the market, and they will not account for capital and industry chain. Advantages, so the living space will become more narrow. In addition, coupled with a new round of environmental supervision in early 2017, it is difficult for companies that fail to meet the production standards to survive, and it is likely that a number of small and medium-sized enterprises will be closed down. According to industry insiders, after this "price surge", the concentration of the industry will be further enhanced, the advantages of leading enterprises are obvious, and SMEs face new challenges of innovation and upgrading.

Raw material "price surge" has spawned new trends in enterprise innovation and upgrading
As raw material prices and production costs continue to rise, it has put even more pressure on manufacturing companies that are in a difficult state of survival. According to expert analysis, this round of "price surge" may be a double-edged sword. On the one hand, if the cost increases, the profit margin of the production enterprise will be squeezed, which will cause the enterprise to control the production cost when producing the product, and use the inferior or even inferior raw materials for production, shoddy, of course, these enterprises are actually "Playing with fire and self-immolation" will eventually be eliminated by the market; on the other hand, pressure can also be transformed into motivation, which will prompt some small and medium-sized enterprises to innovate and change in the predicament, and develop themselves into elite enterprises in the tide of price increases.
Taking the home appliance industry as an example, in the face of the pressure of rising raw material prices, TV companies have long been in a state of loss and meager profit, so manufacturers are actively seeking change, and improving brand reputation and product added value has gradually become the survival and development of home appliance enterprises in the future. Great competitiveness. Industry experts believe that the intelligentization, large-screen and entertainment of home appliances will make home appliances become the center of family life, which is the trend after the price war.
In this regard, many traditional home appliance-related enterprises have begun to transform. Skyworth, Changhong, Hisense, TCL and other TV companies are all planning to reduce the price pressure by adjusting the product structure, that is, continue to reduce the proportion of small-sized models, correspondingly increase by more than 55 inches. High-end, especially OLED products are launched; Haier joins Alibaba to invest in Haier Multimedia and intends to inject color TV assets into listed companies; while Foxconn invests in building a new generation LCD production line in Shenzhen, it announces the establishment of a smart home product R&D center in Shenzhen; Hisense Group also decided to expand the Silicon Valley R&D institution and upgrade it to a research and development center to expand research on core technologies such as chips, optical communications, and artificial intelligence...
In addition, in addition to technological innovation, strengthening supply chain cost management is also a strategy to deal with the “price surge”. In this regard, market participants take steel as an example, pointing out that the price increase of iron ore has led to the rise of steel, and the price increase of steel not only affects the cost of auto parts, but also affects the cost of complete vehicles. Therefore, the more product manufacturers at the end of the chain, the more they must move the cost management to the supplier, and then push the supplier to strengthen the cost management in order from the back to the front, so that the entire supply chain can work together in the cost. In order to achieve the purpose of reducing costs and improving efficiency.
It is not difficult to see that in this round of raw material “price surge”, enterprises themselves are the main responsibility in getting out of the difficulties, but helping the enterprises to “burden” is also an urgent problem that the government needs to solve. At the National People's Congress held in March this year, Ning Jizhen, deputy director of the National Development and Reform Commission, said that in the face of this year's international trend of some commodities, there are still uncertainties and instability, and the pressure of imported price increases may increase. The National Development and Reform Commission will pay close attention to CPI, PPI and its trend, camera choice, precise control, to ensure that the overall price level is basically stable, and help the entity's innovation and transformation to tide over the difficulties.
In this way, the “price surge” can indeed bring a reshuffle to the industry, wash away those small and medium-sized enterprises that are deeply involved in price wars, and leave brand companies that can stand the test of the market, thereby promoting the continued health of the entire industry. development of.

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