The wire and cable industry is seriously overwhelmed by the Red Sea

The wire and cable industry is an important basic industry and has been hailed as the "blood vessel" and "nerve" of the national economy. In 2012, China surpassed the United States as the world's largest wire and cable producer, and its industrial output value is second only to the automotive industry in the electrical and electronics industry.

Due to the low number of industry barriers and the low level of repeated construction, the capacity of the wire and cable industry has expanded and the surplus is serious. In 2013, the capacity of China's wire and cable industry was approximately 70 billion meters. Affected by the slowdown in domestic economic growth and the difficulty of opening foreign markets, the output was 41.95 billion meters (approximately 30% of the world's total), and the growth rate was down 8.8 percentage points year-on-year. Production is mainly concentrated in the eastern and central regions (accounting for 61% and 20%). Overall, the existing production capacity is far greater than the output, and the capacity utilization rate is low (about 60%), in which the capacity utilization rate of ordinary wire and cable companies is less than 40%.

Industry concentration is extremely low and competition is fierce. As of the end of July 2014, there were 3,758 wire and cable companies in China, mainly SMEs, accounting for more than 95%. The top ten companies in China account for only 7% to 10% of the domestic market, far below the U.S. 70%. Fierce competition among enterprises, cutting corners, shoddy goods, dumping below cost, and other vicious competitions occur from time to time. In 2013, 62% of the market-leading products of the 50 specifications and models lost their prices, with an average decrease of -4.8%. Only from January to July 2014, more than 40 companies were eliminated.

Wire and cable enterprises are mainly low-end products with low profit margins. Less companies are involved in high value-added wire and cable, especially in aerospace, aerospace, and nuclear power applications. In 2013, China imported 292,000 tons of wire and cable. At the same time, the overall level of quality of wire and cable products in China is not high, and the pass rate of spot checks is about 90%. Unqualified products and fake and shoddy products pose great security risks. At present, about two-thirds of all fire accidents in the country are related to the quality of wire and cable.

The financial situation of the industry deteriorated slightly. As of the end of July 2014, the number of turnovers of current assets in the wire and cable industry (1.35) fell by 0.08 compared with the same period of last year, and the utilization efficiency of liquidity decreased slightly. The solvency and profitability were basically the same as those of the same period of last year. The total assets were 731.7 billion yuan, and the asset-liability ratio was 56.64%. The main business income was 676.5 billion yuan, and the sales profit rate was 4.17%.

It is expected that in 2014 China's power industry (especially the new energy industry), data communications industry and urban rail transit industries will become demand growth points for the wire and cable industry, driving the industry to expand, and the total output of China's wire and cable industry will reach 44.88 billion meters. It is 7% higher than 2013, but the growth rate is still lower than the average of the previous three years (10.4%). The application of the new capacity projects for the application of new energy and other special wire and cable will drive the industry to continue to expand. Capacity utilization is still low, about 60%.

The competition in the low-end and middle-end products is fierce, and the price fluctuations of raw materials such as copper are intensifying, and the prices of low-end products will continue to decline. It is expected that the growth rate of gross output value (6.5%) in 2014 will decrease by 4.2% from the same period of last year, and the loss surface of the wire and cable industry will expand, eventually leading to the elimination of out-of-competitive SMEs or mergers and acquisitions. However, special high-voltage electric cables, submarine cables and other special cable manufacturers have higher profit margins and better market prospects.