The situation of China's wire and cable industry is grim

The situation of China's wire and cable industry is grim At present, China's wire and cable industry exceeds 99.6% of its enterprises are small and medium-sized enterprises. The industry has a large excess of production capacity. The market is very chaotic. The industry profits have plummeted. Some small-scale enterprises have stopped production, and industry reshuffle is inevitable.

Large excess production capacity, product quality is not guaranteed. In the world, China's total output value of wire and cable has surpassed Japan only after the United States and is the second largest cable producer in the world. However, as a major basic industry in China, the cable industry has not received due attention regardless of market norm degree. Although the capacity of the cable market is currently growing faster, the increase in output has far exceeded the increase in demand. At present, there are 3967 large and small wire, cable, fiber optic cable and electrical equipment manufacturing enterprises in the country, 99.647% of which are small and medium-sized enterprises. These small enterprise products have no quality assurance, no financial guarantee, no credit guarantee, and most of them are robbed by malicious prices market.

Raw materials prices continue to operate at high levels and companies are overwhelmed. As a light-weight industry, raw materials such as copper, aluminum, and plastic account for more than 80% of the total cost of wire and cable products. Since 2007, the rise in energy prices, transportation costs, and human resource costs have further increased the cost of enterprises, and the industry's profit margin has plummeted to the point of loss. In particular, the high copper price operation has greatly increased its production costs. The most affected are small and medium-sized enterprises. These companies generally have disadvantages such as shortage of liquidity and weak market competitiveness. Production and operations are even more difficult. Some smaller companies are unable to withstand the pressure of soaring copper prices. They have stopped production and closed down, looking for new business opportunities, and only a few survived.

The chaos in the market has seriously affected the development of the industry. First, local protection is serious. At present, there are 14 large-scale wire and cable companies across the country, mainly located in Jiangsu, Guangdong, and Shandong. From a national perspective, the unified market has basically taken shape, but the intangible barriers between the regions have not been broken, and the local protectionism in the cable industry is very serious. Foreign cable companies often face heavy barriers if they want to enter the local market, and unreasonable or even illegal barriers substantially hinder the healthy development of the cable industry. Second, sales are chaotic. Bidding is the most common sales method in the cable industry, and the current domestic bidding mechanism is very confusing. In the tendering companies, more than 80% use the lowest bid winning standard. Since many bids do not have uniform standards, the situation of vicious competition and unfair bidding is relatively serious, and many unlicensed companies rely on relationships to participate in bidding. The blind pursuit of low-cost practices has led to poor quality cables that crowd out regular products. Third, the payment method is unreasonable. At present, domestic payment methods are still generally 1-8-1, and even 1-4-4-1, which adds extra difficulty to the liquidity turnover of production enterprises. In fact, the unreasonable payment method, coupled with the increase in raw material prices, has caused the liquidity of many industrial companies to shrink greatly, and the financial management of enterprises is more difficult. Therefore, in the case of overcapacity in China's wire and cable production, increase in production costs and shortage of liquidity, its solvency will inevitably decline.

China Gold billion analysis: At present, China is already the second largest wire and cable producer in the world. However, as over 99.6% of enterprises in the whole industry are SMEs, the industry’s production capacity is in excess, product quality is not guaranteed, and copper, aluminum, The price of plastics and other raw materials continued to operate at a high level, leading to a substantial increase in production costs and a straight decline in industry profits.

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