80% of fastener companies are facing these challenges

Release time:

2020-11-17

80% of fastener companies are facing these challenges...

In 2020, our economy will recover from the trough at the beginning of the year. 2020 is the final year of China's "13th Five-Year Plan" and a key year for the "14th Five-Year Plan" comprehensive plan. At present, China is taking the lead in recovering the economy against the backdrop of the normalization of the prevention and control of the new coronary pneumonia epidemic. Driven by the policy of "domestic big cycle-oriented, domestic and international double cycle of the new development pattern", strengthening existing business ties, exploring new market opportunities, innovative business development direction has become the focus of the current enterprise direction.

The IMF recently released the latest issue of the World Economic Outlook, emphasizing that China's economic recovery is faster than expected, and China will be the only country in the world's major economies to maintain positive growth in 2020.

But in 2020, the fastener industry has also suffered a lot of impact, especially for export enterprises.

According to customs data, China's fastener exports from January to September 2020 were 2938220 tons, a decrease of 6%; the export amount was 6323206 thousand U.S. dollars, an increase of 6.3 percent; and the average price of China's fastener exports from January to September 2020 was 2.15 thousand U.S. dollars/ton.

Jin Meizi interviewed some domestic fastener companies. At present, fastener companies are facing three major challenges.

1, steel prices rise, the cost pressure is obvious.

This year, China's steel prices showed a trend of first decline and then rise. In the first quarter of this year, the national steel market was depressed due to the negative impact of the epidemic. With the strengthening of steel demand, it began to walk out of the trough in April and continued to shake up. As of November 10, the national steel composite price index rose 15.6 percent from this year's low (April 8). The long wood index rose 15.3 per cent and the plate index rose 18.9 per cent.

2020 National Steel Price Index Trend Chart
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The continuous rise of raw materials has led to the rising cost of fastener enterprises, but the price adjustment is afraid that customers are not willing to accept it.

At the same time, Taiwan screw factories on the opposite side of the mainland have increased prices. At the end of October, some buyers and sister Kim complained that their company had purchased fasteners from Taiwan, and several Taiwan screw factories that cooperated frequently increased their prices. one of them said it would increase by 11% and said it could not buy wire materials.

This year, the fastener industry is really not easy. Steel prices are rising, coupled with the economic downturn, weak domestic and foreign demand, trade protectionism is on the rise, and the volume of foreign trade is getting smaller and smaller. The factory is becoming more and more expensive, and we have to hold money to ask for rent everywhere. Material costs and price levels are getting higher and higher, thus narrowing the profit margin. Falling into a dead cycle of not buying equipment and not buying equipment; wages are rising year after year or there is a shortage of labor. Workers turn against each other when they say they turn against each other and see the labor bureau at every turn. It is difficult to collect money, and the speed of payment is slow. Suppliers drag the payment layer by layer.....

Therefore, the fastener manufacturers that can persist in the epidemic are believed to be more reliable and powerful.

2, the appreciation of the RMB, export pressure.

On November 10, the central parity of the RMB against the US dollar increased by 226 points from the previous day to 6.5897, and the central parity rose to the highest point since June 27, 2018.

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Prior to this, on November 9, the onshore RMB exchange rate against the US dollar rose above the 6.60 mark at the opening, the first time since the end of June 2018. On November 9, the dollar index weak shock, the offshore yuan broke the 6.55 barrier reached 6.5462, the day appreciation of nearly 350 points; onshore yuan broke the 6.80 barrier reached 6.5729, the day appreciation of nearly 400 points. So far, both onshore and offshore RMB exchange rates have continued to hit new highs in more than two years.

Offshore RMB
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Onshore RMB
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Financial commentator Hou Jie said that the short-term appreciation of the RMB against the US dollar is a double-edged sword, and the driving force for rapid appreciation comes from the combined effect of internal and external factors.

First of all, from a global perspective, this is the demand for global capital hedging. The global epidemic has not yet been effectively controlled, and daily diagnoses and mortality rates are still hitting new highs. On the economic front, according to World Bank estimates, the world economy will remain negative in 2020. In addition, the US election and the direction of US economic policy after the election are still full of uncertainty. All this has led to a desperate search for safe havens for global funds.

Domestically, this is a reflection of China's strength. The effect of epidemic prevention and control is obvious to all, and the economic growth rate has turned from negative to positive. China's burst of strong consumer demand has stimulated domestic demand growth and spawned a revaluation of renminbi assets. At the same time, the full resumption of production allowed China to quickly capture the world's demand for its products. Exports grew by 11.4 in October, an increase of 1.5 percentage points; the trade surplus was $58.44 billion, an increase of $21.4 billion. The growth of exports and surplus also pushed up the strength of the yuan.

So, will the rapid appreciation continue? He thinks not.

Appreciation is a double-edged sword. On the one hand, it pushes up the price of RMB assets, on the other hand, it has a negative effect on exports. Therefore, it is necessary to take the initiative to maintain the stability, equilibrium and control of the value of the RMB and the exchange rate. With the gradual recovery of the global economy, the uncertainty of the US election is also being eliminated, and it is also a high probability that major currencies such as the US dollar will come out of decline in the future. Therefore, the rapid appreciation of the RMB should only be a short-term situation.

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However, the central bank is more willing to keep the exchange rate stable than the strong appreciation of the yuan. On October 10, the central bank lowered the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0, indicating that it hopes to break the unilateral appreciation of the renminbi and maintain the basic stability of the exchange rate.

It should be emphasized that the RMB exchange rate has continued to strengthen since the beginning of June. The offshore yuan has gradually appreciated against the dollar since 7.1964 to a 6.54 level, rebounding more than 6500 points.

A simple calculation shows that if the foreign exchange is settled at 1 million US dollars, 7.19 million RMB can be obtained before. Today, the minimum is only about 6.54 million, with a loss of more than 650000 RMB.

"Dare not to settle foreign exchange, if you settle it, you will lose money." After this period of time, foreign trade people have completely lost their temper.

And not only against the US dollar, the RMB has appreciated even more against other emerging currencies, such as 31 per cent against the Russian ruble, 16 per cent against the Mexican peso, 8 per cent against the Thai baht and 7 per cent against the Indian rupee. The appreciation against developed currencies is relatively small, for example, 0.8 per cent against the euro and 0.3 per cent against the Japanese yen, but the appreciation against the dollar, the Canadian dollar and the British pound is more than 4%.

After the RMB has strengthened significantly in recent months, the willingness of enterprises to settle foreign exchange has declined significantly. The spot settlement rates for June to August were 57.62 per cent, 64.17 per cent and 62.12 per cent, respectively, well below May's 72.7 per cent and below the selling rate for the same period, indicating a preference for companies to hold more foreign exchange.

After all, if you have touched the 7.2 exchange rate this year and now it is less than 6.6, how can you settle down to settle the foreign exchange?

At the beginning of the year, people in the foreign trade circle described the new crown virus "war epidemic", "domestic play the first half, foreign play the second half, foreign trade people to play the whole court."

Foreign trade people do have to play the whole court, even with the end of the year foreign economy gradually resume work, continue to recover, foreign trade is also facing the pressure of exchange rate fluctuations. Foreign trade export fastener enterprises, come on!

3, price war, vicious competition.

Under the background of weak demand at home and abroad, the competition in the fastener industry is more intense and day-to-day.

In the face of rising raw materials, labor costs, domestic and foreign demand reduction and other pressures, fastener enterprises also face fierce competition. For example, in order to seize the market, competitors may make profits and reduce prices by 15% at a loss.

To this end, the fastener companies how to deal with? Is the risk of losing customers to insist on their own price? Or down to the same price as competitors, a loss deal?

Fastener industry is originally low profit and price transparency, vicious price competition is easy to eat.

But the fastener people must be clear: there is no way out for low-price competition, and the result is that no one can make money!

A salesman asked the boss, the price of a local small factory is very low, very good, how to do? The boss's answer is: its price is so good, why is it a small business, and we are a big business?

This case shows that prices disrupt rivals and themselves.

Disturbing your opponent is temporary, disturbing yourself is permanent. Now, this once powerful enterprise can no longer be found, and that large enterprise is still developing rapidly.

If the price is rotten, the opponent may only suffer for a while, but he may not be far from death.

Appropriate low prices are conducive to industrialization and scale, but prices are too low and excessive, and unscrupulous means will stifle the industry. This is a truth proven by countless facts.

In the current fastener market, if you go around, you will find that there is a serious surplus of similar products. The price of one product is lower than that of the other. If the product makes money, everyone will rush to make which product and which style sells well, and everyone will follow this style. Do it.

For the same variety, the customer only looks at the surface, and the feeling is not too bad. In fact, there is a big gap in the invisible place! But customers don't know, they stare at cheap purchases, bad money drives out good money, and slowly good things start to cut prices in order to survive!

So, this is really an era of death! In order to let oneself live, so don't want to let everybody live! As a result, no one has to live!

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And vicious competition to a certain extent, your price will be reduced to a certain limit. If you exceed the lower limit, you will lose your principles and go to fake products and cut corners......

We very much appreciate those enterprises that always adhere to their own positioning, whether it is brand positioning, quality positioning or price positioning, they are the backbone of the industry, the future of the industry and the hope of the industry, and the enterprises worthy of respect.

The truly respectable enterprise is not the enterprise with the fastest development and expansion, nor the largest enterprise, but the enterprise that consistently insists on creating commercial value and social value, and has its own bottom line from beginning to end. Its existence is a blessing for the industry, a blessing for the society, and a blessing for itself!

Therefore, adhering to the value of one's own products, adhering to one's own commercial value, and adhering to one's own existing value are important corporate and commercial bottom lines.

(Source: Golden Spider Fastener Web)