Will the price of raw materials drop sharply and whether air conditioners will cut prices?

  Industry insiders believe that the recent price is difficult to loosen, and it is not ruled out that manufacturers and merchants provoke local price wars

  International copper prices continued to fall, hitting a new low in nearly 17 months.

Last week, London copper (copper futures traded on the London Futures Exchange) briefly fell below $8,000 a tonne, bringing the entire second-quarter decline to 20%, the worst single-quarter performance in 10 years.

The decline in the prices of important industrial metals represented by copper has also directly affected downstream industries.

The home appliance industry is a big consumer of copper. Among them, air conditioners account for the highest proportion of copper costs, and about 20% of their costs come from copper.

Now that we are entering the peak season for air-conditioning sales, the continued sharp drop in copper prices will bring about a drop in air-conditioning prices in the market?

  Copper prices plummet

  Industrial metal prices fall

  Industrial metals have been experiencing a sell-off in overseas markets of late as fears of a global recession intensified.

Among them, copper, nickel and other industrial metals have shown a trend of plummeting prices.

Last week, the prices of industrial metals represented by copper and nickel fell sharply.

Among them, London copper once fell below 8,000 US dollars / ton.

Throughout the second quarter, London copper has fallen by 20%; London aluminum and nickel fell by 30% in the second quarter, and zinc prices also fell by 25%.

In addition, the LME index of six base metals also posted its biggest quarterly drop since the 2008 financial crisis.

Looking forward to the second half of the year, Nanhua Futures said that copper prices will still be under pressure in the future.

  As a product with the largest proportion of copper in the home appliance industry, air conditioners have been facing cost pressures brought about by skyrocketing copper prices in recent years, and the price focus of air conditioners in the market has also shifted significantly.

Air conditioners that cost 999 yuan a few years ago have disappeared from the market for many years now. At present, the lowest market price of 1 air conditioner is basically around 1,500 yuan, an increase of about 50% from the low point in previous years.

In an interview with a reporter from Beijing Youth Daily, some people from air-conditioning enterprises believed that the decline in industrial metal prices since the second quarter will ease the pressure on raw material costs in the air-conditioning and other home appliance industries in the past two years. It's still too early.

  affect downstream

  Air-conditioning companies have raised prices to save themselves

  The raw material cost of air-conditioning products accounts for a considerable proportion, about 70%.

In particular, the standard requirements for major raw materials such as copper, steel, aluminum, and plastic are relatively high, resulting in a greater impact on manufacturing costs by raw materials.

Among them, the proportion of copper in the total cost of air conditioning can reach about 20%.

In this situation, the sharp rise in industrial metal prices in recent years has a direct impact on the profit level of air-conditioning companies.

  According to the 2021 financial reports of Gree and Midea, the two major home appliance giants with air conditioning as the main business, both giants have experienced a situation where the growth rate of net profit is significantly slower than the growth rate of revenue.

In this regard, the two giants mentioned in their financial reports that the high cost of raw materials has devoured corporate profits.

Gree Electric said that the main raw materials of the company's products are various grades of copper, steel, aluminum and plastics, and their costs account for a large proportion.

Starting from 2020, the prices of raw materials such as copper and aluminum will rise rapidly and continue to run at a high level, and the resulting cost pressure will have a certain impact on the company's operating performance.

Midea Group stated that the main raw materials of the company's consumer electrical appliances and core components are various grades of copper, steel, plastic and aluminum, and the manufacturing of home appliances is a labor-intensive industry. Changes in the macroeconomic environment and policy adjustments have caused large fluctuations in the cost of production factors such as labor, water, electricity, and land. The cost reduction brought about by lean production and efficiency improvement and the overall sales price of end products cannot fully absorb the impact of cost fluctuations. It will have a certain impact on the company's operating performance.

The Beiqing Daily reporter inquired that the raw material cost of Midea Group in 2021 will reach 175.1 billion yuan, accounting for 84.47% of the operating cost, a year-on-year increase of 21.2%.

The raw material cost of Gree Electric Appliances was 86.2 billion yuan, accounting for 88.27% of the operating cost, a year-on-year increase of 13.64%.

  "Until the first quarter of this year, it was the hardest time for air-conditioning companies!" An air-conditioning company operator told the Beiqing Daily reporter that from the beginning of this year to mid-March, the prices of Shanghai copper, Shanghai aluminum, and steel have risen in the past 70 days. They have increased by 3.33%, 8.8% and 4.78% respectively, among which the rapid rise in copper prices has brought great pressure on air-conditioning companies.

  It was also in March this year that many domestic home appliance companies announced price increases, ranging from 8% to 10%.

For example, the price of Midea air conditioners began to increase from March 16, and the price adjustment of household air conditioners was 8%.

In the price increase notice, Midea stated that the continuous increase in the price of factory raw materials has led to an increase in production costs.

In this round of price increases, Midea refrigerators, washing machines and small appliances also have price increases of 5% to 20% respectively.

The shipping price of Gree air conditioners was also raised in early March this year, by about 10%.

  Industry Analysis

  The market price of air conditioners will not loosen in the short term

  According to the practice of the past years, starting in late June each year, air conditioners enter the hottest season of the year.

Will this round of slump in raw material prices appear before the peak season this year affect the price of air conditioners this summer?

  In this regard, many professionals gave different expectations in interviews with reporters from Beiqing Daily, but generally believed that the price of air conditioners on the market in the past one or two months will not change much, and it is estimated that the price of air conditioners will loosen the fastest. Wait until this summer is over.

That is to say, it may be difficult for consumers to directly benefit from the impact of falling raw material prices when purchasing air conditioners during the peak sales season this summer.

  Affected by the price transmission cycle, it is basically the industry consensus that the price of air conditioners will not drop in the short term.

Because air-conditioning enterprises have a certain cycle from raw material procurement to entering production, it will not produce immediate results.

According to industry practice, the production of air conditioners is completed long before the peak season, and the inventory of the channel is completed. Therefore, the air conditioners in the current channel have actually been produced a few months ago, and the cost will not be affected by the recent drop in raw material prices.

In addition, according to industry sources, at present, major domestic air-conditioning manufacturers will do futures hedging in the procurement of raw materials, so the decline in bulk prices will not be directly transmitted to prices.

  Another thing to consider is that the sales price of air conditioners is also closely related to market supply and demand.

There is a large demand for air conditioners in summer, so it is often the time of the year when the price of air conditioners is the highest. In addition, the costs of installation and maintenance during this period have increased significantly, and it may be difficult for air conditioner manufacturers to cut prices.

However, this also depends on the future weather trend. If the hot weather is obvious this summer, the large volume of air conditioners will inevitably support the price. If the temperature is low, the overall sales situation is not good. price war.

It is expected that this situation will not appear until August, and the current air-conditioning manufacturers will definitely remain on the sidelines.

After all, many dealers ran out of air conditioners in the rare high temperature weather that occurred in some parts of the north some time ago, so the merchants holding the supply now hope to bet on the weather for a while.

  Text/Reporter Zhang Qin