Rising raw materials, construction machinery industry welcomes price increases

The main reasons for this price increase are: the prices of raw materials have continued to rise, especially the prices of steel and rubber, which are mainly used in construction machinery, have risen sharply; The impact of factors such as the increase in environmental protection costs of purchasing outsourcing factories has made the price hikes of major OEMs in the industry already on the verge of an arrow, and it is imperative.

Rising raw materials, construction machinery industry welcomes price increases

According to the China Steel Price Network, the average steel price in Shandong this week reached 4,154 yuan/ton, while the price of Shandong steel in July last year was only 2601.8 yuan/ton, an increase of 60% in just over a year. Since April this year, Shandong steel prices have maintained an upward momentum for eight consecutive weeks. The price of natural rubber reached 12,800 yuan/ton, while the price of natural rubber in Shanghai during the same period last year was only 10,585 yuan/ton. In the past year, natural rubber has risen by 2215 yuan per ton, an increase of 21%. The impact of environmental protection is even more pronounced. This year is known as the "most stringent year of environmental protection in history." A set of "combined punches" of, interviews, and special inspections, and the fourth batch of environmental protection inspections, which can be called the most stringent in history, has been launched. Key inspection plans for the Beijing-Tianjin area and Guangdong, Shandong, Sichuan, and Jiangsu provinces Has also been released. Busy at both ends, telescopic loaders, underground loaders

Impact on the construction machinery industry

Steel is the most important raw material for construction machinery, and it is also a major part of the product cost structure. Generally speaking, direct steel accounts for 13% to 15% of the cost of construction machinery products; if you add hydraulic parts, engines, purchased parts and other accessory steel, all steel accounts for more than 30% of the cost of construction machinery products. Construction machinery manufacturing is mainly used for medium and heavy steel (10-20 mm): The average price of medium and heavy plates in 2017 increased by about 30% relative to the average price in 2016. The spot price of 20mm plates has bottomed out since the beginning of 2016. As of August 15, 2017, the price of plate has risen from RMB 1,800/ton to nearly RMB 4,000/ton. Taking into account that listed companies usually purchase raw materials at long-term coordinated prices, the purchase price fluctuates little, and the procurement cycle is six months or one year.

Rising raw materials, construction machinery industry welcomes price increases

Construction machinery companies respond to rising raw material costs through price increases 1. For truck cranes, steel costs account for about 17%. If steel prices increase by 33%, product prices need to increase by 5.61% (33%*17%) to cover costs. 2. For excavators, the cost of steel accounts for about 20%. If the steel price increases by 33%, the product price increases by 6.6% (33%*20%) to cover the cost. Leading construction machinery companies have strong pricing power and have good cost transfer capabilities. Generally, they can also respond to cost increases in the following ways: 1. Centralized procurement to reduce costs (applicable to companies with strong bargaining power); 2. Borrow products Upgrades (engine upgrades, industry 4.0 upgrades) raise prices; 3. The industry chain shares the pressure of price increases.

In fact, as early as the second half of last year, the "construction machinery industry is about to usher in a wave of price increases", but the major construction machinery companies have taken the initiative to bear the pain caused by the rise in raw materials as the industry situation has just improved and the purchasing power of users has yet to be restored. The price of the commercial vehicle industry has been raised at the end of last year. Since the beginning of this year, the construction machinery industry has been showing a continuous upward trend, and some host companies have even sold out of stock. Under the continuous pressure of increasing environmental protection supervision and rising raw material prices and labor costs, some host companies finally can't stand it, and price adjustments are inevitable.