The world is affected by the epidemic and the economy is sluggish. In this regard, the strong domestic supply chain shows a distinct advantage. In the second half of the year, orders for some products have been transferred to my country, which has also brought about "explosive orders" in foreign trade exports in several industries. The home appliance industry and the textile industry are both very popular.
However, since the second half of the year, the prices of raw materials have risen sharply, ocean freight has risen unprecedentedly, and the exchange rate of the renminbi has remained strong, putting many domestic foreign trade companies in an embarrassing situation of "pressure on both sides".
The home appliance industry has no worries about orders but worries about profits
In the first three quarters of 2020, the cumulative export value of China's home appliance industry reached 59.069 billion US dollars, a year-on-year increase of 9.1%; the cumulative import value reached 3.122 billion yuan, a year-on-year decrease of 7.7%; the cumulative surplus was 55.947 billion US dollars, a year-on-year increase of 10.2%.
In November 2020, the domestic market for home appliance industry continued to pick up, and exports continued to maintain rapid growth. Among them, exports of household air conditioners were 4.5982 million units, a year-on-year increase of 11.95%. The export volume of refrigerators reached 3.865 million units, a year-on-year increase of 64.1% and a month-on-month increase of 3.6%. The export volume of washing machines increased by 12.3% year-on-year.
In recent months, the prices of major raw materials for home appliances such as copper, aluminum and steel have been rising.
Data show that in the fourth quarter of 2020, the Shanghai Aluminum Index rose by 9.3%, and the Shanghai Copper Index rose by 13.4%. Goldman Sachs International Commodity Research analyst released a report saying that the "bull market" of copper is in full swing, and the price has reached the highest level since 2017.
However, this is not good news for manufacturing industries such as home appliances.
The home appliance industry generally has a large demand for copper, aluminum, steel, plastics and other bulk raw materials, and the cost of raw materials often accounts for 70% to 80% of the total cost. For example, the 2019 annual report of Gree Electric, the leading air conditioner, disclosed that raw materials accounted for 86.66% of the company's operating costs for the year. . In the peak period of year-end shipments, the rapid increase in raw material prices made home appliance manufacturers miserable.
For home appliance foreign trade companies, rising costs are only one aspect, and the exchange rate has also brought a "pinch attack" from another aspect.
Sea freight + exchange rate, the more you sell, the more you lose
Behind the increase in shipping costs is the tight supply of containers. "Before, even if the price increased, containers could still be found, but starting from the end of November 2020, even the containers were difficult to grab. Even if the space was booked very early, it was discovered that there were no containers when loading the containers, resulting in a backlog of goods in the warehouse."
"Just like an airplane ticket, even if you have money, you don't necessarily get a ticket. The shipping space is the same, and even if you have a space, you don't necessarily have a container to load." In the past, you only need to book a space one week in advance. It may not be available for half a month.
In addition to the high sea freight charges and unavailable container accidents, the factor that "eats" profits is more from the appreciation of the RMB.
After breaking through the 7 mark in mid-2020, the RMB/USD exchange rate has now risen to around 6.5.