First Line｜With Skyrocketing Copper Prices, The Difficulties And Breakthroughs Of Copper Processing Towns
Du An (pseudonym), the "big steward" of Zhejiang Tongcheng Alloy Copper Tube Co., Ltd., may be as sensitive to copper prices as shareholders are to stock prices. He watched helplessly as copper prices soared from over 60,000 yuan/ton this year. On May 21, LME copper futures hit $11,104.5/ton, and the main Shanghai copper contract hit 88,940 yuan/ton, both setting new records. Since then, global and domestic copper prices have continued to fluctuate at high levels. As of May 27, the price of Shanghai copper main chain rose again, from 83,750 yuan/ton to 83,880 yuan/ton.
Duan Company is one of the important copper pipe processing enterprises in Shangyu District, Shaoxing. Its downstream customers include large customers such as Dunan and Sanhua, as well as many small and medium-sized enterprises. The copper pipe processing plant is an important link in the copper industry chain. Copper prices are high and demand is weak. As a manager in daily contact with customers and factories, Duane felt increasing stress and anxiety.
Raw material costs rise, but orders shrink
Copper industry enterprises gather in Tangpu Town, Shangyu District, Shaoxing City. On both sides of the main road, which is about 20 meters wide, copper mining companies are almost next to each other. The relationship between copper companies is also very close. According to Duan, many copper mining company owners in the town worked in the same factory for a period of time and later opened independent factories. The boss and the boss are old acquaintances. The Shangyu District Copper Chamber of Commerce told Silverstone Finance that at its peak, there were more than 200 copper pipe processing companies in Tangpu. Although the number has decreased now, there are still more than 120 copper pipe processing companies taking root here.
However, life for Tangpu Copper Enterprises has not been so easy recently.
The order placed by Xu Lixin, deputy general manager of Xingpeng Copper and secretary-general of the Shangyu District Copper Chamber of Commerce, is almost a benchmark for the entire Shangyu Copper Company's operations. Because more than 80% of the copper pipe factories in Tangpu Town need to purchase the mother blanks of Xingpeng copper materials for deep processing. "The shipment volume of mother blanks in May this year shrank by more than 40% year-on-year; 80% of the companies in the town were worse than last year, or even worse than last year." Xu Lixin said.
"This bundle is 300,000 yuan." Standing in the factory warehouse of a copper pipe processing company in Shangyu Economic and Technological Development Zone, Hangzhou Bay, sales general manager Chen Luo (pseudonym) pointed to a pile of electrolytic copper plates on the ground and told Silverstone Finance . There are probably more than 10 bundles of electrolytic copper in his factory warehouse. These electrolytic coppers go through furnaces and then machine processing, and finally become copper pipes in air conditioners, cars, and refrigerators.
The soaring copper prices make Chen Luo worried. "The cost of capital is too high. With the same amount of capital, the purchase volume has dropped by about 20%." Chen Luo's customers are mainly small household appliances, air conditioners, refrigerators, and new energy vehicle manufacturers. Chenluo Company purchases about 15,000 tons of copper every year. "The current monthly lighting cost is about 130 million yuan, an increase of 25% over last year."
Capital costs are rising while orders are trending down . Walking in Chen Luo's factory, he told Silverstone Finance that in an environment of high copper prices and weak real estate and infrastructure, downstream customers are under great operating pressure and will receive fewer goods. Especially now that there is no obvious upward trend in the prices of terminal-related products, "customers are under pressure."
"Before the rise in copper prices, sales volume this year and last year remained basically stable. But after the price increase, sales volume in April and May this year may drop by 10% to 15% year-on-year. "
Duane's company basically covers everything from copper pipes to copper product processing. Although the company has large customers, it also has many small companies such as sanitary ware. Duane admitted to Silverstone Finance that orders have dropped significantly. "In the past, other companies would stock up on goods, but not anymore. In addition, prices are unstable, and small businesses will wait and see whether prices will fall."
Enterprises in the middle reaches of the industrial chain are under the greatest pressure
Copper prices are soaring. Will the copper products in our lives react? Silverstone Finance visited some small hardware stores in Binjiang District and Yuhang District of Hangzhou and found that the prices of copper floor drains and copper sanitary ware have not increased significantly.
Cong Peihao, big data director of the Nonferrous Business Department of Fubao Information, told Silverstone Finance that the current copper price is out of touch with the price of end products, so this part of the cost is indeed borne by the intermediate industry chain companies.
By the middle of the industrial chain, the pressure to increase prices has stopped, which also means that the processing fee income of copper processing companies is decreasing.
"Our processing fees are temporarily stable, but it is indeed difficult. The processing fees may drop in the second half of this year." Chen Luo said bluntly.
Mr. Duan's factory has subsidized the processing fee. " Generally speaking, processing fees are declining, but the prices for different customers are different. We will subsidize profits based on the customer's situation."
Zhu Li (pseudonym) is the owner of a motor factory in Shangyu City. He told Silverstone that the enameled wire in the motor is made of copper. A 180 motor uses about 5 kilograms of copper, but the current situation is that copper has increased by about 17 yuan per kilogram , which means that the cost of each motor has increased by 100 yuan, but the price of the motor has not changed . "How to move it? It's hard to sell it at this price now. You may have to lower the price before you can sell it."
Julie said, "Now we are not thinking about how to make money, but how to live."
Faced with fluctuations in copper prices, most companies can only respond passively, silently digesting costs and cutting profits. Du Shenlong, a veteran expert in the nonferrous metal industry who is familiar with Shangyu Copper Enterprises, visited the enterprise with Silverstone Finance this time. He bluntly said that what Shangyu copper companies are doing now is trying to maintain prices. On the one hand, we are waiting for copper prices to fall, and on the other hand, we are waiting for downstream demand to pick up.
Break through new scenarios
Faced with the multiple difficulties brought about by soaring raw material prices, many industry insiders said that although traditional methods such as hedging can cope with it to a certain extent, they also bring greater capital costs. How should the copper industry break through?
Xingpeng Copper has a business history of more than 40 years and is a long-established copper pipe enterprise in Tangpu Town. Xu Lixin, deputy general manager of Xingpeng Copper, said that in recent years, the products of downstream customers such as air conditioners and refrigerators have been continuously iterated, and the upstream copper pipe industry has also had to upgrade accordingly.
"This is for Huawei mobile phone batteries, and the processing fee per ton is more than 200,000 yuan." Holding a sheet in his hand, Xu Lixin said that although the demand for copper accessories in mobile phone batteries is only about two tons per year, the profits are extremely high. high. In recent years, Xingpeng Copper has actively leveraged its many years of production and operation experience in the field of copper processing, continuously increased its presence in global emerging markets, and actively expanded new energy, 5G commercial and other businesses. Currently, the newly expanded business accounts for 30% of the company's total revenue.
In 1998, Chen Xinxiang, the founder of Jingxiang Air Conditioning Company, returned to his hometown to start a business. Chen Xinxiang told Silverstone Finance that when he chose to make copper tubes, he noticed the problem of product homogeneity in the industry. If he wants to be in a favorable position in the production and operation for a long time, he must increase the added value of the product, that is, the processing fee.
To this end, he invested more than 20 million yuan in equipment upgrades and technology research and development. Today, Jingxiang Air Conditioning has developed from a single copper pipe processing factory to a source manufacturer of high-efficiency pipes such as fin condensers, evaporators, surface coolers, and coils. The company's products have also expanded from traditional buildings and air conditioners to photovoltaic power generation. Power generation, medical machinery, new energy, rail transportation and other fields. The processing fee is generally 25,000 yuan to 30,000 yuan per ton. "Since 2020, the company's output value has grown at an annual rate of 30%." Chen Xinxiang said.
The Tangpu Town government has also introduced policies to help local companies increase production capacity. "Several Policy Opinions on Promoting High-Quality Economic Development of Tangpu Town in 2023" shows that the Tangpu Town government has established enterprise upgrade awards, industrial investment awards, R&D investment awards, scientific and technological innovation awards, etc. to guide and encourage the transformation and upgrading of industrial enterprises.
