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Crisis and Opportunity coexist in 2016

Update:04 Aug 2017
Summary:

For most small and medium-sized motor companies, the da […]

For most small and medium-sized motor companies, the days of 2016 were not very good. A series of problems such as rising raw materials appeared particularly prominent this year. Some small and medium-sized enterprises even fell into a crisis of bankruptcy. In order to ease the cost pressures, motor companies have to look for alternatives to silicon steel sheets, and the quality problems that this creates are worrying.

Since the beginning of this year, domestically produced cold-rolled silicon steel sheet iron and steel enterprises have been affected by the rise in raw materials from the upstream, and have continuously raised the ex-factory price of cold-rolled silicon steel sheets, thus transferring cost pressures to downstream companies. Motors, appliances, and home appliances are material-intensive industries. Take small and medium-sized motor industries as an example: Silicon steel sheet is one of the main raw materials, accounting for about one-third of the total cost of production. In addition, due to the fact that the small and medium-sized motor industries are in a state of oversupply, the competition is fierce. In the face of the sharp rise in the price of silicon steel, there are many difficulties.

In order to survive, small and medium-sized motor companies can only start from reducing the cost of raw material procurement, looking for alternatives to silicon steel sheet, in order to solve the urgent need.

Some enterprises, looking for suitable grades of silicon steel sheet, conducted type test comparisons. After passing the qualification, the higher grade cold rolled silicon steel coils were replaced. For example, small motor companies that produce fractional horsepower motors, oil pump motors, hardware tools, and micro-motors do not require widths of 1,000 mm or 1200 mm instead of cold-rolled silicon steel strips. The monthly market supply is about 20,000 tons.

Some manufacturers of motors, electrical appliances, and home appliances produce low-end motors, electrical appliances, and household electrical appliances. They simply use ordinary steel strips. They use the general method of reclaiming water called hot-rolled thin strips and anneal them with bright light. The ton price is only below RMB 5,000/ton, which greatly eases the purchase cost.

There are also a number of small companies that specialize in the purchase of cold-rolled silicon steel sheet products. The procurement of these materials is basically a medium and low-end product for SMEs. Large-scale enterprises that produce export and military large and medium-sized motors still use cold-rolled silicon steel sheets produced by major domestic manufacturers. The small size of the company makes it difficult to achieve economies of scale

At present, there are nearly 2,000 motor plants in China, large and small. Although there are a large number of enterprises, quite a few are small enterprises. Due to the large number of manufacturers and the large output, the situation of mutual competition to seize the market price competition. The phenomenon of uneven product quality, mutual price competition, and meager profits of the industry have become the main factors affecting the survival and development of motor companies.

The motor itself is a labor-intensive product and it is difficult to produce benefits without achieving a certain scale of output. Therefore, the profits of the industry are very slim. The motor industry in the country employs about 300,000 people. In 2003, the industry realized a profit of only 280 million yuan. Even in some relatively profitable companies, net profit does not reach 5%.