Cable industry urgently needs to solve excess capacity

At present, the capacity utilization rate of the wire and cable industry is around 60%, and the phenomenon of overcapacity is very serious. Even so, there are still a number of projects under construction or proposed in China. The overcapacity in the cable industry will become even more prominent. This is not only the wire and cable industry, but also the fiber optic cable market.

Reasons for excess capacity in the cable industry

First, the cable manufacturers have made significant contributions to the production of local GDP, coupled with low cable entry barriers, vicious investment competition among localities, and lags in system reform, which have caused continuous expansion of production capacity and oversupply.

Second, the domestic cable industry has a low level of technology and weak independent innovation capabilities. This makes the competition between cable manufacturers mainly reflected in the expansion of the amount of resources invested and output, as well as the price competition, rather than focusing on the improvement of independent innovation ability and quality improvement.

Third, because there is a certain time lag from the input of production factors to the formation of production capacity, when the market demand in the future looks promising in the long term, many companies are generally ahead of the market demand in order to avoid losing market opportunities. The “cellar” part of the production Capacity, resulting in excess capacity before the peak of market demand.

The risk of overcapacity in power cables

At present, the overcapacity in the power cable industry is very serious, the industry is in a state of overstaffing, the conventional cable is being squeezed seriously, and the new product technology is not mature enough and is in a bottleneck period.

The power cable industry invests mostly in high-voltage and UHV projects, and the high-pressure and UHV project cycles in the past two years are mostly about one year. In other words, the capacity expansion effect of these UHV power cable projects invested in these two years will be released in the next two years, which will put some pressure on the high end of the power cable industry.

According to statistics, there are about 200 companies with high-voltage cable production capacity in the world, and China currently has about 78 companies with high-pressure production capacity, accounting for 40% of the world's total.

The overcapacity of cable products will inevitably directly lead to a drop in profit margins and low-price competition, while low-cost competition will also cause problems such as cutting corners and cutting materials. At present, the Chinese market has formed the world's largest cable recycling industry chain, and it has acquired foreign retired cables and added some materials to make cables. In addition, many cable companies in China even add recycled materials to the production process of optical fiber cables, and they are normalized. Only a small amount of exported cable products do not use recycled materials. This degree has seriously affected the immediate interests of the cable upstream industry, raw material suppliers. They resented that due to the lower and lower product quality requirements, the revenue from sales of 35 tons of raw materials in the domestic market is still less than a ton of export revenue. .

The risk of overcapacity of fiber optic cable

In August last year, the State Council issued the "Broadband China Strategy" and Implementation Plan, positioning broadband as a strategic public infrastructure for the first time, and deploying broadband development goals and routes for the next eight years. The broadband strategy has thus risen from a single sector to a national one. strategy. In December of the same year, the Ministry of Industry and Information Technology issued a 4G license to announce the advent of telecommunications 4G era. The "Broadband China" strategy and 4G will inevitably bring about a new round of rapid development of the optical communications industry, and it will also drive the development of the optical fiber and cable industry. This is a great news for the domestic cable industry.

However, up till now, despite the strong demand of the fiber optic cable industry, due to the limited product attributes of optical fiber cables, the life cycle of the optical fiber itself is about 50 years. Once a product update or replacement is completed, the demand will be significantly reduced, and the industry will Directly to the plain, so the current development of China's fiber optic cable industry is very good, but the production and demand of fiber optic cable has exceeded 100%, after the expansion of production capacity, the industry is likely to be silent. Therefore, in the long run, the market outlook of the industry is not optimistic.

The overcapacity of fiber optic cable is divided into two aspects, one is the expansion of optical fiber preform capacity, and the other is the capacity expansion of optical fiber companies. In terms of optical fiber preforms, in the past two years, due to the prosperity of the industry, the scale of the industry's expansion in the near future has become larger, and the scale of these expansions will be released in the near future.

In terms of capacity expansion of optical fiber enterprises, last year, under the stimulation of the market, many optical fiber companies such as Hengtong Optoelectronics, Zhongtian Technology, and Fiberhome Communications all had large-scale expansion operations in 2012, all of which expanded, and the eight mainstream companies accounted for the total. 95.71% of the market size; of which Changfei's capacity expansion is estimated to reach 32 million core kilometers, reaching 17.78% of the total market expansion.

In optical fiber capacity expansion, domestic optical fiber production capacity exceeded 180 million core kilometers in 2013, a year-on-year increase of 27.54%. The newly added capacity in the past year includes not only the 7 million-core-kilometer-capacity capacity of the original industry companies; Hengtong's 8 million-kilometer-km capacity. There are also new Kellogg's 10 million core kilometers of capacity entering the optical fiber industry. In the domestic industry supply and demand, 2013 180 million core kilometers of optical fiber production capacity has already met the domestic 147 million core kilometers of optical fiber demand.

For the entire wire and cable industry, whether it is the overcapacity of power cables or the overcapacity of optical fiber and cable, it has laid a hidden danger for the domestic cable industry, but also restricted the fair, healthy and sustainable development of the domestic cable industry. Despite the good news of the “two sessions,” the capacity that can be consumed may be limited compared to the industry’s overcapacity and taking into account the technical gold content of products.