Recently, the industry is most concerned about the news that international iron ore prices have risen sharply. The world’s top three mining giant’s offer soared from 20% to 30% to 50% to 80% to 90%. Such a significant increase in iron ore prices has a huge impact on the Chinese steel industry and its related downstream industries. Steel is one of the most important materials for automobile production. The amount of steel accounts for about 70% of the automotive materials. What is the impact of the rise in steel prices brought about by this iron ore price increase on China's auto and parts industry? In 2009, auto companies with high gross profit margins achieved by lower steel prices faced with rising steel prices.

Rising quantitative analysis

Due to the difference in the proportion of steel costs in the entire vehicle price and the difference in the gross profit rate of the models, this round of steel price increases will have different effects on the industry. The average steel consumption of cars is about 1 ton, and the cost is only 5,000 to 6,000 yuan, which is about 5% of the total vehicle cost. The steel used for trucks is in the order of heavy, medium, light, and fine, with steel quantities of 9, 4, 1.5, and 0.8 tons, respectively, and costs ranging from 4,000 to 45,000 yuan. According to the division of different uses such as vehicles and parts, the total amount of steel used directly for automobile vehicles accounts for 50% of the total steel consumption in the automotive industry, the proportion of modified vehicles is 15%, the proportion of motorcycles is 2%, and the engine ratio is 1%, automobile and motorcycle accessories accounted for 32%, so the increase in steel prices has the greatest impact on the entire vehicle and parts industry.

According to the different types of trucks and cars, the amount of steel used for medium-duty trucks is 3.6 tons, of which cold, hot-rolled plates and high-quality steel account for the largest proportion, which amounts to 84%. The car is only 0.8 tons, of which the largest share of cold-rolled plates and high-quality steel, totaling 90%, so the rise in steel prices has the largest impact on commercial vehicles.

We only calculate the direct material cost impact of automobile plants. Assume that the pressure of rising cost of parts and components companies is absorbed in its internal processes. The prices of hot rolled steel, cold rolled steel and high-quality steel are taken as the main types of quantitative analysis of the automotive industry. The weights of various types of steel for commercial vehicles and cars are as follows:

The weight of all kinds of steel for commercial vehicles - 29% for hot-rolled plates, 53% for cold-rolled plates, and 53% for high-quality steels; weights for all types of steel for cars - 79% for cold-rolled plates and 21% for high-quality steel.

The impact of gross margins on these types of vehicles is estimated. The calculation results show that the average cost of bicycles in the whole automobile manufacturing industry will increase by 1,089 yuan/unit, and the average gross profit margin of the industry will fall by 1 percentage point; for different models, the gross profit margin of the heavy truck industry will have the greatest impact, and its gross profit margin will be The decrease of 2.7 to 3.2 percentage points has the least impact on mid- to high-end cars, which is only 0.4 to 0.6 percentage points lower. However, from the result of the decline, light trucks and economical cars are under the most pressure, and their gross profit margin will be reduced to 6 %, while the commercial vehicle industry is most likely to increase prices.

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Parts "Frozen"

The profit loss brought by the price increase of ore will be digested at every link of the automobile industry chain. Given the current auto market conditions, it is impossible for cars to “price increase” and can only be distributed among parts and vehicle companies.

In fact, since last year, the rise in raw material prices represented by steel products has brought operating pressure to parts and components companies. Faced with another rise in steel prices this year, the days of spare parts companies are even worse, and this will undoubtedly worsen the situation. On the one hand, the parts and components companies have to bear the direct cost increase caused by the increase in steel prices. On the other hand, they also have to bear the pressure of price reduction imposed by the entire vehicle company, because when the entire vehicle company faces the pressure of cost reduction, it will usually The pressure was passed on to the parts companies. However, it is relatively difficult for parts and components suppliers to raise prices for customers. Even if they raise the price of a car, the increase is basically less than the increase in raw materials. Plus, a complete car manufacturer may not necessarily raise the purchase price of the supplier; if the car The sales market cannot withstand the increase in vehicle prices, and OEMs may continue to lower prices for component manufacturers. Last year, some parts companies, including Visteon in the United States and Valeo in Europe, saw a drop in profits, mainly due to the increase in raw material prices. This year, the brutal competition of auto parts suppliers will become increasingly fierce.

Many parts and components companies said that the current part of the company's internal cost reduction is not enough to make up for the increase in raw material prices, and some parts and components companies that consume a larger proportion of steel products are even more miserable. Take the example of steel bearing bushes whose steel cost accounts for about 40%. Due to the increase in steel prices last year, the cost increase for bearing bush companies has increased by more than 10%.

The industry believes that in the face of frequent cuts in the auto market, it is almost impossible for small and medium-sized spare parts companies to absorb the cost of increasing steel prices by increasing the prices of parts for auto manufacturers. Companies that originally relied on low labor cost advantages are now suffering from two squeezes, and the rising cost has caused some backward manufacturers to withdraw from the market.

Various countermeasures

Judging from the current market environment of China's auto industry, the cost factor may not be a key factor in the development of automobiles. However, concerns about the economic growth prospects, the crowding-out effect of inflation and its expectations on auto consumption, and the rise in oil prices and adjustment of taxes and regulations to consumption The suppression of the market may be the more serious situation facing the automotive and parts industries. If this year's auto industry slows down as predicted, the impact on the corresponding steel products will be even greater. It can also be said that both the automobile and the steel will be affected industries under the changing economic growth environment.

The production of iron ore and steel-making coal are consumables and will eventually dry up one day. Therefore, the rise in steel prices is an inevitable trend. It is just a matter of time, just like the rise in fuel prices. Faced with this inconclusive result, the automobile industry is also “Eight Immortals Crossing the Sea, each showing a supernatural power”.

Under normal circumstances, auto and parts companies will start from reducing the cost of procurement, which is the common practice adopted by most manufacturers. For example, some companies basically use domestically-made steel. Because the increase in domestic steel prices is much lower than that of imported products, although companies are facing the pressure of raw material price increases, the impact is not significant. For multinational corporations, because of their global reach, they have an advantage in reducing procurement costs. According to the person in charge of Delphi's China Logistics Department, because Delphi has achieved true global sourcing, it can allocate various raw material resources from around the world and relieve the pressure of cost growth to some extent.

Of course, for many large companies, usually while reducing procurement costs, they will also reduce costs by improving internal management. It can cooperate with other companies to obtain reasonable steel prices for steel manufacturing enterprises through unified procurement of steel products, and strive to establish storage points in the vicinity to reduce the raw material storage costs of various companies.

However, in the long run, to truly solve this problem, auto and parts companies should start with themselves and seek new ways to survive. Due to the high price of parts and exports, many domestic companies have sought to expand overseas markets. In this battle for profit, large-scale and technologically advanced companies will undoubtedly occupy more advantages. On the other hand, through the improvement of product technology, new technologies and new materials can be adopted. At present, many automotive products gradually use light and alternative raw materials such as aluminum, plastic steel, and glass fiber, and the proportion of steel used is declining, which will also ease iron. The direct impact of ore price increases.

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