Cable wires and cables, as the primary carriers of power transmission, are inevitably intertwined with the development of downstream industries such as power, construction, automotive, and communication, in addition to being influenced by domestic and international policies and raw material prices.
Domestic and Foreign Policies
In recent years, the country has vigorously invested in urban power grid construction, rural grid transformation, and urban rail transit development, implementing a series of favorable policies. The growth of these industries is expected to generate a surge in orders for upstream wire and cable manufacturers. Simultaneously, due to the persistent high incidence of fires caused by wire and cable quality issues, to prevent major accidents from recurring, the country has been tightening its control over industry and product standards in the wire and cable sector, with new technical standards being introduced continuously.
On the international front, on one hand, our country's cable industry has a significant export volume and is greatly affected by the policies of international economic organizations; on the other hand, the continuous emergence of anti-dumping investigations has had extremely adverse effects on domestic wire and cable manufacturers.
Raw Materials
The cost of wire and cable products is approximately 80% raw materials, including copper, aluminum, and plastics. According to relevant calculations, a 5% increase in raw material prices equates to a 4% decrease in profit. Copper and aluminum are crucial raw materials for wire and cable production, and their price fluctuations determine the profitability of wire and cable companies. Additionally, from the current structure of copper demand in our country, the power industry accounts for over 50%, primarily used in wire and cable, transformers, switches, and connectors. The demand for copper in the wire and cable industry accounts for over 90% of the power industry. Therefore, the development of the wire and cable industry will undoubtedly also impact the demand and price of copper.
Downstream Industry
President Xi Jinping first proposed the new normal of China's economy in May 2014. Currently, policies are favorable for ultra-high voltage construction. The 13 lines planned by State Grid in 2015 are expected to attract over 3 trillion yuan in investments. Additionally, State Grid is also keen to leverage the Belt and Road Initiative to promote ultra-high voltage construction, making the next five years a golden period for the ultra-high voltage industry, and benefiting cable and wire companies handsomely as well. Recently, media reports indicate that China will enter a golden age of ultra-high voltage development over the next five years, which is driving the cable and wire market to grow at an annual rate of 8-9%.
As high-speed rail continues to "go global" and urban rail transit is constantly improving, this provides a market for wire and cable for locomotive vehicles, winding wire, special optical cables, and data transmission cables, among others. Moreover, with China's expressways and railways gradually transitioning to informatization, the demand for optical cables is also on the rise, presenting a promising opportunity for wire and cable companies.
The nation's commitment to the development of offshore wind power has transitioned from the "orderly development" of wind power in 2014 to the "aggressive development" in 2015. Wind power is poised to become the leading force in the restructuring of the national energy structure. As a crucial component of wind power projects, offshore wind will undoubtedly drive the annual demand for underwater cables upward. Moreover, the high technical requirements for specialized cables used in offshore wind will prompt cable and wire companies to continuously innovate and enhance their competitiveness.
In addition, as the new energy sectors such as new energy vehicles and photovoltaics, the real estate industry, nuclear power, aviation, and telecommunications continue to grow, their demand for electrical wires and cables will also increase significantly. The development of these industries will have a profound impact on the wire and cable industry.
