The soaring iron ore prices cause China's logistics supply chain to worry
Causes, soaring iron ore prices
On February 18, Brazilian ore producer Vale announced on its official website its 2008 iron ore benchmark prices with Japan’s Nippon Steel, Japan’s Steel Corporation, and South Korea’s Posco, most of which are iron ore. The price increase was 65%, and the higher grade Carragazian flour rose by 71%. The price in this agreement will be implemented starting from April.
Once this news was announced, it caused a considerable fluctuation in the domestic steel industry. Many domestic iron and steel manufacturers, which have been relying heavily on imported iron ore, have begun to shift the price of steel products to shift the cost pressure brought by iron ore prices to them. Market data show that in February more than 20 domestic steel mills raised their ex-factory prices again on the basis of price increases for steel products in January. As the main raw material for automobile production, the cost of steel products occupies a considerable proportion of the total cost of the automotive industry. For a car that weighs one ton, the steel required for manufacturing is generally between 1.5 and 2 tons, while commercial vehicles use its body. With a large amount of steel itself, the cost pressure on commercial vehicle companies is also relatively large.
Butterfly effect, drastic changes in the automotive industry
While commercial vehicle companies are facing tremendous pressure on the rise in steel prices, other related raw materials for automobiles are also increasing their prices. The increase in costs is an indisputable fact. In the face of this situation, commercial vehicle manufacturers will squeeze the cost toward both ends. On the one hand, to increase the selling price of commercial vehicles, the other is to put pressure on downstream service industries such as automotive logistics, urging them to lower service prices.
Due to the increase in the price of steel products, competition in the auto industry is very fierce. At the same time, the cost of using automobiles is also increasing for consumers. Many automobile manufacturers have fully realized that if one simply considers the pressure of their own cost growth and neglects the current situation in which consumer use costs also increase at the same time, the consumer enthusiasm in the automotive market of a typical buyer's market will surely drop sharply. Commercial vehicle manufacturers are more expensive than ordinary cars because of their own production of automobile types. Therefore, the threshold for purchase is relatively high. If the price increases once, the feeling of the purchaser will become more apparent. At the same time, the enterprise is afraid of losing the current customers because of price issues. Therefore, it is not difficult to imagine that the cost pressures of commercial vehicle manufacturing companies will most likely shift to downstream service industries.
At present, most of China's auto logistics companies are in a meager state of survival. As an important part of the automotive downstream service providers, they will certainly be subject to a certain price shock. Because the rest of the commercial vehicle manufacturers are in a passive position, many auto logistics companies will face the dilemma of being squeezed to the bottom line and their survival will be further deteriorated. Shen Guokang, Chairman and CEO of Brocade Information Co., Ltd., China’s largest logistics supply chain management software company, said in an interview: “Even even the entire automotive logistics industry may be adversely affected by the impact of the increase in automobile raw material prices. "."
Supply Chain, "Chronic Disease" Ignored by Chinese Manufacturing Industry
There is no doubt that China today has become a manufacturing power, but we are a small country in the supply chain.
Like the "Large Earthly Bo", this reality is not always reassuring. With the total amount of China's economy, this is a doomed thing. Today, it is still too early to talk about the splendor of "Made in China". Because, compared with the huge global supply chain system, "Made in China" is only the first link in "China's supply".
In the market economy environment, the supply chain consists of four parts: the value of commodity production to create use, the value of commodity exchange to create ownership, the value of commodity logistics to create time and space, and commodity financing is the lubricant for realizing the above three values. Under the reality of economic globalization, the production process has achieved standardization, which makes the status of the production process in the entire supply chain system has become less important.
On January 20, an economist commented that in the game of global economy, apart from the production of goods, our distribution in the areas of commodity exchange, logistics, and finance was not ideal, and the manufacturing industry was a big one. Can not change the overall decline in the supply chain.
In the past 30 years, the main energy we spent was in the field of production. In all provinces, cities, and counties from east to west and from south to north, they are attracting investment, hoping to attract production companies, produce products, absorb labor, and benefit one economy. In order to compete for the manufacturing industry to settle in the local area, local governments at all levels will take care of and support the package of policies on land, finance, and taxation at the expense of resources and the environment. Local governments with neighboring locations and similar resources have secretly wrestled with investment attraction as a top priority.
On January 11, at the Sino-Foreign Logistics International Cooperation Summit 2008, an executive from Sinotrans Group said in a speech: "China is a big manufacturing country and a small supply chain country."
He said that today's competition is the supply chain competition. According to the comprehensive analysis, in the entire supply chain system of a certain commodity, the non-production cost has exceeded 80%. Among them, the logistics cost of goods accounts for more than 40%, and the time cost accounts for more than 90% of the entire supply chain.
Automobile manufacturers consider upgrading logistics supply chain as "assembly number"
Faced with this dilemma, automotive logistics companies cannot stand still. Since the pressure of upstream commercial vehicle manufacturers is inevitable, they should think about their own way and use various methods to increase profits. Shen Guokang pointed out that with the intensification of market competition, modern logistics companies should continue to expand their industries, business scale, and services in order to increase their competitiveness. They should shift from saving external expenses to controlling internal costs. Through logistics information systems and information-based solutions that focus on comprehensive resource integration, the company optimizes its internal structure and competes for its own competitiveness. Only in this way can the restrictions on upstream commercial vehicle manufacturers be alleviated.
Shen Guokang pointed out that in order to ease its own pressure, auto logistics companies can integrate their own resources through the information system, optimize their allocation, improve their core competitiveness, and thus reduce logistics costs and increase profits. The second is to count on domestic
Commercial vehicle manufacturers increase resource integration, increase industrial concentration, improve their extensive production model, and then increase production efficiency, and absorb pressure from raw material price increases. However, in the face of such rapid iron ore, it is unrealistic for auto logistics companies to wait for the leap in China's entire auto industry. Only by starting from itself can we relieve the pressure quickly and stand out in the city competition.
The famous economist Lang Xianping said: "The real difficulty of logistics is to find the soul of the convergence of the previous step and the next step. Let this logistics system make money for you."
Thus, today's logistics is not a single logistics in the manufacturing process of a certain commodity, but is based on "big logistics" in the integration of international supply chains. To control the manufacturing industry, or to strive to build and control the global supply chain centered on manufacturing, it is precisely the tens of thousands of Chinese manufacturing industries are facing the severe challenges of globalization.
The same is true for the automotive industry.
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