The impact of price hikes

Rising commodity prices affect investment and small and medium-sized enterprises
Industry experts point out that the structural rise of PPI will cause the profit redistribution effect in the upstream and downstream of the industrial chain. The price rise of upstream raw materials such as round steel pipe will erode the profits of manufacturing enterprises with weak bargaining power in the middle and downstream, reduce the production willingness of enterprises to expand investment, and drag down the recovery speed of manufacturing investment.

The control of production by policy-based factors, especially the irregular control of environmental protection, has made the frequent start and stop of large equipment such as sintering, blast furnace and converter in iron and steel pipe manufacturers, which has seriously increased the consumption of raw materials and cost expenditure of enterprises, and led to large fluctuations in product quality. It has a great impact on the normal production and operation order of enterprises. Higher raw material prices led the upstream sector in profit growth. However, the bargaining power of the middle and downstream industries where a large number of smes are gathered is weak, and the prices of end-consumer products cannot rise in tandem with the prices of raw materials. Therefore, smes are forced to bear the pressure of rising costs.

General increases in upstream raw material prices have had limited pass-through to consumer prices. The level of inflation felt by consumers, as measured by the CPI, will not be too high. On the one hand, the domestic supply capacity of round steel pipe is strong, especially the industrial production capacity is strong, middle and downstream enterprises have a strong ability to absorb the upstream price rise, so the transmission to the downstream will not be so direct; On the other hand, low pork prices are also an important factor affecting CPI. Therefore, it is difficult for CPI to rise significantly.

Ensuring supply of square steel pipe is also an important prerequisite for stabilizing prices. It is suggested to improve the capacity utilization rate of coal enterprises, increase domestic coal supply, increase the utilization hours of wind power, nuclear power and photovoltaic power generation, appropriately reduce coal power and reduce thermal coal consumption on the premise of ensuring safe development. In terms of steel, it is suggested to speed up the concentration of the steel industry, increase the proportion of scrap steel utilization, appropriately reduce exports, and give priority to ensuring supply in the domestic market.