The following is the [XGNews]: 9.2 billion orders landed! “Volume and price rise” of China Mobile’s centralized procurement of general cable in 2021 recommended by xgapn.com.
News on October 12 (shuiyi) today, China Mobile announced the bid winning candidates for the centralized procurement of ordinary optical cables from 2021 to 2022, which is eagerly awaited by the optical fiber and cable industry. Finally, 14 manufacturers such as Changfei, Futong, Hengtong, Zhongtian and Fenghuo were shortlisted.
It is roughly estimated that the final average transaction price of the optical cable is more than 60 yuan / core km, compared with about 40 yuan / core km last year, an increase of more than 50%, and began to return to the level in 2019. The “V” reversal trend is obvious. It can be said that this year, China Mobile’s centralized procurement of common cables presents a situation of both volume and price, which undoubtedly injects a “booster” into the optical fiber and cable industry.
It is worth mentioning that due to the sharp rise in the price of raw materials, optical fiber and cable enterprises have been under great pressure and generally suffered losses in recent years. In order to ensure the sound development of the industry, China Mobile has also fine tuned the bidding rules. After this centralized procurement, the price rise covers the rise of raw materials, and it is expected that optical fiber and cable enterprises can make a small profit. This bidding method not only ensures moderate competition, but also ensures the supply of subsequent 5g construction, which meets the trend requirements of the central government on procurement bidding and the requirements of moderately advanced construction of communication infrastructure.
V-shaped price reversal
With the accelerated development of 5g and gigabit optical networks and “double Gigabit”, optical fiber and cable, as the most important infrastructure, operators’ demand for it has further increased. The scale of China Mobile’s centralized purchase has increased by 20% compared with 2020 and 36% compared with 2019, which is the best example. According to the previous bidding announcement, the estimated scale of the centralized procurement of ordinary optical cables is 4.4705 million skin kilometers, equivalent to 143.2 million core kilometers, and the maximum bidding price is 9858.8667 million yuan (excluding tax).
If the increase in procurement scale is expected, what about the price? After all, in the past two or three years, operators have been inseparable from the topic of “price” every time they collect optical cables. Since the second half of 2018, the optical fiber and cable industry has entered a period of adjustment, and the demand of telecom operators is less than expected. Superimposed on the release of production capacity expansion in the early stage, the relationship between supply and demand in the industry has been directly reversed, and the price of centralized optical fiber and cable procurement has fallen step by step.
In such a short time, it is almost difficult for many optical fiber manufacturers to reduce costs through the improvement of manufacturing process and management efficiency. At the same time, it is more difficult to digest under the rapid growth of the prices of bulk raw materials and main raw materials of optical fiber and optical cable, and even the situation that the more winning bids, the more losses.
Therefore, since China Mobile launched the centralized purchase of ordinary optical cables last month, the industry has also been discussing the trend of centralized purchase prices, including the well-known analysis organization CRU and many brokerage institutions. It is generally believed that the price of optical cables has entered the stabilization and recovery stage after the bottom.
This view is also confirmed by the bidding quotations of the final 14 bid winning candidates. After a half cut in 2019 and a further decline in 2020, the centralized purchase price of ordinary optical cables of China Mobile has rebounded to the level of 2019 again this year, showing a “V” reversal.
Meanwhile, Tianfeng Securities believes that a new round of high traffic growth cycle driven by 5g, cloud computing, Internet of things and AI will drive a new round of prosperity in optical fiber demand. In addition, the previous decline in prices led to the contraction and withdrawal of some smooth rod production capacity. The release of new domestic smooth rod production capacity in the last round is coming to an end, while the demand continues to grow rapidly, and the marginal supply-demand pattern is expected to continue to improve.
Rational competition wins the future
In fact, after nearly fierce price competition in recent years, all parties in the industry are actively calling for rational competition. As the purchaser, China Mobile also responded in this centralized procurement to guide the orderly competition and healthy development of the optical fiber and cable industry.
Since the operators started public bidding, the bidding price is the most important reference index, which determines the ownership of the bid winner to a certain extent. This is also an important reason why the competition for centralized procurement of ordinary optical cables in previous years is so fierce. According to insiders, China Mobile has made important changes in bid evaluation methods this year. The price score has decreased from 50% to 40% in the previous two years. At the same time, it has introduced the downward guiding middle price method to guide manufacturers to make rational quotations; The proportion of technical score increased from 20% to 30%, more concerned about the quality of products.
In addition, since the end of last year, the prices of main raw materials of optical fiber and cable have continued to rise, resulting in the high cost of finished optical fiber and cable products, which is undoubtedly worse for manufacturers. Therefore, China Mobile also introduced the price linkage scheme for ordinary optical cables this time. When the price rise of raw materials exceeds the limited range value, the product price linkage mechanism will be triggered, and the bid winner can increase the product price. To a certain extent, this can enable the bid winning enterprises to avoid the risks brought by the rise in the price of raw materials, and is also conducive to the completion of the performance delivery of products.
All the above have laid a foundation for the rational competition of various manufacturers in this centralized procurement, and also released a positive signal for the benign development of the whole optical fiber and cable industry.
Cru pointed out that at present, the global optical fiber and cable market has improved and has fully entered the post epidemic recovery stage. Especially in overseas markets, stimulated by the epidemic, the digitization process is further accelerated, countries’ investment in communication network infrastructure is accelerated, and the demand for optical fiber and cable continues to grow. Cru predicts that the global optical cable demand in the first half of 2021 will increase by 11.1% compared with the same period last year; By 2025, the global demand for optical cables will exceed 600 million core kilometers.
By abandoning disorderly price competition, manufacturers upstream and downstream of the whole industrial chain can have more energy to compete for technology accumulation, process accumulation, customer accumulation and cost control, so as to improve the overall level of the domestic optical fiber and cable industry and lay a foundation for competition with international giants. In this way, we can concentrate on the broader overseas market on the basis of doing a good job in the domestic market.
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