Under the background of declining macroeconomic growth since 2012, the demand for downstream electricity has been relatively weak, and the country’s investment in power grids has also been weakened. The investment in power grid construction for the whole year was 369.3 billion yuan, which was basically the same as that of the previous year, which was significantly lower than that of “Electricity The annual investment plan of 610 billion yuan is planned for the "12th Five-Year Plan" research report of the industry. At present, China's economy is undergoing a structural adjustment, and it is expected that the scale of power grid investment will not be able to return to a faster growth level in the next few years.
The industry concentration of power transmission and distribution equipment industry is relatively low. According to the statistics of China Electrical Equipment Industry Association, there are currently 6,818 enterprises in the power transmission and distribution equipment industry. From the structural point of view, ultra-high pressure and ultra-high voltage products have higher production costs and scale of business investment. Large and high technical content has caused the sub-industry's high barriers to entry and the market is relatively concentrated; while low- and medium-voltage products have low technological content, strong product substitution, and low barriers to entry, there are many sub-industries and markets. The degree of concentration is low, and most companies rely on local power supply bureaus to conduct business.
However, in recent years, the country has continuously adjusted its industrial policies. On the one hand, it has carried out the separation of the tertiary industry from all power supply bureaus, and has completely eliminated the escrow system of county-level power supply companies. On the other hand, a centralized bidding system has gradually been implemented within the power system. These measures will make many small Enterprises and local companies have gradually withdrawn from the market competition sequence, and the market consolidation has been continuously strengthened. It also provides ample room for development for some powerful companies, but the implementation of the centralized bidding system will also increase the price competition among enterprises. The profitability of an enterprise may have a certain influence.
The raw materials used in the production of power transmission and distribution and control equipment manufacturers are steel, copper, aluminum and other metals. Since 2012, with the relatively weak global economic growth, the prices of non-ferrous metals and steel products have basically shown a downward trend.
The drop in raw material prices has eased the pressure on companies to a certain extent, but recently the advanced economies including Japan and the European Union as well as emerging market countries have successively launched quantitative easing policies, which will aggravate the problem of excess liquidity in the world and further reduce the The risk of metal and steel price fluctuations increases; in addition, the continuous increase in labor costs will also increase the company’s cost pressure to a certain extent.
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