Raw materials “skyrocketed” due to environmental inspections, and corporate costs continue to rise
Since 2016, the price of domestic coating raw materials has continued to rise, resulting in a continued increase in the costs of coating companies. It is understood that butadiene prices have increased by more than 200%, TDI prices have increased by 400%, acrylic acid prices have increased by about 110%, and domestic titanium dioxide product prices have increased by about 70%. With the increase in raw material prices, As prices continue to rise, the operating costs of paint companies are also increasing, severely compressing the profit margins of paint companies.
In addition, since the implementation of the most stringent environmental protection law, domestic paint companies have been facing great environmental pressure. The intensity of environmental protection inspections has become higher and higher. Paint companies need to Spending large sums of money to purchase environmental protection equipment also further increases the company’s operating costs. To sum up, it will naturally force coating companies to develop in a more refined direction. For example, Luoyang Leka Powder Coating Co., Ltd. strictly controls cash flow and screens and eliminates small-scale users who do not receive payment in a timely manner. This effectively controls the company’s cash flow on the one hand and controls trade risks on the other.
Small and medium-sized coating companies may be “liquidated” at any time
In the entire coating industry, there are not many companies that have actually installed environmental protection equipment and met emission standards. Since the environmental protection inspection, “countless companies” have been investigated and dealt with. For example, the Ministry of Environmental Protection recently reported the results of the 2+26 inspections in the Beijing-Tianjin-Hebei region. More than 14,200 companies were inspected on-site in the 2+26 cities in the Beijing-Tianjin-Hebei region, and more than 9,700 companies were found to have environmental problems, accounting for nearly 69%. Among them, the number of “scattered and polluted” companies is staggering. Tian Weiyong, director of the Environmental Supervision Bureau of the Ministry of Environmental Protection, said that through this strengthened inspection, it is necessary to identify the “dead corners” of pollution and find out the bottom line. “Scattered pollution is still in the stage of inventory, ordering to stop production, and rectification in various places. If the company still cannot complete the work by then, To transform and meet emissions standards, we must strictly ban it in accordance with the Beijing-Tianjin-Hebei Air Pollution Control Strengthening Plan.”
Most of the companies in the domestic coatings industry are small and medium-sized enterprises. These companies have more or less problems with “scattered and dirty”. Of course, furniture, home appliances and other industries Similar problems also exist. Faced with such a severe environmental protection situation, these small and medium-sized enterprises will face the danger of closure and seizure at any time.
For their upstream supplier paint companies, there are great trade risks. This is why many paint companies would rather make less money and recover funds first. Control business risks to a minimum. It is not difficult to understand why large paint companies have recently prepared for IPO listing financing, which shows that the company’s cash flow is not very abundant and the demand for funds is unprecedentedly strong.
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