Chengdu aims to lift output as costs climb
CHINA'S Chengdu Telecommunications Cable plans to cope with the rising costs of its main raw material, copper, by lifting output capacity and raising prices.
Deputy managing director Du Liangheng expected the cost of copper to rise this year, with the average price surpassing last year's figure of 25,000 yuan (about HK$23,157.50) a tonne.
Copper accounts for about half of the firm's raw material consumption, making it vulnerable to movements in copper prices, according to the latest report by Credit Lyonnais Securities Asia.
To compensate for the soaring cost of copper, Mr Du said Chengdu Telecom raised prices of its copper cables by less than 10 per cent, in January.
He said the price of optical fibre cables would remain stable this year.
Although the firm raised the prices of its copper cables, it cannot afford to raise prices too much because of competition in the copper cables market.
Mr Du said Chengdu Telecom would continue to expand production capacity so that economies of scale would help it to offset higher production costs.
This year, the firm plans to make more than four million pair kilometres (pkm) of copper cable, up from last year's 3.4 million pkm.
Production of television cables and optical fibre cables will double to 10,000 km and 150,000 km.
'Last year, a lot of small enterprises could not afford the rising copper prices,' Mr Du said.
'As for Chengdu Telecom, we transferred some of the cost to customers and we bore some of the them.' But it provided Chengdu Telecom opportunities to acquire small enterprises, as the company wanted to further strengthen its position as China's largest maker of copper cables.
He expected the acquisitions to be finalised in the second half of the year.
Mr Du said the firm's accounts receivables level had been improving since April.
He attributed the increase in accounts receivables in the first quarter to the fact that the Ministry of Posts and Telecommunications had yet to allocate development funding to telecommunications bureaus.
He said the situation was temporary, but refused to provide a figure.
The Credit Lyonnais report, estimated Chengdu Telecom's accounts receivables to be 160 million yuan at the end of last year and 191 million yuan at the end of this year.