Impact of the Depreciation of the USD to CNY Exchange Rate on the Wheel Balance Weight Market.
Buyer: Hey, hello! I have been following the situation in the automotive counterweight market recently and heard that the depreciation of the US dollar against the RMB has a Big impact on counterweight prices. Can you explain it to me?
Manufacturer: Of course! The Drops of the USD against the RMB do have some impact on counterweight prices. What aspects would you like to know about?
Buyer: First, I would like to know what are the two most important factors that affect wheel weight prices.
Manufacturer: The first and most important factor that affects counterweight prices is the price of STEEL. Steel is the most important raw material for tyre counterweights, accounting for over 70% of production costs.
Buyer: Why over 70%? What are car wheel balance weights made of?
Manufacturer: Automotive counterweight products are made up of iron, adhesive tape, and anti-corrosion coatings (galvanized or spray-coated). They are important tyre repair materials in the automotive aftermarket, used to balance the weight of the wheels, ensure stability and balance of the vehicle during operation, reduce tire wear, extend tire life, and provide a stable driving experience.
Buyer: In the past 10 years, as steel prices have risen, counterweight product prices in Europe and the Americas have also skyrocketed. For example, the popular iron adhesive tape counterweights, electroplated, blue tape, 100 pieces per box, 60 grams per strip. Before the increase in steel prices, their selling price could be as low as $5 per box, but with the increase in steel prices, the price gradually rose to $6, $6.5, $7, $7.5, and even reached a maximum of $8. Then, in the past two years, as steel prices have fallen, the price has dropped to around $6-7 per box.
Manufacturer: The second important factor that affects counterweight prices is the exchange rate between the US dollar and the CNY.
Buyer: Why does the exchange rate affect prices?
Manufacturer: Counterweight are low-profit products, mainly because they are not high-tech products and do not have obvious technological barriers. The Price Competition is very intense.
Buyer: In B2B business, the usual payment method is to confirm the order make a prepayment, and settle the balance before or after shipment. If the exchange rate fluctuates sharply, exchange rate losses will occur.
Manufacturer: It is precisely because of these two reasons that exchange rate fluctuations have a significant impact on the cost calculation of this product. For example, since 2023, the counterweight price has dropped from $8 to $6, not only because of the decrease in steel prices but also because the exchange rate has increased from 6.3 to 7.32.
Buyer: However, in early November this year, the sharp depreciation of the US dollar against the CNY raised concerns among Imp&Exp companies, especially for balance-weight manufacturers and exporters with small profit margins. In just 20 days, the exchange rate dropped from 6.32 to 7.11, first from 7.32 to 7.25, then rose to 7.27- 7.28, suddenly dropped to 7.12, and then rebounded to 7.14, and suddenly dropped to 7.11. In just 20 days, the exchange rate depreciated by nearly 4%!
This drastic exchange rate fluctuation has caused concerns among import and export companies, especially for automotive ADH wheel balance weights manufacturers and exporters with small profit margins.
wrote by Alice LV on Dec,5,2023
Thank you for reading.