Xi'an Metro Cable Scandal to Accelerate Sector Shuffling, SMM Reports

SHANGHAI, Apr. 26 (SMM) – A nationwide inspection of companies producing electric wire&cable came in the wake of reports on substandard cables used in Xi'an subway sparked. Recently, China's General Administration of Quality Supervision, Inspection and Quarantine issued the Work Plan of Supervision and Inspection on Electric Wire&Cable Producers. 

SMM survey finds that some domestic electric wire&cable producers had started self-checks, and disassembled faulty cables and sold them to rod makers, and orders at rod producers, which use copper scrap as raw material, were down. Domestic electric wire&cable producers said the nationwide inspection restricted sales of substandard cables, and some small and medium cable producers suspended production as a result. But, this should be a short-term turbulence after outburst of the scandal. 

Vice president of one domestic electric cable producer said most of cables in domestic market meet standards, but some substandard goods do exist as a small number of cable producers manufactured substandard ones in the face of higher costs. It is now the buyer's market, and buyers could purchase goods at lower prices, and this, coupled with unreasonable payment terms, led to the phenomenon. 

Cai Hao, vice general manager of Far East Materials Exchange, said the inspection will be good to the domestic cable market as it will provide a chance for improving overall quality of cables, and will also phase out those disqualified producers of the market. The inspection will accelerate the shuffling of the sector. 

Vice president of one domestic electric cable producer mentioned above added that buying costs for electric wire&cable will be rising after Aokai's problematic cables and following inspections, and sellers will be also wary of sales. It is learnt that half of cable producers in Yangtze River Delta region and north China are offline, and producers in operation are not running at full capacities. But, orders at large producers, which enjoy ample liquidity, high-quality goods and a full range of goods specifications, are up, and those at provinces' leading cable producers are also decent. Based on current condition, copper market is not estimated to see volatile changes, with prices to mainly stay at current trading range.  

An online tip-off revealed in mid March that electric cables provided by Aokai Cable for Xi'an subway line 3 were problematic, which used shoddy and inferior materials to produce cables, to warn of massive safety risks. On Mar. 20, Xi'an government announced at a news conference that all five samples of the cables from Aokai Cable were substandard after tested by Bureau of Quality and Technical Supervision. 

After the exposure, Chengdu, Hefei and Qingdao announced to launch investigations into cables used in its rail transport projects, and replace faulty ones. A nation-wide self-examinations and safety checks by supervisors were carried out at cable producers. 

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