I found this article when I Googled China Power distribution and transmission
http://www.eeo.com.cn/ens/Industry/2010/09/01/179719.shtml it explains why the price of your stock is cut in half
Author got it wrong. It's about an inventory glut caused by global slowdown. To reduce inventory, manufacturers are marking prices down, putting the merchandise on special sale.
When inventories are reduced, prices will jump back up.
It's called the business cycle.
Have to wonder about the author with his mercantilist, nationalist slant.
China is state run, and they protect their industries, that they have the ability to compete in.
"It is implicitly understood that the National Development and Reform Commission allots the production and development of UHV equipment to domestic companies alone. Foreign manufacturers are only allowed to provide selected key technology."
Even if margins are cut, the huge smart grid build out that will occur, will increase revenue and profit. China is a low end manufacturer. Cast resin performers are ingenious, and an improvement, but technologically, they are low end, and a product that China certainly can compete in, even export.
Free trades brings the fair prices. It works for foreign companies but it never worked for Chinese companies. The foreign products always carry premium. The premium often are in the ranges of 20-80% higher for being foreign brand. Japanese and Germany alway sell their products at much higher premium. Most foreign owned companies operated in China will pay the premium just to stay away from Chinese products for better quality / service or whatever the intangible reasons. But that is not necessarily the case all the time. In other words, Chinese has learned to improve the quality and service. But just can't penetrate the foreign owned enterprises (FOE) operated in China. In fact, lots of foreign companies will buy Chinese products and repackaging them to sell under their own product name then sell back to China or outside world with huge margin. Its end results are better than manufacture their own. A famous German chemical company is known to buy Chinese chemicals and repackage them under its own name to rake in 200-300% profit. This is not fabricated fiction, I actually was aware of the deal. This is the first time I saw that foreign companies actually come to China and under sell the domestic companies. What that say is that there is no demand outside China and FOE has to lower the margin to gain market share in the only available market in China. It will kill Chinese company just as it said in the article that Chinese has the R/D to recover. Very intriguing to say the least. Chinese domestic needs will eventually get good quality products with decent or fair prices instead of being screwed over for years when choose to use foreign products in China. It is guaranteed that Chinese will buy foreign product instead of domestic product if the price is same or slight different. Chinese is not like Japanese or Korean they have no royalty to their country except for looking for good bargain price or best deal. Japanese and Korean on the other hands will buy domestic products even if they are craps and price are ridiculously high. It is funny to say that but it is all truth from my experience. What happen now is good for Chinese infrastructure needs, but Chinese company like JST will be doomed. JST will have to lower its price to be less than foreign products or sell at loss to win back the market share. By the way, it is not uncommon that Chinese will sell at loss to win the market shares or to drive the competitor to shut down to win big later. I am glad that I got out JST albeit at some loss.
Actually it doesn't refer to different transformers They may be built differently but the outcome is the same. As far as a little knowledge, I've been installing transformers for 38 years I have most likely forgot more then you'll ever know about them. Invest in what you know. here is a list of JST competitors I believe they are mentioned in the article. http://finance.yahoo.com/q/co?s=JST
Very enlightening. It's difficult to find resources that explain the competitive landscape in the electric transmission industry in China. Listening to the conference calls doesn't provide a complete picture of the market. Interesting that foreign producers are slashing prices. Hope JST can successfully transition to customized transformers and wind oriented transmission devices. Article didn't mention that silicon steel is likely being introduced at below fair market value (being dumped). Management said it was small-local producers that were forcing JST to reduce prices, not foreign-larger producers with superior economies of scale. Guess I still have some unresolved questions. JST hasn't preannounced crap earnings, so there is some reaon for optimism. The recent press release seems like an unremarkable event unless the subway authority is a new class of customer for JST.
I studied the article more carefully, reviewed some prior JST management statements regarding pricing competition and considered some of the public statements by GE's Immelt and others and concluded the article probably summarized the situation fairly well. However, I was troubled by the not-too-veiled attitude of "China has been gouged and screwed by western imperialists", which indicates it was written to placate Chinese interests more than anything else. Nonetheless, I believe that the energy industry landscape has become substantially more competitive as Chinese companies raise their standards and capabilities. I am continuing to hold my JST, but will be watching most closely JST's capability to develop international markets. If it shows no progress there, I will conclude that it is likely to continue to suffer market share erosion in China. The only validation I can get quickly of the quality of its products and service is whether they can export.
Chowder, thanks. Very enlightening article that puts the competitive picture into perspective. It likely explains better why ABB, Seimems, Ahlstrom, etc. are suffering, but also applies to JST. Thanks again.
JST is just now moving into production in its new, huge wind energy electronics plant in Shanghai. This morning, the International Energy Agency announced that Chinese demand for energy will rise over 75% over the next 25 years. It would appear that JST is making the correct move at a very opportune time.