The implication of the “China Moment” ofindustrial aluminium extrusion products istwo-fold. On the one hand, Chinese industrial aluminium extrusion product companies have already emerged as the most competitive in the world. On the other hand, the China’s industrial aluminium extrusion market is growing rapidly, offering immense development potential. Chinese manufacturers have to maintain their core competence in high-value sectors for a smooth transition. Having ordered 21 sets of large-scale extrusion presses of over 75MN scheduled for installation in two years, Liaoning Zhongwang Group, originating from northeastern China, will become the world’s largest industrial aluminium extrusion product developer and manufacturer with the highest number of large-scale advanced equipment and largest production capacity. Apparently, the “China Moment” of industrial aluminium extrusion products has already arrived.
Chinese Manufacturers Competing in the Global Arena
Thelatest report issued by the American consultancycompany IHS shows that Chinese products account for 19.8% of the world’s total output, slightly higher than the 19.4% of the United States.
The above phenomenon is even more obvious in the industrial aluminium extrusion industry. Zhongwang Group based in Liaoning in northeastern China continues to be the largest industrial aluminium extrusion product manufacturer in China and the second largest in the world. With 21 sets of world’s leading large-scale extrusion presses of over 75MN in the pipeline, which are ready for full operations in the coming two years, Zhongwang will undoubtedly becomethe world’s largest industrial aluminium extrusion product manufacturer with the largest numberof large-scale advanced equipment.The company will be well ahead of its major competitors in terms of production capacity.
The “China Moment” of industrial aluminium extrusion products has come.
China’s Influence in the High-Value Sectors
Chinese manufacturing must leave the era of “purchasing an aircraft by selling 800 million shirts”. This has to be backed up by solid expertise.
Famous economist Mr. LangHsien Pingwas ofthe opinion that the Chinese manufacturing sector has to exert its influences in the high-value sectors so that Chinese products will be in a better position to compete in the world.
The general business process for the manufacturing industry can be divided into material sourcing, product design and production, logistics, order processing and sales, i.e. a supply chain workflow. In the industrial aluminium extrusion product sector, the cost is usually calculated by adding the processing fee to the aluminium cost; therefore “product design and production” are the key stages in the supply chain. Research and development, smelting and casting, die production and extrusion pressing are the “four-in-one” key production processes of industrial aluminium extrusion products, andamong them, aluminium extrusion equipment is considered one of the major competitive edges of industrial aluminium extrusion product companies.
The Executive Director and Vice President of Zhongwang, Mr. Lu Changqing, believesthat the Chinese industrial aluminium extrusion product company is a risingstarcompared to its international peers. Zhongwang’s foresighted strategic transformation and continuous investment in production equipment, research and development for high value-added production sessions have made it the world’s second largest industrial aluminium extrusion product manufacturer and the biggest in Asia.
Good tools are a prerequisite to the successful execution of a job. In 2002, while most of the aluminium extrusion product manufacturers in China were still using extrusion presses of around 10MN to produce construction aluminium extrusion products, Zhongwang ordered the world’s largest 125MN aluminium alloy dual action extrusion press, which aroused the attention of the world. The above extrusion press is still being regarded as a mega one in the industry and is able to produce aluminium extrusion products with huge cross-section at various sizes. The output of the large-scale extrusion presses isnow widely used in railways, vessels, aviation and aerospace; which have become the pipelines of Zhongwang’s business in high-end large cross-section industrial aluminium extrusion products.
The various large-scale aluminium extrusion presses introduced by Zhongwang enabled the rapid expansion of the company. In the end of 2009, Zhongwang surpassed Norsk Hydro and Alcoa and became the world’s second largest industrial aluminium extrusion product manufacturer following Sapa.
According to statistics, there are less than 10 sets of extrusion presses of over 75MN in the world (outside China). In the coming two years, Zhongwang will gradually install 21 setsof large-scale extrusion press of over 75MN for commercial production, 4 of which are 125MN large-scale extrusion presses. In contrast to the relatively small-scale equipment set-up in the 60’s or the 70’s by the world’s key players in the industrial aluminium extrusion industry, Zhongwang’s competitive advantage in the future is emerging. At present, large cross-section and high precision industrial aluminium extrusion products are being developed in light of the light-weight and low carbon emission development of the modern transportation, machinery equipment and electric power engineering sectors. Capitalizing on its foresighted judgment and resourceful foundation formed over the years, Zhongwang rides on the wave of employing large-scale aluminium extrusion presses and has become a pioneer in the Chinese industrial aluminium extrusion product industry.
In addition, according to market sources, Zhongwang plans to break the world record of aluminium extrusion press capacity by introducing two 225MN extrusion presses and a 300MN extrusion press to form aone-of-a-kind mega productioncapacity in the industrial aluminium extrusion product industry.
As revealed by Zhongwang Group, the company plans to increase its production capacity to 1 million tons in 2014 and 1.2 million tons in 2015 in order to become the world’s largest industrial aluminium extrusion product manufacturer.
There are strict requirements for the production of industrial aluminium extrusion products. Manufacturers are required to tailor-make products with various specifications for customers. Based on the structural, heat tolerance and hardness requirements of the industrial aluminium extrusion profiles to be produced, manufactures have to carry out smelting and casting, die development and product extrusion. During the above process, Zhongang relies solely on its own equipment and technology. Alongside the rapidgrowth in the number of industrial aluminium extrusion products, Zhongwang has also doubled its number of research and development equipment for producing large-scale and high precision dies.
To meet the growing product demand on aluminium alloy bars of various specifications and size, Zhongwang introduced the world-pioneering Wagstaffsmelting system in order to further improve its smelting quality.
With all advanced equipment ready, Zhongwang will be able to unleash its unique strength. In Zhongwang’s production base in Liaoning, aluminium extrusion products for high-speed rails’body and metropolitan rails’conductors designated for the “Tianjin metropolitan rail project” and “Chongqing metropolitan rail project” were found.
Market Strategy: Befriend a Distant State while Attacking a Neighbor
The year 2010 was an uncommon year for the Chinese industrial aluminium extrusion products companies in which Zhongwang had an especially profound experience.
During April 2010, the United States commenced an investigation into Chinese aluminium extrusion product manufacturers pursuant to their anti-dumping and countervailing regulations. Althoughthe investigation seriously hindered the exports of Chinese aluminium extrusion product manufacturers including Zhongwang, it did not affect Zhongwang’s defined development strategy in the industrial aluminium extrusion product market.
An interesting phenomenon was found when looking into Zhongwang’s 2010 annual report – Zhongwang’s exports to the United States accounted for 29.1% of the total revenue in 2010, representing a year-on-year decrease of 11.7% point, while the company’s exports to Australia increased by 11.8% point year-on-year,reaching 14.9% of the totalrevenue, showing that the loss was compensated by the gain in other markets. The revenue of the Chinese domestic market was stabilized at 55.6% representing a major part of the revenue.
Expanding national demand, transformation of economic growth, improving industrial structure are the fundamental means in response to China’s economic crisis. In view of the above, urbanization in villages and town are in faster pace with larger investment on national infrastructures particularly on transportation and new energy which promotes the applications of industrial aluminium extrusion products.
According to Zhongwang, it is common for a company to experience market dynamic and risk during its development. The anti-dumping and countervailing investigation may not be something negative for Zhongwang’s long term development as it encourages the company to adjust its pace in developing higher-end products and the global markets. Meanwhile, Zhongwang has strengthened its efforts in developing the Chinese domestic market. Leveraging the capability of Zhongwang, the company has received orders from ChangchunSubway, Harbin Subway and Chengdu Subway for several large-scale high-speed rails projects.
Mr. Lu Changqing believed that in 2011, the revenue of the Chinese domestic market will increase further to over 80% of the company’s total revenue with the potential to grow even further. The company’s sales will focus on the Chinese domestic market supplemented with exports.
Stepping into High Value-added Aluminium Flat Rolled Product Business
According to industrial sources and related research institute, Zhongwang is going to roll out the high value-added aluminium flat rolled product business. It is believed that the company’s move will arouse the attention of the global industrial aluminium processing industry and will change the market landscape of the global aluminium flat rolled product industry once again.
Zhongwang highly values the project and it is said that planning has been undergoingfor a year. The company engaged the Boston Consulting Group in 2010 to conduct for 8months aresearch on the global and Chinese high value-added aluminium flat rolled product market. The research findings are in line with the forecast of Zhongwang on the high value-added aluminium flat rolled product project.
In comparison to the world market, China’s aluminium flat rolled products are generally of medium-to-low end, 600 kilotons of high value-added aluminium flat rolled products consumed by China every year have relied on imports. While most of the Chinese companies which are interested in the business have been stopped by the huge investment, Zhongwang is stepping into the arena with confidence, as well as close to RMB20 billion cash in hand.
According to related research institute, Zhongwang is going to be the first company tointroduce the whole series of world’s leading aluminium flat rolled product production lines and equipment in China. The designed capacity will be as high as 3 million tons, and construction will begin this year. When the whole project is in operation, it is believed that Zhongwang will not only reshape the competition landscape of the global market of aluminium flat rolled products but will also become a top player in it, and so will its industrial aluminium extrusion products.
As suggested in the latest research report by Hong Kong Phillip Securities, investors are recommended to follow Zhongwang in long term. The institute believes that the company will become a rarely-seen integrated high value-added aluminium processing manufacturer.
“The implication of the “China Moment” ofindustrial aluminium extrusion products istwo-fold. On the one hand, Chinese industrial aluminium extrusion product companies have already emerged as the most competitive in the world. On the other hand, the China’s industrial aluminium extrusion market is growing rapidly, offering immense development potential. Chinese manufacturers have to maintain their core competence in high-value sectors for a smooth transition.” said Lu Changqing.
