China Zhongwang Holdings Limited, with a focus on the local and high end market, has the answer. As of the 1H this year, Zhongwang posted an increase of 58% of revenue from the domestic market as compared to that of the previous year. China market has become the Company’s revenue and profit drivers. 

 

China aluminium extrusion enterprises need to put more efforts to cultivate the domestic high-end market. A public affairs officer fromZhongwang told National Business Daily that the Company has spent 7 years and invested billions of yuan on its strategic switch to industrial aluminium extrusions business. 

 

When interviewed with National Business Daily, Lu Changqing, Executive Director and Vice President, said, “apart from infrastructure and financial investment, the developments of aluminium extrusions and high end industrial aluminium extrusions in particular, requires core technology, talent acquisition and certification from downstream market. It takes time. Money alone is not the only solution.”

 

Analysts held the view that China being a sizeable market for industrial aluminium extrusions, domestic enterprises could tap the China market when faced the pressures from overseas markets. 

 

“As seen from orders hereto, Zhongwang has not been affected. The orders placed with Zhongwang are still robust.” The Company’s sales target this year is 400,000 tonnes and they center on transportation, machinery and equipment and power engineering, according to the Company’s public affairs official on Sept 6. 

 

Zhongwang has now focused on the domestic and high end markets. Subject to antidumping and countervailing measures in such countries as Canada, Australia and the U.S., China’s aluminium extrusions industry has found itself struggling with exports. 

 

According to Lixun, an analyst from myyouse.com, aluminium extrusions companies see their costs increasing and profits decreasing. “Export prices are settled at LME prices. Increasing raw materials costs has sent the price of ingots high. On the other hand, overseas ingot price has decreased which in turn lowers quotation offers of overseas aluminium extrusion manufacturers. Aluminium extrusions export is thus affected,” said Lixun. 

 

He continued, decreasing profits from exports negatively affect the aggressiveness of aluminium processing companies.

 

What’s more, the uncertain outlook of the global economy also lowers the sentiment of overseas buyers.    

 

Rumor has it that the Ministry of Finance is brewing to lower the tax rebate of certain commodities. Though the policy of lowering the tax rebate of 4% has not yet announced, the worries have clouded aluminium companies. “It is reported that export tax rebate of certain aluminium extrusions will be decreased from 13% to 9%, an equivalent to an increase of export costs of $170 per tonnes. The policy further affects middle and low end companies,” an aluminium analyst said on the condition of anonymity.

 

“The halt of high-speed rail train projects also directly hit the domestic aluminium market. Production and export both are on a downward trend. According to China Non-ferrous Metal Industry figures previously released, aluminium production in July was 2011.5 kilotonnes, a decrease of 8.8% than that of the previous month. Production volume in August is likely to drop below the 2 million tonnes and the export will be declined,” said Lixun. 

 

 

Faced with soaring prices of coal, electricity and electrolytic aluminium, aluminium companies need to switch from construction aluminium to industrial aluminium extrusion. 

 

“In the 1H, Zhongwang continued to expand the capacity of large section aluminium extrusions. Another strategy was to further aluminium extrusions deep processing technology. First, it could continue to expand high end products and deep processing products export business. Second, industrial aluminium extrusion products require high technology which could further enhance product gross margin,” a Zhongwang public affairs official said. 

 

Development of deep processing technology has become part of Zhongwang’s business strategies. As early as 2003, the Company started to switch from construction aluminium extrusions to industrial aluminium extrusions and currently it is the second largest industrial aluminium developer and manufacturer. This August, the Company announced in Hong Kong that it would tap high ended flat rolled business which shares plenty of synergies with its industrial aluminium products. The annual production capacity will reach 3 million tonnes, arousing awareness among global industrial peers. Thus far, Zhongwang exports industrial aluminium extrusion deep processing products to the U.S. market. 

 

According to the Company’s public affairs official, the world as well as China faces a bullish aluminium extrusions market. Future trends and development are mainly focused on transportation, machinery and equipment and electrical equipment. It is predicted that the annual global aluminium extrusion usage from downstream business will reach 8,720 kilotonnes by 2015 whereas China 5,430 kilotonnes. 

 

Not all aluminium extrusion companies are able to share a slice of the market. High ended aluminium extrusion products, be they used in railway and transportation, aviation and aerospace or auto bodies, require complex alloy ingredients and high precision. “Necessary equipment and capital investments aside, high ended aluminium extrusion products require core technology research, talents, downstream market’s certification and endorsement among other factors. It takes time apart from money.” Lu Changqing, Zhongwang’s executive director and vice president said. 

 

It took Zhongwang 7 years and invested billions of yuan to realize the transformation. 

 

China market itself is sizeable. Faced with export pressures, aluminium extrusion companies in China should tap the domestic market. In the 1H this year, revenue from the China market posted an increase of 58% than that of the previous year for Zhongwang. China market has become Zhongwang’s major revenue and profit sources.