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China's aluminum processing industry development path selection in the context of trade war

July 13, 2019

From 2017, the United States launched a hearing investigation into China's exports of aluminum products, to a few other countries began hearing, investigation, and the frequency of hearing investigation increased, aluminum processing industry has become China's non-ferrous metals industry most directly in the face of trade disputes. It is an undeniable fact that this long-term, repeated use of customs duties and other means of interference, China's aluminum processing industry inevitably has an impact.


According to data released jointly by China Nonferrous Metals Processing Industry Association and Beijing Antaico Information Co., Ltd., in 2018, the output of "China Aluminum Processing Materials Integrated" was 39.7 million tons, an increase of 3.9% over the previous year. it is 35.27 million tons. Aluminum production growth decreased by 4.6 percentage points compared with the previous year, the industry from the 21st century continued to develop at a high speed, suddenly entered the low-speed development stage.


In addition to the obvious external impact, the industry's development of the inherent motivation is insufficient, but also need to pay attention to and need to be resolved. According to the National Bureau of Statistics and the Nonferrous Association, China's aluminum processing industry achieved revenue of 893.1 billion yuan in 2018, an increase of 3.8% over the previous year; The aluminum processing industry basically earns a relatively fixed processing fee profit model, and the benefit is relatively small by the fluctuation of aluminum price. In the past two years, the industry's average sales profit margin has fallen sharply, partly reflecting the industry's overcapacity and homogenization competition has been very serious.


Overall, China's aluminum processing industry difficulties should not be underestimated, but confidence is more unshakable, more energy can not relax, industrial development is still in an important period of strategic opportunity!


The foundation and advantages of industrial development still have


China's aluminum processing industry is relatively concentrated. According to the National Bureau of Statistics and the Nonferrous Association data, in 2018 China's aluminum production of the top ten provinces and cities: Henan, Shandong, Guangdong, Jiangsu, Chongqing, Zhejiang, Guangxi, Inner Mongolia, Xinjiang and Fujian aluminum production accounted for 76.4% of the country's total output. Guangdong South China Sea, Henan Gongyi, Shandong Binzhou, Shandong Linyi, Shandong Longkou, Hubei Daye, Liaoning Dashibridge, Anhui Luxi, Guangxi Baixian, as well as Jiangsu, Zhejiang and Shanghai regions formed a number of different scale, each with its own characteristics of a number of aluminum processing industry clusters.


Increased scientific and technological innovation capabilities. The whole industry has now built a national identification of enterprise technology center 19, of which 17 aluminum processing enterprises. Chinalco Group, Nanshan Aluminum, Liaoning Zhongwang, Guangdong Xingfa, Guangdong Feng Aluminum, Yuefeng Aluminum Group and other state-owned and private aluminum processing leading enterprises have established enterprise research institutes. Industrial technology innovation alliance, academician workstation, post-doctoral research workstation, national recognition laboratory and other innovative platforms are increasingly popular. Aluminum processing material standards to meet the needs of industrial development, the overall reach the international level, has been recognized and adopted by many countries in the world. As of 2018, the number of patent applications in the industry reached 31,023, of which 12,928 were patented. "High-performance large-size complex cross-sectional aluminum alloy profile extrusion forming and application technology" "12,000 tons of aviation aluminum alloy thick plate tension stretching equipment development and application" "high-performance aluminum alloy overhead wire materials and applications" and other projects in recent years won the second prize of national science and technology. A number of other achievements won the China Nonferrous Metals Industry Science and Technology Award. High-end ingots and precision profiles, high-strength aluminum alloy processing materials, lithium-ion power battery aluminum foil, aviation thick plate, automotive body plate, aluminum alloy oil drill pipe and other high-tech and high value-added products continue to make breakthroughs.


Aluminum processing industry chain is complete, complete product variety, reasonable structure. So far, China has established from aluminum and aluminum alloy smelting, casting to mold design and manufacturing, aluminum and aluminum alloy extrusion, rolling, forging, aluminum surface treatment, to deep processing of the complete industrial chain. With aluminum processing supporting equipment, accessories industry has been developed by leaps and bounds; Aluminum extrusion material is the largest, the plate belt is second, aluminum foil third, forming a suitable for China's national conditions of the industrial structure, different from the United States, Japan and other Western countries, the product structure is reasonable.


Technology and equipment level into the international advanced ranks. Aluminum profiles, aluminum strips and aluminum foil and other large-scale products of increasingly mature production technology, production efficiency and product quality continue to improve, products gradually break through the occupation of the international market; Aluminum alloy oil drill pipe and other production, the world's leading aluminum processing equipment, China not only have imports, but also the largest number of the world, the most comprehensive varieties, domestic aluminum processing equipment has made considerable progress, greatly narrowing the gap with the international advanced aluminum processing equipment.


Resilience to external risks and enhanced international standing


Aluminum consumption is mainly domestic, in various fields have been widely used, domestic consumption accounted for nearly 90% of China's aluminum production (excluding aluminum foil blanks of repeated statistics), for China's aluminum processing industry to provide a strong domestic market support.


Aluminum processing main equipment and supporting equipment can be produced independently. A variety of aluminum production technology in a comprehensive grasp, the industrial chain is complete.

From the proportion of production: in 2018, China's aluminum production accounted for more than half of the world's total output, up to about 55%. From the point of view of aluminum exports: China's aluminum exports increased from 130,000 tons in 2000 to 5.21 million tons in 2018, accounting for about 20% of the world, export destination countries and regions more than 200. From the leading enterprises: China has not only formed a million tons of integrated aluminum processing leading enterprises represented by Chinalco Group, Nanshan Aluminum, Liaoning Zhongwang, etc., but also formed a number of leading enterprises with international influence in the market segment, such as 2018 Mingtai Aluminum aluminum strip production reached 770,000 tons, into the world's first square Dingsheng new material aluminum foil production reached 500,000 tons, the world's first, Liaoning Zhongwang aluminum extrusion production reached 600,000 tons, Asia's largest, the world's second largest, Guangdong Xingfa and Feng aluminum construction aluminum sheet production of more than 500,000 tons, the world's leading, Nanshan aluminum can production of about 500,000 tons, into the world's top three.

Trade war has limited impact but cannot be ignored


Despite the increasingly serious trade protection, China's aluminum exports in 2018 against the trend of significant growth, the total annual export of aluminum 5.21 million tons, an increase of 22.8% over the previous year, of which, aluminum extrusion exports 970,000 tons, accounting for 18.6%, an increase of 16.4% over the previous year; An increase of 34.6 per cent over the previous year, while aluminum foil exports amounted to 1.29 million tons, or 24.7 per cent, an increase of 10.6 per cent over the previous year. Since 2019, aluminum exports have continued to grow, with 1.71 million tons of aluminum exports in the first four months, up 11.2% year-on-year, but exports to the United States are down 52.39 percent year-on-year. In 2018, China's total exports of aluminum to the United States 340,000 tons, accounting for 6.5% of China's total aluminum exports, accounting for 0.86% of China's annual aluminum production, of which less than 10,000 tons of aluminum profiles, 247,000 tons of aluminum strip, aluminum foil 73,000 tons. Whether from the export of U.S. aluminum to China's total aluminum production ratio, or from the export of U.S. aluminum to China's total aluminum exports as a proportion of the proportion is not large, the direct impact on the industry is limited.


Although the direct impact is limited, the trade war has affected judgment and confidence in the future economy. Trade frictionwill will persist in the process of accelerating global economic integration and regulating cyclical contradictions. In 2018, in addition to the United States, the European Union, Argentina, India, Canada, Mexico and other countries to China's aluminum and some aluminum products exports. In 2019, Vietnam, Canada, Turkey and other countries have opened 7 investigations into China's exports of aluminum. We must live in peace and security, in the world economy into recession and domestic economic downside risks increased, we must firmly grasp the supply-side structural reform this main line, focus on solving deep-seated structural contradictions, but also flexible to adopt counter-cyclical policy measures, actively expand the effective demand for domestic aluminum consumption, stable industry development.

Choice of future development path for aluminum processing industry

At the same time of the rapid development of China's aluminum processing industry, there are still some shortcomings and problems in the process of turning from big to strong, but China's development is still in an important period of strategic opportunity, which provides a prerequisite for the continued growth of China's aluminum consumption in the next few years. Our research also shows that China's raw aluminum consumption into the platform period around 2025, the next few years still have a growth rate of 5% to 8%. Aluminum has both light quality, color beauty, easy processing, affordable, recyclable and many other advantages, the future in meeting the needs of ordinary people in the better life should and will play a more important role.

  • Path One: From scale speed to green manufacturing, intelligent manufacturing. From the last two years of industry earnings data, profit decline, profitability significantly reduced is a real problem in the industry. This is a warning to the "quantity" way of production. "Quantity control" will be the aluminum processing industry in the practice of the five development concepts on the basis of the inevitable choice. With China's pollutant emissions and other environmental standards are getting higher and higher, environmental protection enforcement and supervision is becoming more stringent, China's aluminum industry environmental costs are increasing, solid waste and waste problems highlight, industry development must be in the direction of green manufacturing and intelligent manufacturing efforts. Research advanced energy-saving, emission reduction and consumption reduction technologies, improve the "three waste" governance and industrial solid waste resource utilization level, promote the use of green energy, the production of green products, the creation of green factories, the formation of green industrial parks and industrial chains, the development of automated production lines and information technology combined manufacturing methods.
  • Path 2: accelerate the transformation and upgrading, extend to deep processing, realize technological transformation, equipment upgrading, adjust product structure, develop new products, meet the needs of different levels of users, especially high-end products. Per capita aluminum consumption in western developed countries has stabilized, and per capita aluminum consumption in Japan and the United States began to decline after peaking in 1997 and 1999, respectively. In this sense, the ceiling of domestic consumption will soon be formed, the traditional areas of the market has become saturated, and emerging consumption has not yet formed a scale. Under the background of consumption top by top, aluminum processing capacity is not suitable for large-scale expansion. Should be purchase-oriented, purchase and better than new, positive transformation and upgrading, adjust the product structure, adapt to market changes, professional characteristic development, high-precision new, emphasize features, emphasize brand. We must take the structural reform on the supply side as the grasping hand, start from improving the quality of supply, focus deeply on the people's growing needs for a better life, expand high-end supply and effective supply, and better meet the needs of the masses.

Major economies and global aluminium consumption

  • Path 3: Strengthen the innovation ability. We will strengthen basic research and application development, attach importance to patents, standards, scientific and technological achievements, track cutting-edge technologies, promote the "going out" of Chinese technology, Chinese equipment, Chinese products and Chinese standards, strengthen management innovation and achieve lean management.
  • Path four: "Go out." "Going out" not only means going abroad, overseas development, but also out of the "home door", strengthen upstream and downstream cooperation, to the upstream electrolytic aluminum production base to seek cooperation, optimize the production layout of enterprises, enhance electrolytic aluminum raw materials guarantee, magnification of costs and competitive advantage. Can be concentrated in the consumption of factories, improve the rate of response to market changes, better adapt to the market and lead the market. We will continue to expand exports. The dominant enterprises improve the global layout, mergers and acquisitions, participation in the international leading aluminum processing and application enterprises, into the global aluminum processing value chain, enhance international competitiveness. To the densely populated countries and regions with a certain consumption potential to build factories, not only to develop new markets, but also to resolve the impact of trade protection.
  • Path 5: A combination of industry and finance. Conditional listing enterprises should actively plan to list, with the help of capital market forces to achieve enterprise value-added, wealth value-added, asset value-added, brand value-added. Listed companies should increase the intensity of direct financing in the capital market.

Give full play to the characteristics of both commodity and financial attributes, and take aluminum products as the carrier of the combination of industrial capital and financial capital, and promote the integration of industry and capital. Use good futures tools, do a good hedging. Prevent financial and market risks and achieve the steady development of enterprises.


On June 29, Chinese President Xi Jinping met with U.S. President Donald Trump in Osaka, Japan. After about 80 minutes of talks, Chinese President Xi Jinping and U.S. President Donald Trump agreed to restart economic and trade consultations on the basis of equality and mutual respect. Trade frictions between China and the U.S. economies are over. But in the long run, trade friction will always exist, which in another way makes China's aluminum processing industry clear, must achieve high-quality development, in order to enhance the ability to resist fluctuations in the world economy. "Danger" or "opportunity" has never existed independently, although faced with unprecedented complexity and serious situation, but we have the wise leadership of the Party, with a large domestic market of 1.4 billion people, the people's desire to pursue a better life is very strong, the application of aluminum is still promising.


(The author is the deputy secretary of the Party Committee of China Nonferrous Metals Industry Association and chairman of the China Nonferrous Metals Processing Industry Association)