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The influence of COVID-19 epidemic situation on Aluminum processing Industry

February 21, 2020

Abstract: generally speaking, the epidemic situation of COVID-19 has had an impact on the normal operation of the aluminum processing industry, but mainly in the short term. In the medium to long term, the epidemic will not change the basic trend of stable and long-term improvement of China's economy.

During the Spring Festival in 2020, a COVID-19 epidemic swept the country and spread around the world, threatening people's lives and health. Many provinces, autonomous regions and cities across the country launched a "first-level response" one after another. Traffic control, home isolation, extension of Spring Festival holiday and other prevention and control work carried out in an orderly manner. The epidemic has affected the normal operation of production and operation activities in various domestic industries, and exports have also been restricted because the WHO listed novel coronavirus as a "public health emergency of international concern". Under the cover of the nest, there are finished eggs, and the aluminum processing industry is naturally unable to stay out of it, and it is bound to be adversely affected by this major epidemic.

After the outbreak of the epidemic, the CPC Central Committee and the State Council attached great importance to the prevention and control of the epidemic, regarded the prevention and control of the epidemic as the most important work at present, and took the most comprehensive and stringent prevention and control measures through national mobilization, full participation, and the whole country. Joint prevention and control started a people's war on epidemic prevention and control, which effectively ensured that the epidemic was not out of control and laid an important guarantee for the final victory of prevention and control.

Under the tight control of the epidemic, the start of the enterprise was delayed again and again after the year, completely disrupting the original market rhythm of the aluminum processing industry. Enterprises are faced with tests such as insufficient number of workers, limited logistics, difficult supply of raw materials, high pressure of cash flow, and so on. Procurement, production, sales and other work is difficult to carry out normally. At present, the start of domestic real estate and infrastructure construction has been delayed, the consumption of cars and household appliances has temporarily stagnated, and the consumer demand downstream of the entire aluminum processing industry has been suppressed.

Judging from our recent research on many large, small and medium-sized aluminum processing enterprises in Jiangsu, most of them are actively preparing to return to work and production. The outstanding problems encountered at present can be summarized as "people, things, money" in enterprise production.

"person" includes the number of workers and the cost of wages.

The rate of workers returning to work is low. Since the outbreak of the epidemic, various provinces and cities have generally taken restrictive measures such as isolation and observation on the floating population and those who have returned home. Measures taken in different regions, such as road closure, village closure, persuasion, refusal to enter, household registration, residence, and isolation time, have made it more difficult for employees from other places to return to work, directly resulting in the low rate of workers' return, aluminum processing enterprises are facing a shortage of front-line production workers and technical personnel, and production resumption cannot be carried out normally. Affect sales orders and contract plans. The survey shows that 60% of the medium and large enterprises have partially resumed production, and about 70% of them have temporarily restored half of their production capacity, while small and micro enterprises have not yet resumed production as of February 20.

Wage costs have increased. Employees' delays in going to work, basic salary, low attendance rate, and increased difficulty in recruiting workers have led to an increase in labor costs. 60% of enterprises expect labor costs to increase by 10% to 20%.

"thing" includes transportation logistics and supply chain materials.

Logistics and transportation is difficult. At present, there are great difficulties in logistics and transportation, every province has a strict access system, and all regions strictly control the traffic, with emphasis on ensuring the transportation of medical materials and related personnel. after returning to work, enterprises may face the difficulties that raw materials cannot be transported in and products cannot be transported out, which will affect the supply of raw and auxiliary materials, product order delivery, import and export trade, and directly affect the process of resuming work.

The supply chain is not running smoothly. The production of enterprises needs raw materials, and the production of aluminum processing enterprises involves upstream and downstream industries, and the resumption time of different regions and different types of enterprises varies, even if their own factories resume work, if the upstream raw material supply enterprises stop work and stop production due to logistics, transportation, staff return and other reasons, directly lead to downstream enterprises into the situation of "making bricks without straw", the operation of the enterprise supply chain is blocked, and raw materials cannot be purchased. Affect normal production. The supply of raw materials is basically difficult to obtain and will lead to a rise in prices at the same time. According to research, 80% of enterprises expect prices of raw materials to rise, of which more than half are expected to increase by 10% and 20%. Due to the sudden occurrence of the COVID-19 epidemic, most enterprises have more or less gaps in production material reserves, which to a certain extent affected the production security of enterprises, resulting in difficult delivery of orders and rising costs.

"money" is mainly the cash flow problem of enterprises.

The capital chain of the enterprise is tight. Enterprises can not return to work normally to reduce revenue, deal with the epidemic, increase the demand for funds, employees' wages, daily operations and other continuous consumption of cash flow, in addition, based on logistics control, orders can not be delivered, which means that the payback is delayed, capital turnover occupies a large amount, and even faces the risk of breach of contract claims. On the one hand, there are undeliverable orders and irrecoverable payments, and on the other hand, hard costs such as salary, social security, rent, management fees, interest and so on. It has to be said that most enterprises are in the plight of being attacked. Bank credit is highly tight, according to research, only more than 30% of the current cash flow of enterprises is relatively normal, the cash flow of small and micro enterprises is relatively tight, most enterprises can only maintain short-term cash flow. If the problem of orderly resumption of work of these enterprises can be solved in a relatively short period of time, the cash flow pressure of these enterprises will be alleviated.

In addition to the above factors, the slowdown in consumer demand and increased export pressure also bring certain obstacles to the recovery of the aluminum processing industry. In terms of consumer demand, China's aluminum consumption accounts for 39% of construction, 17% of transportation, 16% of electricity, 14% of consumer durables, 7% of machinery manufacturing, 4% of packaging and 3% of the other 3%. Among them, construction, transportation, electricity and consumer durables account for the largest proportion of areas. at present, most construction sites and factories across the country are facing problems such as delays in resuming work, difficulties in recruiting workers, poor freight transport, and so on, and it takes a long time for consumption to recover. a direct impact on the order situation of aluminum processing enterprises. On the export side, due to the impact of logistics and epidemic control, the efficiency of the port is lower than before, which will have an important impact on the delivery cycle. All countries have stepped up quarantine of Chinese transport vessels, coupled with the delay in the resumption of work by domestic export traders, which will have an impact on exports, making the aluminum processing industry, which was originally affected by trade frictions and environmental constraints, even worse. It is expected that foreign trade export business will continue to be in the doldrums in the first half of the year.

In order to ease the operating pressure on enterprises, in view of this epidemic, the central bank, the Ministry of Finance, the Banking and Insurance Regulatory Commission and other departments, as well as a number of local governments, have accelerated the formation of a joint force and precise measures to reduce taxes and fees in industries and regions seriously affected by the epidemic, to solve problems in the production and operation of enterprises, to help enterprises speed up their orderly operation in the midst of difficulties, and at the same time issued a series of proactive fiscal policies to further stimulate and expand domestic demand. Encourage exports, increase investment, promote the stable development of all sectors of the national economy, and try our best to minimize the impact of the epidemic.

Generally speaking, the COVID-19 epidemic has had an impact on the normal operation of the aluminum processing industry, but mainly in the short term. In the medium to long term, the epidemic will not change the basic trend of stable and long-term improvement of China's economy.

The aluminum processing industry is an important industry that provides basic raw materials for all aspects of the national economy. The fundamentals of demand in the consumer sector have not changed, and the overall market demand has only been postponed. It can be predicted that the situation will return to stability after the epidemic. We must strengthen our confidence, help each other in the same boat, make scientific prevention and control, and accurately implement policies, make concerted efforts of the whole country to fight the "epidemic", and take practical actions to help win the battle for the prevention and control of the epidemic. With the care of the party and the government and the joint efforts of the whole industry, economic development will certainly be able to embark on a stable and broad road, and the aluminum processing industry will also come out of the trough and counterattack a new life.

Gather strength to fight the epidemic and forge ahead with confidence to watch the spring blossom!

Yuefeng Group is a leading aluminum extrusion enterprise in the world. at present, it has formed a development pattern of three core businesses: industrial aluminum extrusion, aluminum Calendering and deep processing. the company's products have been widely used in green construction, transportation, mechanical equipment and power engineering and other fields, and its customers are all over the world's major markets.

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