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The impact of China-US Trade War on the Aluminum Alloy Hub Industry in mainland China from the Perspective of Export data

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The impact of China-US Trade War on the Aluminum Alloy Hub Industry in mainland China from the Perspective of Export data
The impact of China-US Trade War on the Aluminum Alloy Hub Industry in mainland China from the Perspective of Export data

At the beginning of the Spring Festival, an unexpected black swan came unexpectedly, diluting the smoke of the Sino-US trade war, and the fear of this uninvited guest has long replaced the unease about trade frictions. There is no doubt that the impact of this black swan on us and the global economy will far exceed the little loss caused by trade disputes between countries, and its impact may be more far-reaching than we can imagine now. But we don't have to panic too much, and panic won't solve any problems. If we look back at history from the perspective of time, it is not difficult to find that no matter how big the plague will pass sooner or later, and then the cold winter will eventually usher in spring, of course, you must first ensure that you can not fall in the winter. Therefore, after a simple "natural disaster" (let's just think that this is an accidental natural disaster), the problems facing the world must be economic problems. How to start the stalled economic engine and adjust the already unbalanced economic posture? it must be the top priority for everyone to think about in the future.

As we all know, the troika that has driven China's economic growth for a long time are investment, consumption and export respectively, and for our aluminum alloy automobile wheel industry, the most important things are investment (need large-scale and efficient production), consumption (domestic OEM and after-sale conversion market) and export. So what is the specific situation of this "export" that our industry has been relying on for survival and development? Next, we will use historical data to review the export performance of the aluminum alloy hub industry in mainland China in the past eight years.

From 2012 to 2019, the export of aluminum alloy wheels in mainland China still maintained a relatively stable development trend under the environment of various encirclement and interception in the international market, but the export volume decreased by 90300 tons compared with the previous year. In terms of exports to the US market, the trend is similar to that of overall exports, with a significant decline in 2019, a decrease of 110724 tons compared with the previous year (from this data, the decline in total exports in 2019 is entirely due to a decline in exports to the United States over the same period). In the above data, we can also see that products exported to the United States in the past eight years have accounted for about half of the mainland's total exports, both in terms of amount and quantity. The United States has indeed propped up half of the sky in our export market. From this point alone, there is no doubt about the importance of the American market to us. In addition, another remarkable feature of the US market is that the average price is significantly higher than that of other overseas markets. During the eight-year statistical period, the average unit price of products exported to the United States is US $5 / kg. The average unit price of exports to non-US overseas markets is US $4.52 / kg, a difference of more than 10%. If the average unit weight of each wheel is calculated at 10 kg. The same wheel can be sold for an extra $4.80 when exported to the United States. because of this price difference, exports to the United States have made us an extra $1.5 billion over the past eight years. Earn an average of $187 million a year! This is why no matter how hostile and anti-American people are, as soon as they have the opportunity to export their products to the United States, they will immediately give up their past grievances and do not hesitate to take orders.

The above is an overview of the export market of our aluminum alloy wheel products, and this is also a basic state under the normal international trade order in the past, but as we all know, since 2018, China and the United States have had great differences on the issue of mutual trade. After the negotiations failed, the friction intensified, and the two sides fought fiercely, each carrying out many dazzling rounds of trade sanctions and anti-sanctions on the other. Among them, two of the US sanctions are directly related to the aluminum alloy wheel industry. the first is to impose a 10 per cent tariff on $200 billion of goods from China, including aluminum alloy wheels, from September 24, 2018. This was followed by a 25 per cent tariff on the above-mentioned $200 billion goods on June 15, 2019. What is certain now is that these two rounds of sanctions have had a great impact on us. Judging from the direct and visible information we have, the result is that the previously mentioned aluminum alloy wheels exported to the United States in 2019 decreased by 110000 tons compared with the previous year, and exports decreased by 647 million US dollars. Although the conclusion is clear, I personally think that some details are worthy of further exploration. Perhaps we can understand some truth and sum up some experience through these limited data along the thread of time. This will at least do us no harm to avoid detours in the future.

Let's take a look at the data chart of alloy wheel products exported to the United States in 2018, combined with the changes in export volume before and after the first tax increase time node to analyze the impact of US sanctions on us:

From the picture above, we do not see that the number of aluminum alloy wheels exported to the United States in the three months of October, November and December in 2018, that is, the first tax increase node, is significantly lower than that in the previous nine months. On the contrary, there was a highlight of annual exports in November. Why? According to our analysis, this is mainly due to the fact that the rapid devaluation of the RMB at that time offset some of the impact of tax increases in the United States; secondly, because most exporters believed that there would always be a solution to the Sino-US trade dispute at that time, so everyone unanimously chose to "continue", and there was a brief spectacle of "grabbing exports". The most important thing is that the overall profit level of exports to the United States at that time was already higher than that of domestic OEM products, and it was also higher than that of other overseas markets, so we could afford to impose a tariff rate of 10% in the United States. Moreover, the domestic market had shrunk at that time, what could we do without such a large US market? (excerpt from "Wang Juguang: reviewing the slowdown in investment growth of 2018 aluminum alloy wheel projects in mainland China") but all this began to change slowly in 2019, with a downward trend in the number of products exported to the United States since February 2019. As a result, the number of products exported to the United States in 2019 decreased by 23.18% compared with 2018, and the absolute number decreased by 110724 tons, equivalent to 11072400 aluminum alloy wheels!

Please pay attention to two main points in the above picture: first, the overall decline began at the beginning of the year, not from the second tax increase time node in June; second, there is no obvious cliff decline after the second tax increase time node. The fact seems to be different from what we thought beforehand. What is the cause of this? First of all, since the Sino-US trade talks have not progressed smoothly since the first time point of the tax increase, the daily criticism of the United States by our state media has really affected exporters' confidence in the normalization of Sino-US trade relations (of course, the US media have not been idle, but because of language, most of us want to care, but there is nothing we can do about it). Therefore, everyone has planned to gradually reduce the number of non-high-quality orders, such as after-sales market orders with poor payment conditions and orders from poor-quality customers with poor reputation. as a result, there has been a gradual decline in the number of products exported to the United States market since 2019. Second, in terms of supply and demand, this time the decline in export willingness is due to the rising cost of the supply side, rather than any change in market demand, so as long as someone on the supply side is willing to sell, the export volume will not fall off the cliff. On the contrary, if there is a vicious problem in demand, there will certainly be a precipice decline, such as the economic crisis in 2008, which is still fresh in everyone's memory. in particular, those continental hub enterprises that used to be dominated by the American market should never be forgotten. In addition, there is another indicator that can also show the shrinking volume of products exported to the United States from the side, and that is the share of the US market. The winding line in the picture below is the link between the number of aluminum alloy wheels exported to the United States each month as a proportion of total exports.

After the above analysis, we can now make a simple summary:

First, exports are very important to us, and the American market is more important. At present, under normal circumstances, overseas markets can provide an average of about 100 million product orders for our industry every year, of which the United States market accounts for half, and the price in the United States market is relatively good. So for us, what we have got should be "done and cherished".

Second, there are no winners in the trade war. Due to the result of vicious competition in the market, most of the current export price terms in our industry have changed from CIF, which was widely used 30 years ago, to terms similar to DDP now, and the terms of payment have also been simplified from Lhand C in the early years to Tmax T, so there is no doubt that we are responsible for the tariffs levied by the United States in accordance with the DDP price terms. Even if it is not under the DDP clause, in such a buyer's market, the duties paid by the importer will be passed on to us by reducing the price of the product, so just from the perspective of aluminum alloy wheel products, we are the victim of the trade war. Of course, American consumers may suffer a little loss due to the increase in product prices caused by the imbalance between supply and demand in the market.

Third, if the product also has "toughness", the "toughness" of this export product depends on the cost or profit level of the product, not anything else. Over the past year, I have been hearing the new term "economic resilience" and searched it on the Internet. The results are as follows: "Economic resilience means that in the face of changes in various external and internal environments, the state can adjust its policies in a timely and flexible manner. Be able to prevent big economic ups and downs and avoid hard landings." Well, according to this explanation, the "ability" of RMB to depreciate rapidly by 10% in 2018 should belong to this category of "toughness". If this is one of the "toughness", then the scope of this "toughness" should be limited, because bad handling can easily be defined as "exchange rate manipulation", and economic collapse is not a dream if you try too hard. Therefore, I personally believe that the "resilience" of a country's economy should depend on its economic structure, and the "resilience" of a product should depend on its profit level or added value. For example, as discussed earlier, after the first time point of tax increase in the United States, the export of our aluminum alloy wheel products has not been affected in any way. On the one hand, the "toughness" of the first concept has played a role. On the other hand, because the profit level of our products exported to the United States is high, when export costs drive up profits and expectations continue to fall, although there has been a decline in foreign sales, it has not fallen off a cliff. This is the real product "resilience" at work!

In short, economic globalization has made world economic activities beyond national boundaries, making economic activities among countries and regions in the world interdependent and interrelated, forming an organic whole in the world. Changes in the economic field of any one of these countries will cause shocks to the world economy as a whole. In such an environment, no one can be left alone. Therefore, every economy in this community with a shared future should be cautious in its words and deeds, live in harmony with other economies, enjoy equality and mutual benefit, and shoulder their own responsibilities.

Whether we are willing to believe it or accept it or not, this unfinished trade war between China and the United States has loosened the industrial chain that we have painstakingly built for many years, some foreign capital has slipped away, and even local manufacturing capital is accelerating. In the end, the reason is that this way of resolving trade differences has hurt the confidence of investors.

Next, let's look back at the epidemic we are experiencing. This is also a painful case of a global disaster caused by carelessness in our community with a shared future for mankind. At present, according to state media reports, the situation abroad is already quite serious. In order to cope with the rapid spread of the epidemic, dozens of countries around the world have taken measures to "seal the country" or "seal off cities" at home. China is in this "community with a shared future for mankind". Although we have won an initial victory in the fight against the epidemic, and although our domestic economy is "resilient", our trading partners have collapsed, can our economy still outshine others? The official economic data for February have been released, and I believe you will be able to find other data. We will not repeat them here. I would like to retell a piece of news closely related to our industry released by China Business Daily on March 21 to feel the current economic situation: "in the week of March 12-19, A number of car brands represented by Volkswagen, Mercedes-Benz, Renault, Peugeot Citroen, General Motors, Ford, Fiat Chrysler and so on have announced 'production suspension and risk aversion'. According to the reporter's incomplete statistics, worldwide, 14 car companies have stopped more than 100 factories. According to the study of the Federation of passengers, this is the most serious production interruption in 10 years. " If this news is true, then the cliff drop in the export of aluminum alloy wheels that we have been discussing before will really be possible to reappear! Although this epidemic has nothing to do with the Sino-US trade war, through our discussion of this incident, we may be able to give everyone a deeper understanding that only unity can solve common problems and promote the common development of human society. No one can predict how much damage this disaster will eventually cause to us, because there are too many unknown factors, but there is no doubt about the global economic recession. the outbreak of the economic crisis may be just a tipping point. How can the worsening global economy survive the current catastrophe? The time has come to test our wisdom, not our passion. Please remember: peace is the most precious thing.

The relationship between China and the United States is one of the most important bilateral relations in the world, and the impact of its changes is not comparable to that of a butterfly flapping its wings in the South American rainforest. A famous exposition by our supreme leader on Sino-US relations is quoted as the conclusion of this article: "the good relations between China and the United States are beneficial not only to the two countries and the two peoples, but also to the world." We have a thousand reasons to improve Sino-US relations, and there is no reason to damage Sino-US relations. "

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.

Give us a call at +86 18662963676, email us at sales@profiles-aluminum.com to find out how YueFeng Aluminium can help with your aluminum profile/ aluminium extrusion/ aluminium solutions design.

Pub Time : 2020-03-27 14:10:48 >> News list
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