Demand for aluminum bar to keep sluggish
----Interview with Lixin Wang
Deputy General Manager
Baotou Hebao Metal Materials Co., Ltd.
- Baotou Hebao Metal Materials Co., Ltd. is located in Guyang County, Baotou City, Inner Mongolia Autonomous Region, with a superior geographical location and convenient transportation. The company covers a total area of approximately 87mu (5.8 hectares), with a floor area of 16,875 square meters. The company, with a total investment of 210 million yuan (28.92 million US dollars) and an annual production capacity of 150,000 tonnes, is one of the largest aluminum alloy round ingot production enterprises in Northwest China and a high-tech enterprise specializing in the production and sales of aluminum alloy. The company's main products are 1-7 series deformed aluminum alloy round ingots, including cast aluminum alloy ingots with specifications of φ90~φ380.
- Asian Metal: Hello, Mr. Wang. Welcome to Asian Metal's interview. Please introduce your company briefly.
- Mr. Wang: Baotou Hebao Metal Materials Co., Ltd. was established in May 2022, focusing on R&D and production of deformed aluminum alloy round ingots and mainly consuming high-quality aluminum liquid 99.85%min from East Hope Guyang Plant. Our company operates six 35-ton natural gas smelting furnaces. The sales volume of our deformed aluminum alloy round ingot of series #2, #3, #5, #6 and #7 across the country exceeded 10,000 tonnes, and the products are mainly used in building materials, industrial profiles, automobiles, solar photovoltaic, rail transit and other industries. We are able to supply about 600 tonnes per month of wind power generation aluminum bar 6063 to customers, with high-end aluminum bar 6005 for solar panel frame as our featured product, and we have stable customers in the deformed aluminum alloy round ingot market.
- Asian Metal: What do you think is the reason for the weakening demand for aluminum bar in the first half of this year, and is your company also impacted by the sluggish demand?
- Mr. Wang: Firstly, European and American countries raised tariffs on Chinese aluminum products, leading to a significant decline in export orders, especially in industries such as aluminum foil, solar photovoltaic modules, and new energy vehicles, which have been severely impacted. Secondly, the sustained downturn in the domestic real estate industry led to a decrease in the consumption of building profiles. Finally, most of the newly added aluminum bar production capacity in the past two years has ran at full tilt this year, resulting in a sharp increase in supply, but the demand for the material shrank. These are the main reasons for the continued decline in demand for aluminum bar in the first half of this year. We were also hit by the weakening demand. For example, orders for our featured product, aluminum bar for solar photovoltaic frame, decreased significantly. In mid-June, the daily sales volume of our aluminum bar dropped from 300 tonnes to around 200 tonnes.
- Asian Metal: Amid declining demand, some aluminum bar plants started to cut or halt production in May and June to avoid overstock. When do you think they will resume production?
- Mr. Wang: I think another important reason for some aluminum bar producers to cut or even halt production is that they suffered losses resulting from low TCs, so when they will resume production mainly depends on the following two factors. The first one is when the demand for aluminum bar will return to normal level, or at least recover to a level where producers could make profits. The second one is whether primary aluminum producers could give more discounts to aluminum bar producers in prices of liquid aluminum. Given the current market situation, I think chances are small that the market demand in the second half of this year will recover to the level a year ago.
- Asian Metal: The demand for aluminum bar is usually weak in July and August due to the hot weather. What do you think of the demand during the period this year and would it be better than previous years?
- Mr. Wang: It is certain that the demand for aluminum bar in the market from July to August this year will not be better than the same period in previous years. The demand in the aluminum bar market was good last year on the whole, especially for demand from solar PV industry. However, orders from solar PV industry declined sharply this year and those from real estate industry and overseas customers also declined to different degrees. We cannot deny that there is also a consumption highlight, which is the new energy vehicle industry, but the consumption increase in the new energy vehicle industry cannot compensate for the reduction in other industries.
- Asian Metal: Is there already a serious overcapacity of aluminum bar in China? What do you think is the most ideal operating rate for domestic aluminum bar producers?
- Mr. Wang: There has indeed been a serious surplus of aluminum bar capacity in China. According to statistics, the domestic production capacity of aluminum bar has reached 32 million tons, nearly 70% of the total primary aluminum production capacity of 45 million tons, and almost all primary aluminum plants are surrounded by aluminum bar plants. I believe the most ideal operating rate for aluminum bar producers stays at 70-90%. By virtue of stable long-term orders from large customers, we keep our operating rate at 80-90%, while the average level for producers across the country is only 50% or so.
- Asian Metal: In the first half of this year, TCs for 6063 aluminum bar in China generally fluctuated within the range of RMB100-300/t (USD13.77-41.31/t). What's your estimation on TCs in the second half of this year?
- Mr. Wang: How TCs for aluminum bar will move depends upon changes in market supply and demand. In the first half of this year, the aluminum bar market saw oversupply while downstream demand was soft, so more and more aluminum bar producers joined in price competition and TCs kept fluctuating within the range of RMB100-300/t (USD13.77-41.31/t). I don't feel too optimistic about market demand for aluminum bar in the second half of this year, so I believe that there would be no positive changes in TCs for aluminum bar, which are expected to still fluctuate within the range of RMB100-300/t (USD13.77-41.31/t).
- Asian Metal: Entering the second quarter of this year, some aluminum bar producers who intended to cut their costs began to increase aluminum scrap proportions in their aluminum bars. Will this method lead to receding quality of aluminum bar and will this cost-cutting method be suitable for all aluminum bar producers?
- Mr. Wang: Increasing aluminum scrap proportion will surely lead to higher impurity contents in aluminum bar and accordingly to declining quality of the material, but this doesn't mean that aluminum bars of this kind will not be used. For usage in building doors and windows, coating, household decoration, etc., secondary aluminum bar can meet requirements on quality. But if aluminum bar is to be used in industrial profiles, specific product parameters are needed, and not all aluminum bar producers are suitable for using large quantities of aluminum scrap in their products.
- Asian Metal: Now Chinese government encourages green recycling utilization of nonferrous metals. How do you think of development prospect for secondary aluminum bar?
- Mr. Wang: Under the global background of low-carbon drive, Chinese government also encourages green recycling utilization of aluminum scrap, so we believe that development outlook for secondary aluminum bar is bright. But the biggest challenge is to control production capacity so as to avoid blind production expansion and disorderly development.
- Asian Metal: In the face of fierce competition in the industry, what is your company's future development direction? Are there any new projects planned for the future?
- Mr. Wang: Facing fierce market competition, we should first ensure that our traditional products will not lose their advantages, so we will cling to our basis of building profiles and solar PV profiles. Meantime, we will increase investment in equipment, technique, capital and research to enhance our strength in industrial profile filed, develop more high-end aluminum bars and increase the added value of our products. In the future we may consider producing A356.2 aluminum alloy so as to enrich our product portfolio.
- Asian Metal: Mr. Wang, thank you for your wonderful sharing. Wishing your company continued success!
- Mr. Wang: Thank you. And I would also like to thank Asian Metal for providing such an excellent consultation platform.
