----Interview with Zhenjiang Yang
General Manager
Guangdong Hongbang Aluminium Co., Ltd.
Founded in May 2014, Guangdong Hongbang Aluminium Co., Ltd. is a joint venture between Guangzhou Industrial Investment Holdings Group Co., Ltd. (Fortune Global 500) and Guangdong Hongjin New Materials Group Co., Ltd. With a registered capital of 200 million yuan (27.62 million US dollars), the company has an annual production capacity of 200,000 tonnes. It mainly produces various grades of aluminum ingot and provides green aluminum liquid products direct supply service for die-casting plants within a radius of 80 kilometers.
Asian Metal: Hello, Mr. Yang. Welcome to Asian Metal's interview. Please introduce your company briefly.
Mr. Yang: Hongbang Aluminium is located in the (Zengcheng) Automotive Industry Base (Zengcheng Economic and Technological Development Zone) in the eastern part of Guangzhou, adjacent to the entrances and exits of Huaguan Expressway and Guanghui Expressway, and 10-15 minutes' drive from Guangyuan Expressway and Guangshen Expressway, with extremely convenient transportation. Our main partners include Guangzhou Ahresty Casting Co., Ltd., GAC Honda Automobile Co., Ltd., Wuyang-Honda Motor (Guangzhou) Co., Ltd., Guangdong Hongtu Auto Parts Co., Ltd., Guangdong Ray Shine Technology Co., Ltd., Zhongshan Broad Ocean Motor Co., Ltd., Dongguan Everwin, Google, Amazon, and so on. With a professional aluminum alloy research and development team and an experienced management team, our company has passed many system certifications such as ISO9001 and IATF16949 quality management, ISO14001 environmental management, ISO45001 occupational health and safety management, and GB/29490-2003 intellectual property management, and our products meet the testing requirements of ROSH, halogen and SVHC. As a national high-tech enterprise, an engineering technology center and an innovative enterprise in Guangdong Province, the company has established Guangzhou Enterprise Technology Center and Guangzhou Enterprise Research and Development Institution, and jointly built a new material research and development center with universities such as Suzhou University. Our company owns 25 utility model patents, 2 invention patents, and 11 software copyrights.
Asian Metal: What do you think is the main reason for the weak demand for secondary aluminum alloy market in the first three quarters of this year?
Mr. Yang: I think there are three main reasons. Firstly, the growth in the demand for secondary aluminum alloy ingot in the domestic automotive industry has not kept up with the increase in supply, resulting in a mismatch between supply and demand. At present, the secondary aluminum alloy ingot market sees huge overcapacity, with an average operating rate of less than 50% in the industry. Secondly, although the sales growth of new energy vehicles is rapid, it is currently unable to make up for the reduction in demand for secondary aluminum alloy ingot caused by the decline in sales of fuel vehicles. Thirdly, the continuous increase in the import of aluminum alloy ingot has also seized a portion of the sales share of domestic secondary aluminum alloy ingot production enterprises. According to statistics, the total import volume of aluminum alloy ingot before the COVID-19 pandemic was 210,000 tonnes in 2019. After 2020, the annual import volume increased to 1.1-1.2 million tonnes, and it is expected to rise further to around 1.3 million tonnes in 2024.
Asian Metal: It is the peak season for secondary aluminum alloy ingot market in September and October every year. What do you think the demand will be like this year?
Mr. Yang: With the gradual decline in sales of fuel vehicles, the growth rate of domestic demand for secondary aluminum alloy has been weakening year by year. Currently, the demand for secondary aluminum alloy in new energy vehicles cannot make up for the gap in the weakening demand for fuel vehicles. The sales of secondary aluminum alloy of our group in September and October this year increased by about 18% from July to August, higher than the expected 10%, while the overall market sales increased by about 10%.
Asian Metal: Do you think the demand for aluminum alloy will further recover in November and December?
Mr. Yang: I believe that the demand for aluminum alloy will continue to pick up in November and December for two main reasons. Firstly, the sales of new energy vehicles will increase further in November and December, which provides strong support for the demand in the aluminum alloy market. Secondly, some large and medium-sized enterprises need to strive for performance at the end of each year in order to achieve their annual targets, which also boosts the demand for aluminum alloy. As far as our group is concerned, we expect an increase of around 25% in the sales each month in November and December compared to October.
Asian Metal: The Regulations on Fair Competition Review passed by the State Council came into effect on August 1. Which enterprises do you think are most affected by the regulations, which companies are benefiting from it, and what's its impact on your company?
Mr. Yang: I think enterprises, which do not have their own competitive advantages and mainly rely on government subsidies to seize market shares at low prices, would be the first ones impacted by the new regulations. Most of these enterprises are located in remote areas in the central and western regions, far away from both the consumption markets and the raw material supply areas, so they have no geographical advantages, and their products do not have their own competitiveness. After the implementation of the new regulations, these enterprises will lose subsidies and accordingly face huge survival challenges. As for us, we strongly support the implementation of the new regulations. As a company located in Guangzhou and doesn't enjoy any local government tax rebate subsidies, we rely entirely on the competitiveness of our products to gain the recognition of customers. After the implementation of the new regulations, the market impact of aluminum alloy ingot brands, which mainly rely on government subsidies to form price advantages, will be reduced sharply. The core competitiveness in the market will shift from prices to product quality and service, which help create a more benign market competition environment, benefit companies like ours that prioritize products and services as their core competitiveness, rather than those relying on low prices to win.
Asian Metal: In recent years, the domestic new energy vehicle industry has developed rapidly, and the market share of new energy vehicles keeps increasing. What impact has this had on die-casting aluminum alloy producers?
Mr. Yang: The increasing market share of new energy vehicles has two main impacts on aluminum alloy ingot producers. Firstly, new energy vehicles do not have engines and transmissions, so the mainstream grades of aluminum alloy needed for new energy vehicles will change. For example, the aluminum alloy ingot ADC12 used in new energy vehicles will be significantly reduced, while the usage of ALSi10MnMg, C611, HJAM05 or some other standard of aluminum alloy ingot will increase. At the same time, aluminum used in new energy vehicles will definitely increase to meet lightweight requirements. We now need about 250kg of aluminum to produce a traditional fuel vehicle, but over 350kg of the material to produce a new energy vehicle and even over 500kg in the future. Secondly, the change of mainstream grades of aluminum alloy used in new energy vehicle manufacturing means higher requirements on the aluminum alloy ingot producers' capabilities in R&D and production. Aluminum alloy producers need to produce new grades of aluminum alloy ingot that could meet the higher requirements of new energy vehicles through improving their own R&D capabilities.
Asian Metal: In terms of new energy vehicle components, many automobile manufacturers are rapidly advancing integrated die-casting technology, which has extremely high requirements on material and means higher requirements on aluminum alloy producers. Does your company have any arrangements or plans in the field of integrated die-casting materials?
Mr. Yang: We have been tracking or exploring in the new energy vehicle aluminum alloy material filed since 2018. So far, we have developed new integrated die-casting aluminum alloy materials with our own patents through our research institute, including about a dozen of new aluminum alloy materials related to both the production and electronic control of new energy vehicles. We have also launched a new plant in Yunnan Province specifically for the large-scale and integrated production of new die-casting materials.
Asian Metal: What is the development direction of your company in the face of fierce industry competition, and are there any plans for new projects in the future?
Mr. Yang: On the basis of keeping our existing products, we will focus on developing new aluminum alloy materials with characteristics of low-carbon green aluminum, high toughness, high thermal conductivity and high electrical conductivity. By working with automobile manufacturers, we will optimize production processes, continuously reduce production costs, and enhance price competitiveness. In the field of aluminum alloy materials used in new energy vehicles, we will raise the proportion of aluminum scrap and promote the application the grade reservation reduction method. We will raise our investment in technology R&D, and develop more new aluminum alloy materials suitable for new energy vehicles, such as foam aluminum, which is also a direction of our research and development at present.
Asian Metal: Thanks again for your wonderful sharing and we wish your company a brighter future.
