Secondary aluminum alloy consumption to rise steadily
----Interview with Zuosheng Gu
General Manager
Huizhou CSMET Aluminum Alloy New Material Co., Ltd.
![Images of people](//img.asianmetal.cn/img_interviews/2024/index_big_zuoshenggu.png)
- Huizhou CSMET Aluminum Alloy New Material Co., Ltd. belongs to CSMET Group, a group company orienting at product development, manufacture, sales and trade of aluminum alloy. In 2012, based on aluminum alloy ingot business, the group innovated its product model and took the lead in the industry via direct supply of liquid aluminum alloy in medium and long distance, which greatly saves manufacturing costs and cuts pollution emission for downstream die-casting enterprises. Also, adhering to the business strategy of "liquid aluminum transportation service", the group has successfully achieved rapid development. In 2017, the group produced and sold 250,000 tons of aluminum alloy, with sales revenue exceeding 3.5 billion yuan. In order to meet the development needs of aluminum alloy in the future, the group has established a technology R&D center and developed new projects on the strength of the "liquid aluminum transportation service" strategy, and meanwhile it is devoted to stimulating further cooperation with customers, universities, research institutes and other units. After the Baotou project came online in March 2020, the group owns an annual production capacity of 600,000 tons in total.
- Asian Metal: Hello, Mr. Gu, welcome to Asian Metal's interview. Please introduce your company briefly.
- Mr. Gu: Huizhou CSMET Aluminum Alloy New Material Co., Ltd. is a subsidiary of CSMET Group, located in Huizhou, a main domestic die-casting market distribution center, near Guangzhou and Dongguan. The company was established on November 15, 2017 with a registered capital of 65 million yuan, and holds a planned production capacity of 50,000 tons per year now. On October 29, 2018, our furnace ran into operation with first feeding, marking the first production of aluminum ingot. And on November 16 of the same year, we successfully delivered the first batch of aluminum liquid to our customer. We mainly focuses on direct supply of aluminum alloy liquid, along with certain aluminum alloy ingot. Among our total output, aluminum liquid accounts for about 70% and aluminum alloy ingot accounts for the remaining of 30%. Moreover, we mainly supply to the numerous large and medium-sized die-casting enterprises in Guangdong.
- Asian Metal: In the past year, most of the secondary aluminum alloy producers have reported that their demand was not good, but based on the year-end statistical data, the production of secondary aluminum alloy in 2023 increased month on month. What do you think is the reason for the difference between the perception of producers and actual results?
- Mr. Gu: I think the negative feedback from producers in the past one or two years does not refer to a decline in sales, but rather to a decrease in industry profits. From the overall production and sales data of the country, the production and sales of secondary aluminum alloy are increasing year by year, with an average annual growth rate of around 6.4%. In 2023, the sales volume of secondary aluminum alloy ingot by major enterprises increased by about 14% compared to 2022. Of course, the sales came from new established enterprises in Ma'anshan and Lu'an of Anhui and Huzhou of Zhejiang in the past two years, and also showed the increase in production and sales of existing enterprises. The expansion of secondary aluminum alloy production capacity exceeds the actual demand, and suppliers compete to lower prices, resulting in a sharp decline in profits. Therefore, the poor demand mentioned by them in the past two years is more to express the substantial decline in profits.
- Asian Metal: Do you think there will be a significant increase in the demand for secondary aluminum alloy in the second quarter? What is your target growth rate in sales?
- Mr. Gu: Compared to the first quarter, the market demand for secondary aluminum alloy will definitely increase in the second quarter, but compared to the second quarter of last year, I believe it would basically keep unchanged. Based on the current consumption capacity of the society, it is difficult for downstream customers of secondary aluminum alloy ingot to experience explosive growth in demand. Even if there is an increase in demand, the consumption of the whole industry will increase by 2%-3% at most, and the target growth rate in sales of our Huizhou plant in the second quarter of this year is to increase by about 5% compared with the same period last year.
- Asian Metal: How did your company achieve higher average growths in sales than your counterparts?
- Mr. Gu: It has something to do largely with our business extension strategy in advance. Years ago, our company already entered the NEV field, focusing upon NEV-related new materials including heat-treatment-free material and integrated die-cast material. The three years when the NEV industry underwent rapid developments provided opportunities for us to achieve higher average growths in sales than our counterparts.
- Asian Metal: The high growth of production and sales relies on ensured raw material supply. How dis your company satisfy demand for raw materials in 2023 when aluminum scrap supply was tight on the whole?
- Mr. Gu: There were some reasons for tightness in aluminum scrap supply in 2023. The first was that China banned waste importing from abroad, so there were notable decreases in imports of aluminum scrap in China. The second was that strict environmental protection policies in China led to shutting down of many environmentally unqualified demolition plants, so supply of home-made aluminum scrap fell short of demand. The third was that, as governments vigorously encouraged and guided development of green circular industry, in 2023 large new secondary aluminum alloy production capacities were built in China, which goaded notable growths in aluminum scrap consumption. At our Huizhou Shuaiyichi plant, over 50% of aluminum scrap supply comes from our end clients, which spares us around 50% of aluminum scrap purchases. In 2024 we plan to increase utilization rate of scraps supplied by our clients to 70-75%. Meanwhile, Guangdong, as the main distributing centre on aluminum scrap in China, has natural advantages in aluminum scrap supply, so tightness in aluminum scrap supply in 2023 imposed limited effects upon our company.
- Asian Metal: This year Chinese government will advance large-scale equipment renewal and consumer goods trading-in. What influences do you think this will have upon secondary aluminum alloy consumption and what fields will the influences center on?
- Mr. Gu: Governments to promote equipment renewal and consumer goods trading-in will surely advance secondary aluminum alloy consumption. Regarding specific consumer goods, auto industry will be the main field, especially the NEV industry is expected to undergo the largest growths in secondary aluminum alloy consumption. Household appliance and 3C electronic products industries will also play a main role in consumer goods trading-in as they maintain a large proportion in secondary aluminum alloy ingot consumption. Though local governments have not laid down specific methods in equipment renewal and consumer goods trading-in, we believe that this will bring significant benefits to the secondary aluminum alloy industry.
- Asian Metal: Do you think the new energy vehicle industry as well as the large-scale equipment updates and the replacement of old consumer goods with new ones will become major growth points for demand of secondary aluminum alloy in 2024?
- Mr. Gu: First, I think the new energy vehicle industry, one of the fastest growing industry in recent years, is still in the climbing stage for high consumption growth now. Owing to constant promotion and development of the integrated die-casting industry, new energy vehicle industry remains a major growth point for the consumption of secondary aluminum alloy currently. Second, boosted by governmental policies related to large-scale equipment updates and the replacement of old consumer goods with new ones, we are optimistic about the demand for secondary aluminum alloy from the home appliance industry and the 3C electronics industry. We have communicated with Huawei and other companies recently and all of them are relatively optimistic about the order volume in 2024.
- Asian Metal: The secondary aluminum alloy industry now witnesses overcapacity, but there are still new projects going into operation now. How does your company keep rapid growth of business facing fierce competitions in the market and do you still have new projects coming on stream in the future?
- Mr. Gu: The capacity utilization rate of our plant in Huizhou has been at a high level and even in a saturated state in the recent years, which is mainly caused by our advantages in location, our policies of seeking excellent customers by the core business of direct supply of aluminum liquid and developing high-net-worth consumers by the auxiliary business of aluminum alloy ingot. In the face of the overcapacity in secondary aluminum alloy industry, we give priority to stabilizing our production and sales and optimizing our own customers among many customer groups rather than feel worried. We definitely have new projects to be launched in the future and our group company is making preliminary surveys and checks for these projects at present, and we will disclose details in the group announcement.
- Asian Metal: Thanks again for your sharing, Mr. Gu, and we wish your company a greater success.
- Mr. Gu: We'd also like to thank Asian Metal for providing such a good platform for us to exchange views and develop together.