Survey on Aluminum Extrudate Industry in China

- Part One

Released Date: June 2006

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Researched & Prepared by:

Guangzhou CCM Chemicals Co., Ltd.

Guangzhou, P. R. China

Updated in July 2001

Copyright by Guangzhou CCM Chemicals Co., Ltd. (P. R. China)

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Content

Introduction

Methodology

Executive Summary

I. Flow Chart of Aluminum Extrudate Production

II. Brief History of Aluminum Extrudate Production in China

III. Government Role in Aluminum Production

IV. Overall Situation in 1999 and 2000

V. Import & Export of Aluminum Extrudate

VI. USA Market

VII. Geological Distribution of Aluminum Extrudate Manufacturers

VIII. Conclusion & Suggestion

Glossary:

Foreign:

Anything/activities pertaining to individual/unit coming from territories outside Mainland, P. R. China. E.g., foreign countries means countries except mainland China.

Toll Production/manufacturering:

Someone, usually a trader, imports the raw material (like aluminum ingot) from overseas or buy the raw material from somewhere else in domestic market, entrusting the factory/manufacturer to produce the final product (like aluminum extrudate). Then the trader exports the final product to oversea customers or sells it to domestic buyers.

Ownership:

- State owned:

The whole asset of a factory/company is invested and owned by the local/central government.

- Private owned:

The whole asset of a factory/company is invested and owned by individual person. The owner has his/her own right to the management of the factory/company.

- Stock:

The company is managed in form of stock company. It may/may not listed in the Stock Market. But the management must comply with the rule of stock company.

- Joint venture:

Foreign company and Chinese company invest together the entity. The profit is shared by both side of cooperators and on mutual benefit. The Chinese partner maybe an individual or a state owned unit.

- Wholly foreign owned:

The investor/owner of the company is an individual/unit coming from areas outside the mainland China.

Extrusion Press:

Unit: MN—million Newton

Inside the table below, the number in the bracket indicates the sets of that kind of extrusion press. E.g. 20MN (2) indicates that the factory has two set of machine, each with extrusion press of 2 MN.

In case of the manufacturer discloses the total number of extrusions, that number is enclosed. Otherwise only the largest extrusion press is indicated.

- E.g. “20MN(2), 18MN(1), 5.5MN(2). Total 5 sets.” means that the factory disclosed that they have 5 sets of extrusion in total, two of them are 20MN in press, one is 18MN in press and the rest two 5.5MN in press.

- E.g. “20MN, 18MN. Total 12 sets.” means that the factory have 12 sets of extrusion in total including the largest set of 20MN in press. But the factory did not disclose how many sets are 20MN, or how many sets are 18MN.

- E.g. “20MN, 18MN” means that the large extrusion in the factory include the largest of 20MN in press and 18MN in press. But the factory did not disclose how many set in total that they have, neither did they mention how many there are each kind of machine

- E.g. “20MN” means that the largest extrusion is 20MN in press. But factory did not disclose how many extrusion they have in total, neither did they disclose the information of other extrusion.

Alloy Designation:

The assigned brand of aluminum alloy that the factory used during the production of aluminum extrudate. This designation complies with the nonmenclature by American Aluminum Association.

Associated Company:

Only those company/companies that are related to the production of aluminum extrudate are included in this report. For many large corporations have a lot of subsidiaries, some of which engage in the business irrelavent to the aluminum extruade. Hence these companies are excluded in this survey.

Introduction

By end of 2000, the production of primary aluminum in China has been 2,817,000MT/year, next only to that of in USA and Russia. The Chinese people have shown to the world the fast pace in developing the aluminum downstream products by fully utilizing the domestic resources. The aluminum fabrication has become one of the most important industries in China.

Aluminum extrusion profile, or extrudate, being an items used widespread in construction, industries and other areas, has been growing rapidly in the past. Though Chinese aluminum extrudate industry is characteristics of its large production and low quality, the potential ability of Chinese people to improve the production technology and the enhanced position of Chinese material among the international market have got the acquiescent from oversea businessman.

The present report is to offer better understanding on the Chinese manufacturers of aluminum extrudate and uncover the actual situation therein, aiming to illustrate what this industry is today and how it will go in the years follows.
Aim

The aim of this report is:

- To find the major Chinese aluminum extrudate manufacturers in details, including background, aluminum extrudate production situation, ingot sources, associate companies, etc.

- To find the direction and strategy of Chinese manufacturers for the USA market, if possible.

- To find the role that the Chinese government play in the aluminum extrusion industry.

 Thus this report is consist of two parts:

- The main body of market report thereinafter.

- The appendix I, in a separate file, the situation of top 90 manufacturers in China.

- The appendix II, also in the separate part, the notices of some primary suppliers mentioned in the appendix I.

Methodology

…… (Omitted)

The details information of each manufacturers has been edited and summarized in the appendix for reference.

Executive Summary

- Comparing with other kinds of aluminum derivatives, the aluminum extrudate is the largest items in production quantity.

- The actual production of aluminum extrudate in 1999 and 2000 is 1,070,000 and 1,300,000MT, respectively.

- There are around 1,100 manufacturers engaging in the aluminum extrudate production, but nearly half of them locating in the sea coast areas of China, especially in Guangdong Province.

- There are over 2,500 sets of aluminum extrusion machines around China and large part of them are outdated and lack of competitiveness.

I. Flow Chart of Aluminum Extrudate Production

II. Brief History of Aluminum Extrudate Production in China

The aluminum extrusion industry in China started in 1956, when NELA-Northeast Light Alloy Co. Ltd. was established. The total production capacity at that time was 6,000MT/year. In 1960s and 1970s, following the establishment of Northwest Aluminum Fabrication Plant and Southwest Aluminum Fabrication Plant, a lots of small to middle size factories had been set up, including Chengdu Aluminum Sections Factory, Tianjin Aluminum Factory.

The aluminum extrudate industry grow up in the end of 1970s, when Liaoning Yingkou Donglin Aluminum Co. Ltd. began to produce the aluminum extrudate for construction purpose. The production capacity during that period reached to 73,000MT/year in the 1970s.

Since the 1980s, the Chinese people introduced in large quantity the oversea equipments, which symbolized the first roaring tide for the aluminum extrudate industry. From 1984 to 1986, the total numbers of aluminum factories increased from 69 to 175. While the total number of extrusion machine increased from 96 sets to 305 sets, and the production capacity, from 90,000MT/year to 380,000MT/year. By 1987, there were 450 set of extrusion machines in total.

From 1989 to 1990, China government restricted the application of aluminum products in construction, which once restrained the ever growing speed for the establishment of new factories. But the production of aluminum still kept increasing.

Starting 1991, the second roaring tide for the aluminum extrudate industry came. This period lasted till 1997. A large number of extrusion press machines were imported from oversea countries. According to some statistics, there had been 2,500 sets of aluminum extrusion press by end of 1997. And there have been no more import of extrusion press afterwards.

By 1997, the total production capacity of aluminum extrudate was 1,800,000MT/year and there were total about 1,300 factories and 200,000 people engaging in this industry. However the average production for per factory was less than 1,000MT/year. Definitely the industrial structure is abnormal and the interacting modification is essential.

From 1997, some small and outdated factories have to stop production or to be annexed by some large ones, due to the uncompetitive production cost and product quality. It is estimated that about 18% aluminum extrudate manufacturers had been driven out of the market. By end of 1999 around 1,100 aluminum extrudate manufacturers were. It is expected that more and more manufacturers will force to quit from this industry in the future.

Table 1. The production of aluminum extrudate over the past years. Unit: 1,000MT

Year	1980	1985	1990	1991	1992	1993	1994	1995	1996	1997
Production	4.7	52.0	100.5	163.5	193.1	226.8	634.5	914.3	827.9	884.5

Table 2. The situation of aluminum extrudate in 1996 and 1997, unit:1,000MT

	Capacity	Production	Import quantity	Export quantity
1996	1,742	828	85	39
1997	1,800	884	69	100

III. Government Role in Aluminum Extrusion Related Industries

1. General

Generally the Chinese government are playing less and less role in the aluminum extrusion industry that they did before.

In the past, under planning economics system, the production of non-ferrous metal products was highly central controlled. Any establishment of new factories must first be approved by central government, mainly the State Planning Committee and the former Ministry of Material, together the former China Non-ferrous Metal Industry Corp. These government organizations draw blueprint for aluminum industry and assigned the task to the appointed manufacturers. All the import & export activities including the toll production, must be carried out by state-appointed companies and must be in accordance with national policy.

Since the end of 1980s, China started the economic reform and lessened the control on the non-ferrous metal industry, including the aluminum industry. The production and sales of aluminum products were running in the aim to meet the demand domestically and internationally. The situation of aluminum industry, like other industries, began in accordance with market economy.

In recent years, China further let off the central supervisional. Some central government organizations, like China the China Non-ferrous Metal Industry Corp, have been dismissed in 1999. All the aluminum factories/companies are under the administration of local government or some large industrial group. This means that the owners/investors or managers have their own right to decide the daily operation of the production, sales and other affairs. But the establishment of new production line or new factory must be approved by local government.

In march 2001, China sanctioned a law for the Joint venture company. According to the new law, the joint venture does not need to submit the production plan to local authorities as they did before. The joint venture can purchase the raw material in domestic market or from oversea market.

2. Import & Export Tariff

From 1992 to 2000, China has announced for three times to lower the tariff on import & export materials. But the decrement on aluminum products has been quite slim.

Import Tariff

The import tariff for aluminum oxide has been decreased from 20% to 18%, while the import tariff for primary aluminum has always been 9%, unchanged. The import tariff for aluminum downstream products, including aluminum extrudate (except windows & doors), has been decreased from 20% to 12%. It is expected that it will decrease in the future but the decrement is limited.

Export Tariff

Principally China levies export tariff on aluminum products. But in 2000 the tariff is zero.

China government encourages the export of aluminum products by VAT rebating. The rebate rate is 15%. E.g., in importing the ingot, the government will charge 17% VAT. But if you use the import ingot to make aluminum products for exporting only, the government will payback 15% VAT. If you buy USD1,000 ingot and use them to make extruade valued at USD15,000 and all of the extruadte is exported, principally you have to pay USD (15,000-10,000)x17% VAT to the government (USD850). But the government rebates 15% VAT. Then you just pay VAT USD (15,000-10,000)x17%-USD (15,000-10,000)x15%=100USD.

Non-tariff barrier

There is no non-tariff barrier for the import of aluminum products. Quota or License is not needed for the import. But China controls the import quantity of aluminum oxide so that to balance the aluminum oxide market in China.

Others

China Customs will supervise the toll production by accounting the export quantity of aluminum products on calculation of the import quantity of primary aluminum.

In other areas, China does not limit the import and export of aluminum product including aluminum extrudate.

Table 3. The tariff for aluminum related products

	Import Tariff		Export Tariff
Items	Favorite rate	Common rate	Custom rate	Temporary rate
Aluminum oxide	18%	30%	0	0
Non-alloy aluminum	9%	14%	30	0
Aluminum alloy	9%	14%	30%	0