Executive Interviews

Asian Metal: Hello, Mr. Han. Welcome to the interview by Asian Metal. Please introduce your company briefly.

Mr. Han: Nantong Hongjin Metal Aluminum Co., Ltd. was established in 2011 and now has an annual production capacity of 250,000t of aluminum alloy. The company, currently one of the largest liquid metal producers in China, is mainly committed to providing high-quality aluminum alloy ingot to domestic and foreign customers, and providing fine aluminum alloy liquid distribution and service to surrounding customers. The company, as the designated qualified supplier for Google and Amazon, mainly provides aluminum alloy products to end customers such as BMW, Mercedes-Benz, Audi, Volkswagen, General Motors, Tesla, Toyota, Honda, Nissan, BYD, NIO, XPENG, Geely, as well as those from industries such as 5G and 3C. The grades of its aluminum alloy products could meet the international standard grades such as ADC12, A380, AC46000, A360, ADC10, AlSi12, A356, B39H, HS1-DAA, R-14, K-Alloy, and special standard grades of various enterprises.

Asian Metal: The demand for secondary aluminum alloy ingot kept weak in the first three quarters of this year, and the market failed to see brisk deals during the traditional peak season, namely from March to April. What do you think is the reason for it?

Mr. Han: In the first three quarters of this year, the demand for secondary aluminum alloy ingot was indeed unsatisfactory as you said, and there are three main reasons. First of all, as the main consumer industry of secondary aluminum alloy ingot, the automotive industry overdrew part of its consumption potential in 2023 through a series of preferential activities in the fourth quarter of 2022. Secondly, in the first half of 2023, the price competition among automobile manufacturers of various brands caused consumers to stand on the sidelines towards the auto market. Finally, the impact of the three-year COVID-19 epidemic has led to a decline in the consumption capacities of end consumers. From the supply perspective, the production capacity of secondary aluminum alloy ingot continues to increase even after the establishment of carbon peaking and carbon neutrality goals, and the market has already witnessed a state of serious excess, with capacity utilization rate under 50%, and the operating rate of the entire secondary aluminum alloy industry in the off-season is as low as about 38%. Coupled with the impact of imported secondary aluminum alloy ingot, the contradiction of oversupply is more prominent. These factors are the main reasons for the weak demand.

Asian Metal: Has your company also suffered from the decline in demand this year, and what is the specific reflection?

Mr. Han: Although various secondary aluminum alloy producers have suffered different degrees of impact this year and the orders of some enterprises in the first half of the year fell by 30%-50% compared with the same period last year, the impact on our company is not great and our sales this year are basically stable compared with last year. What’s more, in some months we have even achieved year-on-year increase, for example, in July this year our sales increased by about 13% against the same period last year. As most of our customer groups are domestic high-quality automobile engine plants and leading die-casting enterprises with strong anti-risk abilities, our orders have not fallen significantly this year. Secondly, our customers have laid out the new energy automobile industry in advance, realizing a smooth transition and balance between new energy vehicles and fuel vehicles.

Asian Metal: September and October are also the traditional peak season for the consumption of secondary aluminum alloy ingot in the market. China's sales of secondary aluminum alloy went up by about 5.92% MoM in September this year. Do you think there will be a substantial increase in October?

Mr. Han: After analyzing both the current and the future situation, I think that it's of small possibility for secondary aluminum alloy ingot demand in the domestic market to weaken in October, but it’s also hard to see a significant increase like the same period in previous years. Vehicle companies hold a large amount of stocks now and don't have sufficient motivation to further raise their output; meanwhile, consumers' purchasing potential is limited. Because of the two factors, the strong demand for secondary aluminum alloy ingot in the traditional peak season in previous years won't appear this year. Our output went up by 14.38% MoM in September and is expected to basically keep steady in October.

Asian Metal: In the recent years, the sales of traditional fuel vehicles have been decreasing with the continuous increase in the proportion of new energy vehicle sales. What impact will this have on the demand for secondary aluminum alloy ingot in the market?

Mr. Han: The development of new energy vehicle industry has indeed had an impact on the secondary aluminum alloy industry, but generally speaking, the consumption of aluminum in new energy vehicles is more than that in fuel vehicles. The aluminum consumption of ordinary fuel vehicles is around 180kg per unit, while that of new energy vehicles is around 280kg now and might increase to over 300kg in the future; however, the structure of the material has changed. As new energy automobiles do not need engines, the development of the new energy vehicle industry has a big impact on the consumption of traditional aluminum-silicon-copper alloy. The demand for traditional aluminum alloy will decrease with the gradual increase in market share of new energy vehicle industry by 2030-2035 when the market would witness the parallel of fuel vehicle and new energy vehicle. However, in order to realize the green and low-carbon development of the automobile industry, it also needs to add different proportions of secondary aluminum alloy to new materials for production of new energy vehicles.

Asian Metal: In terms of the downstream market of secondary aluminum alloy, which section would contribute new growth to the demand in Q4?

Mr. Han: The growth of new energy vehicle industry slows down after its market share exceeded 30%, but it still would be the principle consumption industry in the future due to the huge base of China's automobile market. Moreover, under the background of energy conservation and emission reduction, as well as lightweight designs, the application of integrated die-casting aluminum alloy materials with no heat treatment on new energy vehicles will bring decent growth in the future. I believe that 2023 is definitely a groundbreaking start for new materials in the new energy vehicle industry, and we will see the fast growth of the consumption of the new materials from 2024. Meanwhile, the conversion from fuel vehicles to new energy vehicles will bring both opportunities and challenges to secondary aluminum alloy enterprises. On the one hand, the development of new energy vehicles stimulates consumption on aluminum alloy materials and contributes a lot to the enterprises' sales increase. On the other hand, the further the lightweight trend develops, the more new aluminum alloy materials are demanded. It will bring higher requirements for the producers with regard to production and R&D capabilities. Those who have poor capabilities in production and R&D will have to be gradually eliminated from the market.

Asian Metal: Major manufacturers in the NEV industry have reportedly expanded businesses into the integrated die-casting field. Has your company set your footprint in this field?

Mr. Han: Large-size integrated die-casting is a revolution in the die-casting industry. The new concepts, new techniques and new processes impose new requirements on production materials. To meet demand from the large-size integrated die-casting field, as early as two years ago we initiated research on thermal-treatment-free aluminum alloy materials. Based upon cooperations between our company and universities as well as research institutes, we were granted national invention patent for thermal-treatment-free materials in March 2023. The consumption proportion of secondary aluminum alloy in the thermal-treatment-free materials we designed at the beginning of our R&D process already reached about 30%, which could meet the targets of green and low-carbon development of automobile industry .

Asian Metal: Despite the secondary aluminum alloy over-capacities now, the market would keep seeing new projects put into operation. Facing such fierce competition, how does your company succeed in maintaining high-speed growth? Will you have new projects coming on stream in the future?

Mr. Han: For all walks of society, I always believe that there is no uncompetitive industry, only uncompetitive enterprises. In order to stay competitive amid fierce competition while maintain rapid growth, we need to have forward-looking management philosophy and management experience. Therefore, we plan to file for an IPO next year. To boost competitiveness and expand market share, we, with reference to layout of major automobile companies and industry development plan, set up four plants respectively in Liu'an (Anhui), Xianning (Hubei), Tianjin Economic-Technological Development Area and Funing (Yunnan), with a total production capacity of 720,000tpy. The plants in Liu'an and Xianning would be put into commercial production in October, and the Tianjin plant is scheduled in January 2024, followed by the Funing plant in the first half of 2024. When the four new plants reaches full operation, our group company's total production capacity will reach 1.6 million tonnes per year.

Asian Metal: Thanks for your sharing. We wish your company a greater success.

Mr. Han: Thank you. We wish Asian Metal a prosper business, and we welcome Asian Metal to visit our company in the future.