by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
button in toolbar for more information.
Metal Casting Technologies : September 2005
ASIAN OVERVIEW This paper highlights the changing landscape of the Chinese foundry industry in the light of the recent trends in automotive industry, the bellwether of the economy. An attempt is made to highlight the car industry status, its challenges of declining profitability due to the rising costs of alloys, energy, almost all inputs in the face of reducing selling prices experienced by both domestic and foreign owned car manufactures. Even though the major driving factor for the Chinese foundry industry is the local motor, transport sector a reference is also made to the general trends in the new horizon of the Chinese automakers investment in Russia. 1.There is no industrial revolution without castings enterprise! Globally, today, nearly 65 million tonnes of castings are being produced and consumed, this is expected to reach 85 million tones within next ten years of period wherein the major increase in the consumption is contributed by internal consumption drive offered by the Chinese economy. Add to this the immense potential increase in castings migration from the American, European countries to China for enhanced partnerships in manufacturing and fabrication of not only raw and machined components but also for the final utility/ machine for use in both local and overseas markets. The recent emergence of the China as the global powerhouse for manufacturing industry is case in point. 2. The Foundry Industry in China The foundry industry in China is very large, estimated to produce about 18 million tonnes of castings, the largest in the world in volume terms but significantly lower in value terms as compared to 14 million tonnes American and 4-5 million tonnes German foundry industry. China exports about 10 per cent of its output in the form of rough and machined castings. Currently there are more than twenty thousand foundry plants spread across the State owned captive units, county owned castings enterprises and the foreign owned and Sino-foreign JV enterprises. The captive foundries are defined those that are located within the sites of large enterprises for instance producing machine tool, railway, turbine, truck, cars, pumps, engines and pipes etc. Therefore by virtue of these business relationships between the foundry shop and the parent group a captive foundry tends to depend on the performance and policy fate of its parent company for business direction, capital investments/divestments, and human skill development objectives. However, increasing trend in the transformation of foundry enterprises as independent profit or business units may also be witnessed. Mergers and consolidation are also very common in both the SOE and the locally owned private enterprises. The foundry industry also has seen the growing competition from the overseas business enterprises having set up wholly owned or joint ventures to exclusively manufacture castings --rough and machined to supply to both local and overseas markets. The castings migration form Europe is fastest in engineering, automotive, energy and railway sectors. The Australian foundries are looking for cost-effective castings for mining, engineering and water transport industries. IA strong link between foundry industry and the automotive or motor sector trend emerges strongly. The Chinese economy will continue to be robust until 2010, by then the local car industry is expected to overtake the Japanese market and by 2015 expected to surpass the USA as the leading car producer having in excess of 15 m cars. 3. The current challenges in the Chinese automotive Industry It is interesting to note that Steel Mill<>Car<>Foundry connect very closely because of which the general engineering, plastic injection moulding, glass, electronics and electrical engineering businesses also tend to relate to health of the motor or transport industry --cars, railway, trucks, LCVS< buses, motor cycles, scooters, tractors, ships and airplanes. It is possible to predict the health of any local foundry industry by gauging the status of the motor, vehicle industry as it typically represents 75% of the castings consumed directly in the form of parts and spares and the rest indirectly as machines and tools that construct and run the transport industry. The recent cooling down measures in the macro economic sectors of real-estate, steel, cement and restricted credit facility to the consumers has resulted in only 4 % growth in six months over year 2004 that had grew more than 20% over, the Table 2.3 reflects the Return on Investment drop in year 2004 compared to the year 2003.Only latest entrants such as Honda, Hyundai, Shanghai GM having net assets les than Rmb 12 b Rmb have managed to do marginally better. Only Shanghai VW and FAW VW Jvs appear to have fixed assets in excess of Rmb 25 b whilst the recent entrants Honda, Toyota, Shanghai-GM and Hyundai have less than 1Rmb 12 b in fixed investments. Shanghai VW, FAW --VW and Toyota had approximately 3-10% Return on sales where as GM, Honda and Hyundai achieved 14-20% range in the same period. However in global standards almost all American giant car manufacturers had less than 5% return on sales reflecting a very bleak scenario in world markets. CHINA Table 2.3: The recent profitability & Return n Invvsetment trend in car manufacturers in China Return on Investment ROI ROI Car Makers in China Y2003 Y2004 Honda 48% 42% Hyundai 50% 34% Toyota 28% 19% Shanghai -VW 18% 10% Shanghai GM 40% 30% FAW-VW 21% 8% Source: Garson Mgmt, Auto Collaborative, S- S-VW report. April 2005 IN CHINA TRANSPORT MEANS CASTINGS BUSINESS -- THE TRENDS & THE FUTURE By Gopal Padki, CEO Foseco China 24 www.metals.rala.com.au