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Metal Casting Technologies : September 2005
Despite the above short term challenging trends, the overall car assembly is expected to double from current level to 7 m by Y2009 as projected below. 4. Some positive horizons in the market Today China imports high quality and latest technology based engineering and machine tool units from Germany, Japan to manufacture a range of high quality and highly skilled, mass- produced industrial and consumer durables for the global markets. This type of trade is what opens up a vast opportunity for the Chinese castings manufacturers and OEM producers based in China to tap rough & machined cast components but also the higher value added OEM and ODEM market that is currently in excess of 100 b US$ per yea, which is expected to reach at least 175 b US$ before 2010. The industrial out put, which is already one of the highest in the world, is expected to grow on an average figure of 12% per year until In addition, there is growing opportunity in electronics, telecommunication, navigation, and medical areas where there are requirements for quality castings made out of ADI, aluminum and stainless steel castings having a total market potential in excess of US$ 3.5 b now that is expected to reach Us$ 9 by 2010, around world expo time in Shanghai. Till then the growth in the foundry industry continues to tie its fate to human and material transport business growth in China and its recent ambitious activities of investments in the Russian vehicles market that si estimated to have a potential of one million units per year: In progressive Russia: • Nanjing Automobile group, Fiat's partner has clinched a US$ 200 million deal to produce light duty trucks, 40,000 trucks pant by 2010. • Chery Auto, Anhui, expects to produce its Feng Yun sedans and Tiggo sport utilities (SUVs) having yearly capacity of 6,500 units in Y2006. • First Automotive Work, FAW, the State owned company has begun assembling 800- 1000 SUVs this year and expect to reach 6,000 units next year. Hence transport in China means castings business. ASIAN OVERVIEW CHINA ACKNOWLEDGEMENTS 1. Foseco Foundry International Ltd. UK 2. JDPower & Associates 3. The Economist 4. The Fortune 500 magazine 5. AFS Foundry data on Web 6. DGIV/Euopean foundry association 7. Mechanical engineering Society of China 8. China Foundry Association, Beijing 7. China Special Report, Auto New, China Daily 8. MOFTEC 9. Ministry of Machinery & Electronics 10. Foseco Foundry China customers 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0 10000 20000 30000 40000 50000 60000 70000 80000 CHINA -- Car Assembly Trends -- (J.D.Power) '000's Units per Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CHINA -- INDUSTRIAL OUTPUT; Reported % Change on Previous Year % Change 0 2 4 6 8 10 12 14 16 18 20 2010 AN ECONOMIC SNAPSHOT ON CHINA Metal castings being the enablers of many metal manufactures, it is therefore worthwhile to keep a focus on the economic trends in China for its domestic growth and that of its exports. China is still being fuelled by strong external trade, and real gross domestic product (GDP) grew a stronger than expected 9.5 percent in the first half of 2005, according to the August issue of the China Quarterly Update. With merchandise exports up by 33 percent in the first half (in US$ terms), and by 29 percent in July, China reached a trade surplus of US$50 billion in the first 7 months. Imports, meanwhile, decelerated significantly from 33 percent in 2004 to 14 percent in the first half. The report says growth is expected to slow to about 9 percent for the whole year of 2005, and about 8 percent in 2006, due to reduced growth expected in world economic activity and trade, on top of already slowing domestic demand. Global trade growth is projected to fall from 12 percent in 2004 to 6.4 percent in 2005, which is likely to affect China's exports. "Despite some softening, the macroeconomic outlook for China remains favourable. The focus ahead should be more on the structural issue of rebalancing growth. The rebalancing would be away from the relatively volatile export and investment-based growth to more stable consumption-based growth," says David Dollar, World Bank Country Director for China. According to the report, slower credit and profit growth, lower foreign direct investment and modest growth in machinery and equipment imports are pointing to a further slowdown in investment to a more sustainable pace. Signals are that the government's measures to slow the real estate sector are also starting to work. National accounts and customs data also suggest a slowdown in domestic demand in the first half of 2005. "Despite an unavoidable slowdown in exports, external risks appear modest," says Bert Hofman, World Bank Lead Economist for China. "Domestically, a two-way risk is formed by the considerable uncertainty on the extent to which domestic demand, notably investment, is slowing." Thus, on economic policies, the report suggests that sustaining rapid growth means finding the right balance between preventing a sharp investment-led downward correction and, at least as important, avoiding excessive investment, deflation, and a large decline in profitability that would risk an even harder landing. The report says the change in China's exchange rate regime represents a desirable move in the direction of greater exchange rate flexibility. 26 www.metals.rala.com.au