Development of China's Copper Plate and Strip Industry --Part I



Development of China's Copper Plate and Strip Industry--Part I

As a metal, copper comes in third only to iron and aluminum in terms of importance in national economy and as a non-ferrous metal, it ranks second in terms of consumption. The copper industry is a pillar of the non-ferrous metal industry in China. In 2016, the copper industry's assets accounted for 23% of the national non-ferrous industry's total, and its income accounted for 35%. China also holds an unrivaled position in the world's copper processing material market because it is the main driving force for the stability and growth of the market.

Copper plates and strips are important types of copper processing materials, as well as copper processing products with the highest technical content. They are widely used in electronics, electrical, communication, instruments & meters, instrument control & machinery, medicine, optics, military, aviation & satellites, transportation, automobile manufacturing, construction, finance, clocks & watches, machinery manufacturing and other fields.

Since the reform and opening up, with the rapid development of the national economy, the domestic demand for copper plates and strips has increased sharply, promoting the rapid growth of the copper plate and strip production industry. The domestic output of copper plates and strips soared from 73.018 tons in 1978 to 3.25 million tons in 2016. Since 2004, China has become the largest copper plate and strip producer in the world. In the meantime, the copper plate and strip production technologies in China has been greatly improved through several large-scale technology introduction, absorption and innovation, and the product quality has achieved the international advanced level. The domestic copper plate and strip industry has shifted from the production of ordinary products to high-precision ones.

1 As the policy environment continues to improve, the enterprises should seize the opportunity of the supply-side reform.

In response to the challenges brought by the new round of industrial revolution (industry 4.0), the State Council has issued the "Made in China 2025" plan, which sets the goal of building a manufacturing power and proposes five major projects and ten key areas including new materials. At the end of 2016, the State Council set up the National Leadership Team for the Development of New Materials Industry, which is composed of 23 departments. In early 2017, the National Expert Advisory Committee on the Development of New Materials Industry was established. The copper processing industry plays an important part in implementing a series of major initiatives such as carrying out the "Made in China 2025" plan, building a manufacturing power, promoting steady industrial growth, adjusting industrial structure and increasing efficiency.

On September 28, 2016, the Ministry of Industry and Information Technology released the Non-ferrous Metals Industry Development Plan (2016-2020). The Plan has included new materials including copper materials as key areas and pointed out that their development focus is on technological innovation, high-end materials and intelligent manufacturing technology. In addition, the Plan specifies that by 2020, refined copper production should reach 9.80 million tons, apparent consumption of refined copper should reach 13.50 million tons, with an average annual growth rate of 3.3%; the proportion of the sales income of highly processed products to the main business income of the whole industry should be increased from 30% in 2015 to 40%; the proportion of scientific research expenditure to main business income in key non-ferrous metals industries should be raised from 0.6% in 2015 to 1%.

On June 5, 2016, the General Office of the State Council printed and distributed the Guiding Opinions on Creating a Good Market Environment, Promoting the Structural Adjustment and Transformation and Increasing the Benefit of Non-ferrous Metals Industry (State Council General Office Document No. 42 of 2016), which have included "high-precision electronic copper strips, copper-nickel alloy plates and strips and high-performance copper foil" as key basic materials.

To promote the domestic basic research on copper and copper alloy processing, enhance independent innovation and original innovation ability, solve common technical problems in the production of high-performance, high-precision copper and copper alloy, improve the international competitiveness of products, and meet the great demand for national economic and social development and high technology development, the "manufacturing technology for high-performance, high-precision copper and copper alloy plates and strips" and the "manufacturing technology for the special processing material-high-performance copper alloy" were both listed as national key research and development plans in 2016. The two projects were headed by Academician Xie Jianxin from University of Science and Technology Beijing and Professor Mi Xujun from the General Research Institute for Non-ferrous Metals respectively.

The improving policy environment has created a good environment for the healthy development of the copper plate and strip processing industry. Copper plate and strip processing enterprises can make full use of the national supply-side structural reform to accelerate technological innovation and structural adjustment, develop copper materials for emerging industries, and improve the added value of products to seize the high-end market while maintaining steady development in the traditional electronics industry and other fields.

2 As the market grows year by year, the demand for high-precision new types of plates and strips is increasing rapidly.

The annual output of copper processing materials in China increased from 451,800 tons in 1990 to 16.82 million tons in 2016, with an average compound annual growth rate of 25.40%. From January to July, 2017, the output was 12.1763 million tons (including repetitive statistics). With the rapid development of China's copper materials industry, the copper plate and strip industry has also grown rapidly. The market size of China's copper plate and strip industry was roughly RMB 96.4 billion, RMB 99.8 billion and RMB 105.8 billion in 2013, 2014 and 2015 respectively and about RMB 114 billion (estimated by the China Non-ferrous Metals Processing Industry Association) in 2016, showing rapid growth. Since 2004, China's copper processing materials production and consumption has ranked first in the world for 13 consecutive years. Meanwhile, China's copper plate and strip production and consumption also ranks first in the world, accounting for about 2 / 5 of the world's total production and consumption.

Copper plate and strip production was 3.25 million tons in 2016, and grew from 882,000 tons in 2006 to 2.51 million tons in 2015, with a compound annual growth rate of 12.3%. China ranks first in the world in terms of year-on-year growth of copper plate and strip production and is also the world's fastest-growing market in terms of copper plate and strip consumption. In 2017, the domestic demand for copper plates and strips was about 3.6 million tons and the development space is broad. The copper strip production in China has been on the rise year by year except for a slight decline in 2009 and 2011.

In recent years, with the continuous expansion and change of market demand, copper plate and strip processing enterprises in China have experienced dramatic changes in terms of capacity, output and product structure. The demand for ordinary plates and strips has basically stabilized, and the supply and demand has balanced out. However, due to the rapid development of automobiles, electronics and electrical appliances, electric power, telecommunications, clothing and other industries, the demand for copper plates and strips is not only reflected in the growth of quantity, but in the high requirements for varieties, quality, performance and specifications. Therefore, the demand for high-precision new types of plates and strips has been increasing rapidly in recent years, and has exceeded supply. This provides a broad market for copper plates and strips.

3 China's net import of copper plates and strips will continue.

China's net import of copper processing materials and copper plates and strips has continued for some time. Copper plates and strips are an important part of the import and export trade of copper processing materials in China. From 2006 to 2016, China's import of copper materials, plates and strips declined year by year (except for 2010) and the import of copper plates and strips accounted for 18-24% of the total import of copper processing materials. China's export of copper processing materials stabilizes between 450,000-560,000 tons each year, where the export of copper plates and strips is between 26,000-50,000 tons, accounting for 5-8%. Since 2014, China's net import of copper plates and strips has accounted for more than 80% of the total net export of copper processing materials. From January to June 2017, China's net import of copper plates and strips was 1.49 times that of copper materials. This shows that the development rate of copper plates and strips is still lower than that of other copper processing materials. In addition, although China's net import of copper plates and strips from 2012 to 2016 continuously declined compared to that from 2006 to 2011, the proportion of their net import to that of copper processing materials was on the rise. This indicates that our country currently cannot meet domestic demand for high-precision copper plates and strips, and that these products are inadequately supplied in the domestic market. And in the next 2-3 years, the net import situation of copper processing materials, especially copper plates and strips, will not be fundamentally reversed.

China is the largest importer of copper plates and strips in the world. In addition to China, Japan, Germany and the United States are the largest copper plate and strip producers in the world. The main countries and regions exporting copper plates and strips are Germany, the Taiwan region of China, and Japan, and the main countries importing copper plates and strips are China, France, the United States and Italy. Our country mainly exports to countries and regions including Hong Kong, Japan, Malaysia, Thailand, India, Bangladesh and Vietnam, which are mainly underdeveloped regions of Asia. Our country mainly imports copper plates and strips from developed countries and regions such as Japan, South Korea, the Taiwan region and Germany.

4 The production capacity of China's copper plates and strips is mainly concentrated in economically developed areas.

At present, the production of China's copper processing materials in China is mainly concentrated in economically developed areas, such as the Yangtze River Delta region, the Pearl River Delta region and the Ring-Bohai Region.

The annual copper plate and strip production capacity of five provinces and autonomous regions - Zhejiang, Jiangxi, Anhui, Guangdong and Jiangsu accounts for 22%, 15%, 14%, 10% and 7% respectively of the country's total. The five provinces account for 68% of the country's total output of copper materials.

China has more than 200 copper plate and strip production enterprises, which are small in size and have relatively poor production technology and equipment. The output of Truchum Advanced Materials and Technology, and Ningbo Xingye Shengtai exceeds 100,000 tons. Among the high-precision plate and strip enterprises that can satisfy modern technology needs, the top five enterprises by total output are Truchum Advanced Materials and Technology, Chinalco Luoyang Copper, Ningbo Xingye Shengtai, Ningbo Jintian and Anhui Xinke. In 2016, the total output of the five enterprises accounted for 15.1% of the country's total, showing low concentration of the industry. The largest domestic producer of plates, strips, and electronic strips for lead frames is Ningbo Xingye Group. In 2016, the company's output reached 120,000 tons, which alleviated the domestic urgent need for high precision copper and copper alloy plates and strips. Among the main producers of elastic tin, phosphor and bronze materials, Ningbo Xingye Group and Anhui Xinke have the largest capacity.

5 There are still some problems in the industry, such as low profit margin and inability to localize high-end products.

Despite technological progress over more than 30 years, China still has a considerable gap to bridge with advanced industrial countries in terms of copper plate and strip production technology and product quality. At present, the following problems exist in the industry:

(1) Low profit margin and greater financial risk

At the national macro-economic level, the copper plate and strip processing industry still faces a big downside pressure. Due to low processing costs and weak prices of the industry, enterprises are having greater difficulty in production and operations and have recorded profit reduction a result of inadequate demand and rising costs. The financial risk is increasing, and the debt rate of enterprises is rising.

(2) Extensive operations and low benefit of copper plate and strip processing enterprises

At present, the extensive production and operations, low degree of intensification and similar product structures of quite a number of production enterprises have resulted in fierce competition in the domestic low-grade copper plate and strip market, and the low benefit of enterprises. For example, the yield rate of copper plates and strips differs with production methods and product types. As foreign developed countries generally adopt the large cast ingot processing method, their comprehensive yield rate of copper plates and strips can reach up to 70%, while this rate in our country is about 50-55%. This has led to rising processing costs and declining profit of copper plates and strips in China. Increasing the yield rate plays an important part in saving energy, and reducing metal consumption and costs.

(3) Slow localization of key high-end varieties

In addition, China's copper plate and strip processing industry is seriously hindered by problems such as a large number of small-size enterprises, fewer varieties, low precision, poor uniformity and inferior quality of products, and disorderly competition between enterprises. This situation has led to domes tic enterprises' overcapacity of low-end products and their heavy dependence on the import of high-end products. Although the processing equipment and production technology of some large domestic copper plate and strip enterprises have reached the world's advanced level, some high-end high-precision copper plates and strips still need to be imported in large quantities due to backwardness in new alloy optimization and core technology, especially high-end processing equipment and the import quantity is dramatically increasing year by year. This has seriously restricted the development of China's high and new technology industry and national economy. It also shows that the production of high-precision copper plates and strips remains a vital issue in the production of copper plates and strips in China, and that copper plates and strips still have a huge potential market.

6 With abundant consumer demand, the downstream industrial chain should be closely associated with the upstream industrial chain to ensure coordinated development.

(1)The copper plate and strip industry chain is divided into four parts: copper ore dressing, copper smelting, copper plate and strip processing, and copper plate and strip consumption. Among them, copper ore dressing and copper smelting industries are upstream industries. The copper plate and strip processing industry is in the middle of the industrial chain and plays an important connecting role. The consumers of copper plates and strips such as electronic and electrical, electric power, light industry, machinery manufacturing, household appliances, new energy, automobile, construction, national defense and transportation are downstream industries.