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Bon voyage!
editorial
Food for thought
Richard Felton EDITOR
T
he remarkable success story of Zhuzhou Cemented Carbide detailed in this issue of Metal Powder Report puts flesh on the bones of the Chinese hardmetals giant whose existence has been becoming more apparent by the month. The real value of reports of this nature is the time perspective they can give readers - in this case a 20-year comparison of then and now. Chinese dominance of the market today extends far beyond just having the world's largest reserves of tungsten into the higher levels of skilled use of that resource. Not every Chinese cemented carbide manufacturer can compete at world level, and indeed there are many that never will. But there are some who are very good indeed - growing in terms of world-class reputation as well as the quality, sophistication and volume of their production.
Zhuzhou Cemented Carbide is undoubtedly one of the leaders in the burgeoning Chinese market. What we see today is the fruit of a two-decades-plus policy of steady investment in skills, machinery and research and development. Its rise to prominence should be seen in the context of what has happened in the Chinese hardmetals industry more widely in those past two decades. The country is estimated to have 45 per cent of the world’s tungsten ore reserves and to produce around 70 per cent of the essential raw materials on which the hardmetals industry is based. In the early 1980s China produced around 5000 tonnes of cemented carbide annually, about 20 per cent of world production, with most of it being consumed in the country's internal markets. By last year production had reached 15 000 tonnes a year, triple what it was in the 1980s and, indeed, double the 7500 tonnes achieved 10 years ago in 1995. That indicates that the rate of change is increasing in terms of production, and that is borne out by China's current position in the world market. By last year China had cornered about 40 per cent of the global market and exports amounted to 20 per cent of production, or 3000 tonnes. The larger Chinese companies have reorganised themselves vertically so that they have access to raw materials and every
Straws in the wind AFICIONADOS of quarterly and half-yearly corporate reports in the US could be forgiven a slight shudder when they consider the PM industry there. Now while it is true that one swallow does not make a summer and one bad quarter does not make a bad year, it is also true that there are some ominous signs about. The bankruptcy of Brockway Pressed Metals aside, one of the PM industry's leading lights, GKN, has announced a decline in metal powder and PM part sales over the first half of the year. Although UK-based, GKN is the owner of two giants of the North American PM industry - parts maker GKN Sinter Metals
metal-powder.net
and powder manufacturer Hoeganaes. Their sales decline is entirely due, they say, to a slump in sales in North America, the area which accounts for more than half GKN's PM sales. And at the heart of it lies the decline in market share and the huge losses being racked up by General Motors and Ford. This may, of course be nothing more than an unfortunate statistical blip. But thankfully for GKN and its employees, operations in the rest of the world look distinctly brighter - sales up 5 per cent in Europe and some 16 per cent in Asia and Latin America. A global approach to business obviously has its benefits.
intermediate stage on the way to final production and sales. This means that they can service the markets at several levels, trading in processed tungsten as well as finished goods and generating good profits while doing so. Their customers, after all, include large European and American toolmaking concerns whose balance sheets make very comfortable reading for their shareholders and which have had the foresight to establish themselves in the Chinese market comparatively early. Wealth creation is a little discussed aspect of the hardmetals industry, whose manufacturers seem by nature reticent to the point of taciturnity when questions of profitability are raised. This may be a natural and rather becoming modesty, or just plain tight-lipped, depending on your point of view. But it is worth remembering a wellinformed estimate made at the European Powder Metallurgy Association's Lausanne meeting in 2002, with its focus on diamond and hard materials, that in hard cash terms, hardmetals in Europe created 35 per cent of the wealth generated by the entire PM industry. Add in diamonds and the proportion increased to about 50 per cent. The success and wealth creation potential of companies like Zhuzhou Cemented Carbide certainly bode well for the future health of the Chinese economy.
Bon voyage! THIS MONTH sees the long-awaited visit to China by a trade delegation from the US made up of representatives of the Metal Powder Industries Federation. The 25strong party will be based in Shanghai and aims to meet for talks with Chinese powder makers, PM manufacturers and, perhaps most importantly Tier One companies and their major customers, automotive companies. It should be a bit of an adventure. Anyway, it’s an appropriate moment to wish them all the best for their endeavours.
October 2005 MPR
3
Food for thought
Richard Felton EDITOR
T
he remarkable success story of Zhuzhou Cemented Carbide detailed in this issue of Metal Powder Report puts flesh on the bones of the Chinese hardmetals giant whose existence has been becoming more apparent by the month. The real value of reports of this nature is the time perspective they can give readers - in this case a 20-year comparison of then and now. Chinese dominance of the market today extends far beyond just having the world's largest reserves of tungsten into the higher levels of skilled use of that resource. Not every Chinese cemented carbide manufacturer can compete at world level, and indeed there are many that never will. But there are some who are very good indeed - growing in terms of world-class reputation as well as the quality, sophistication and volume of their production.
Zhuzhou Cemented Carbide is undoubtedly one of the leaders in the burgeoning Chinese market. What we see today is the fruit of a two-decades-plus policy of steady investment in skills, machinery and research and development. Its rise to prominence should be seen in the context of what has happened in the Chinese hardmetals industry more widely in those past two decades. The country is estimated to have 45 per cent of the world’s tungsten ore reserves and to produce around 70 per cent of the essential raw materials on which the hardmetals industry is based. In the early 1980s China produced around 5000 tonnes of cemented carbide annually, about 20 per cent of world production, with most of it being consumed in the country's internal markets. By last year production had reached 15 000 tonnes a year, triple what it was in the 1980s and, indeed, double the 7500 tonnes achieved 10 years ago in 1995. That indicates that the rate of change is increasing in terms of production, and that is borne out by China's current position in the world market. By last year China had cornered about 40 per cent of the global market and exports amounted to 20 per cent of production, or 3000 tonnes. The larger Chinese companies have reorganised themselves vertically so that they have access to raw materials and every
Straws in the wind AFICIONADOS of quarterly and half-yearly corporate reports in the US could be forgiven a slight shudder when they consider the PM industry there. Now while it is true that one swallow does not make a summer and one bad quarter does not make a bad year, it is also true that there are some ominous signs about. The bankruptcy of Brockway Pressed Metals aside, one of the PM industry's leading lights, GKN, has announced a decline in metal powder and PM part sales over the first half of the year. Although UK-based, GKN is the owner of two giants of the North American PM industry - parts maker GKN Sinter Metals
metal-powder.net
and powder manufacturer Hoeganaes. Their sales decline is entirely due, they say, to a slump in sales in North America, the area which accounts for more than half GKN's PM sales. And at the heart of it lies the decline in market share and the huge losses being racked up by General Motors and Ford. This may, of course be nothing more than an unfortunate statistical blip. But thankfully for GKN and its employees, operations in the rest of the world look distinctly brighter - sales up 5 per cent in Europe and some 16 per cent in Asia and Latin America. A global approach to business obviously has its benefits.
intermediate stage on the way to final production and sales. This means that they can service the markets at several levels, trading in processed tungsten as well as finished goods and generating good profits while doing so. Their customers, after all, include large European and American toolmaking concerns whose balance sheets make very comfortable reading for their shareholders and which have had the foresight to establish themselves in the Chinese market comparatively early. Wealth creation is a little discussed aspect of the hardmetals industry, whose manufacturers seem by nature reticent to the point of taciturnity when questions of profitability are raised. This may be a natural and rather becoming modesty, or just plain tight-lipped, depending on your point of view. But it is worth remembering a wellinformed estimate made at the European Powder Metallurgy Association's Lausanne meeting in 2002, with its focus on diamond and hard materials, that in hard cash terms, hardmetals in Europe created 35 per cent of the wealth generated by the entire PM industry. Add in diamonds and the proportion increased to about 50 per cent. The success and wealth creation potential of companies like Zhuzhou Cemented Carbide certainly bode well for the future health of the Chinese economy.
Bon voyage! THIS MONTH sees the long-awaited visit to China by a trade delegation from the US made up of representatives of the Metal Powder Industries Federation. The 25strong party will be based in Shanghai and aims to meet for talks with Chinese powder makers, PM manufacturers and, perhaps most importantly Tier One companies and their major customers, automotive companies. It should be a bit of an adventure. Anyway, it’s an appropriate moment to wish them all the best for their endeavours.
October 2005 MPR
3