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The sheet metal sector is currently grappling with significant challenges amidst rising production costs and inventory levels. According to data from the National Bureau of Statistics, industrial investment reached 9.5 trillion yuan from January to August, representing a year-on-year increase of 23%. However, this growth rate was down by 0.7 percentage points compared to January-July and 3.6 percentage points lower than the same period last year. With diminishing industrial investments, the banking sector has also witnessed a decline in activity. The sluggish market conditions and pessimistic outlook in the industry have led to a challenging environment for businesses.
Over the past couple of years, the rapid expansion of sheet metal production has slowed significantly. In 2005, the output of cold-rolled coils across the nation stood at just 11.09 million tons, while galvanized steel coil production was 1.3 million tons, and color-coated coils produced 2.47 million tons. By 2011, however, the output of cold-rolled coils surged to 11.74 million tons, galvanized coils reached 235 tons, and color-coated coils climbed to 3.62 million tons.
Currently, the thin sheet industry is burdened by overcapacity. This year, production capacity growth has notably slowed, and the increase in color-coated production has outpaced galvanized and cold-rolled varieties, leading to improved product value-added. As of now, this year's cold-rolled coil output has dropped to 5.95 million tons, galvanized sheet coils have fallen to 600,000 tons, and color-coated coils stand at 1.97 million tons—a significant decrease.
Additionally, the expansion of production capacity has led to increased regional concentration. According to Mysteel statistics, as of 2012, there were a total of 942 thin sheet production lines with a capacity of 226.71 million tons. The East China region leads with 571 production lines and a capacity of 11.428 million tons. Conversely, the northwestern region has only 11 production lines with a capacity of 3.39 million tons.
Despite the expansion of thin sheet production capacity, the downstream industries like automotive, home appliances, and real estate have not kept pace. Data shows that in June this year, the production of household refrigerators, washing machines, and air conditioners grew by an average of 14.4%, -1.3%, and -37.3%, respectively. Meanwhile, China’s auto production and sales in the first seven months of this year reached 10,987,700 units and 10,979,400 units, representing increases of 4.84% and 3.56% year-on-year.
Moreover, the growth of thin sheet production has been accelerating, with cold-rolled products outpacing galvanized and color-coated varieties since 2008. The severe overcapacity has intensified low-end product competition, pushing enterprises into deeper crises. Looking ahead, structural adjustments in the industry will likely drive higher demand for terminal-oriented products.
Encountering Difficulties
On October 18, the national hot-rolling market saw steady gains. In Shanghai, 4.75 mm hot-rolled coils increased by 20 yuan, with more noticeable rises in North China—Beijing and Tianjin both saw increases of 20 to 30 yuan. Markets in Nanjing, Fuzhou, Chongqing, and Xi’an also reported price increases.
Total hot-rolled inventories across the country amounted to 3.9034 million tons, marking the lowest level in ten years. Compared to the same period last year, hot-rolled inventories fell by 401,700 tons, a year-on-year decrease of 9.31%. Cold-rolled inventories, however, reached 1.674 million tons, the highest in ten years.
Cao Jianyong, an analyst at Shanghai Iron and Steel Electronic Commerce Co., Ltd., noted that the high cold-rolled inventory levels are concerning, as consumer demand is likely to decline further. He predicts that cold-rolled market prices will remain under pressure. Cold-rolling offers a relative advantage in profitability and value-added compared to hot-rolling.
Export prospects are equally challenging due to recurring trade frictions. Domestic thin sheet products have faced constant trade disputes from abroad. Since 2009, the European Union and Brazil have conducted multiple anti-dumping investigations targeting Chinese plated sheets without success.
This year marks another challenging year for exports. In August, Australia launched an anti-dumping investigation against China’s hot-dip galvanized and galvanized zinc. Russia successfully imposed an anti-dumping measure against China’s color-coated panels in late 2011, subsequently hiking the export tax to 115% (excluding specific enterprises). This move severely impacted China’s color-coated panel exports, intensifying pressures on the overseas market.
Statistics indicate that color-coated exports rose by 9.6% year-on-year in the first half of the year, while cold-rolled exports fell by 1% and galvanized exports dropped by 3.7%. Although cold-plated product exports have declined slightly, they remain stable at around 1-2% of total exports. However, domestic cold-rolled imports have surged, nearly doubling from the previous year. This trend is unfavorable for domestic producers and exacerbates internal market competition.
Concurrently, downstream companies in the sheet industry are experiencing declining profits and sluggish sales. Survival remains a critical concern for these firms. In June, China’s demand for air conditioners and washing machines contracted significantly.
Seizing Opportunities
The entire sheet metal industry is currently confronting issues such as high supply pressure, weak downstream demand, falling exports, and imbalanced capacity growth among different product categories. Additionally, trading companies in the thin sheet sector are encountering operational bottlenecks and fatigue in their business models.
Amidst these challenges, what strategies should the sheet metal industry adopt? Analysts suggest that the “12th Five-Year Plan†emphasizes energy conservation, emissions reduction, and pollution control, which will steer the industry toward upgrading its downstream products. The current situation has compelled sheet metal manufacturers to accelerate transformation and optimize their industrial chains and product structures. Introducing innovative products tailored for architecture, decoration, automobiles, and home appliances represents a viable path forward. Furthermore, enhancing service quality across the board is essential for long-term success.