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China Zhongwang Holdings is seeking third-party quality and safety certification for its flat aluminium rolled products, as it wants to supply Chinese electric vehicle makers such as BYD. Photo: Handout

Its hopes dented by US tariffs, aluminium alloy products maker China Zhongwang eyes home comforts

10 per cent tariff on all Chinese aluminium products has made trade with US ‘pretty unviable’, says managing director

China Zhongwang Holdings, one of the country’s largest producers of aluminium alloy products, wants to grow sales domestically and in Europe, having been adversely affected by several rounds of US tariffs even before the outbreak of the US-China trade war this year.

The company, based in Liaoning in northeast China, derived as much as 41 per cent of its sales from the United States in 2009. This dropped to just 4 per cent in 2011, a year after it was hit by US countervailing duties that sought to punish Chinese products said to be benefiting from state subsidies and priced below costs.

Its products are mostly used in the construction and industrial sectors. Zhongwang’s US sales climbed back to between 8 and 12 per cent in the four years up to 2015, as it sold aluminium alloy-based pallets used by logistics companies for moving goods, which at the time were higher-value added products not affected by the duties.

“But this came to an end in 2016, when a US policy review saw the net cast wider to cover the pallets,” Amanda Xu Jing, managing director at Zhongwang, told the media on Monday.

“Still, when our Tianjin factory, which makes high value-added rolled flat products, opened a year ago, it managed to sell some products to the US, but when a 10 per cent tariff was slapped on all Chinese aluminium products [in March this year], it became pretty unviable for us to continue.”

The company on Friday posted a 0.5 per cent year-on-year increase in net profit to 1.26 billion yuan (US$184.65 million) for first half of 2018, as its sales volume grew by 14.2 per cent to 325,096 tonnes.

Only 1.5 per cent of its revenue in the period came from the US, while Germany and the Netherlands together took up 3.7 per cent. Mainland China accounted for 88 per cent of its revenue.

Amanda Xu Jing, managing director at aluminium alloy products producer China Zhongwang Holdings. Photo: Eric Ng

About 57 per cent of its first-half revenue was from the sales of aluminium alloy formwork, which is used in construction as temporary moulds into which concrete is poured.

Xu said Zhongwang was China’s largest aluminium formwork producer by capacity, but did not give a market share estimate, only saying that almost all of its rivals had an annual capacity of 10,000 tonnes or less, compared with Zhongwang’s capacity of 280,000 tonnes.

She said the company was seeking third-party quality and safety certification for its flat aluminium rolled products, which are used to make car body parts such as doors, so that it can sell higher value-added products from its Tianjin plant.

No Chinese company has such certification, which could be lucrative for Zhongwang. For instance, Chinese electric vehicle makers such as BYD import components from US aluminium giant Alcoa, said Xu.

Zhongwang has been working with the Anhui province-based Chery Automobile to develop a compact car that weighs 40 per cent less than conventional cars, by having a body frame 90 per cent made of aluminium alloy. It is also hoping to supply products to BYD and FAW Group to lighten their electric buses.

Zhongwang’s former chairman Liu Zhongtian last year called off the US$2.3 billion acquisition of US-based aluminium rolled products producer Aleris, by a company owned by him, after failing to obtain US approval due to national security concerns.

Xu said Aleris’ expertise would be useful for Zhongwang in obtaining the certification it is after.

This article appeared in the South China Morning Post print edition as: China Zhongwang eyes home comforts
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