Downstream demand is weak and new production capacity is still in the ramp-up phase. It is difficult for CNC tool manufacturers to increase revenue and profits this year. In interviews with reporters from the Associated Press, many industry chain figures said that in the context of industry expansion, corporate capacity utilization and new orders are not considered full. At the same time, the cost of major raw materials such as tungsten carbide powder is still high, which will also impact profit growth. In 2024, it is expected that the 3C consumer sector will be the first to recover, and the increased penetration of titanium alloy frame processing for mobile phones will bring several times the growth of cutting tools in this field. In addition, the trend of domestic overall cutting tools replacing imported products will continue, and the share concentration of leading cutting tool companies is expected to continue to increase next year.
“The new demands of the 3C industry mean the arrival of spring for the tool industry, because Apple took the lead in launching a titanium alloy middle frame this year. Domestic mobile phone manufacturers we have contacted including Huawei, Xiaomi, OPPO, vivo mobile phones, etc. will follow up and adopt titanium alloy For middle frames, the processing time of titanium alloy mobile phone middle frames is about three times that of aluminum alloy middle frames. Next year, the application in this field will usher in a peak period, which will lead to a significant increase in tool consumption.” A channel manager of a domestic tool head company Said to a reporter from the Associated Press.
“We did receive new orders from the 3C field, but the volume did not feel very large. Because it has not been rolled out on a large scale yet, this is still an expectation of the market.” A person from Chinatungsten High-tech Securities responded to a call as an investor A reporter from the Financial Associated Press said that the company’s products cover all areas where cutting tools are used. The prosperity of the tool industry next year is positively related to the processing volume in downstream market applications. It’s hard to predict now. At present, the company’s Q4 operating data is better than Q3.
3C titanium alloy is introduced or speeded up, and tool consumption flexibility is improved
In the first three quarters of this year, domestic demand for CNC blades was weak, and overseas markets were still in the early stages of expansion. In addition to Wald (688028.SH), it includes major cutting tools such as Dingtai High-tech (301377.SZ), Chinatungsten High-tech (000657.SZ), Huarui Precision (688059.SH), and Oukeyi (688308.SH). This year, companies have all entered a “consolidation” period in which the growth rate of profits is weaker than that of revenue.
According to statistics on the sales destination of global cutting tools by manufacturing sector, general machinery accounts for 35%, the automotive industry accounts for 34%, the aerospace industry accounts for 12%, the mold industry accounts for 4%, and others account for 15%. On the one hand, the tool sector has to experience the test of slowdown in downstream domestic demand; on the other hand, in the third quarter of this year, extremely high temperature weather caused short-term disruptions to the demand for the machine tool tool industry.
From the perspective of exports, data released by the China Knife Association show that from January to September 2023, the export volume of cutting tools was 17.007 billion yuan, a year-on-year decrease of 2.74%, and the year-on-year growth rate turned from positive to negative.
“Since the beginning of this year, the improvement on the downstream demand side has been relatively limited. The pressure on the demand side and high costs have squeezed the company’s overall profits. Since entering the third quarter, the company’s core products such as CNC blades and micro manufacturing drills have been improving.” Chinatungsten High-tech recently said Confessed when interviewed by the agency. A person from the company’s securities department told a reporter from the Financial Associated Press that with the steady recovery of the industry in the fourth quarter and the improvement of downstream demand, the company’s Q4 operating data has improved month-on-month.
Reporters from the Financial Associated Press communicated with many people in the industry chain, including related companies, and learned that although they all believe that the recovery of the downstream manufacturing industry in 2024 will still be affected by many variables, the acceleration of the introduction of 3C titanium alloys will improve the tooling industry. Consumption reached a consensus.
The CNC tools produced by Dingtai Hi-Tech are mainly 3C tools, supplemented by standard tools. A source from the company’s securities department told a reporter from the Financial Associated Press, “Since processing titanium alloy materials causes greater loss of cutting tools, as the application trend of titanium alloys in mobile phone middle frames increases in the future, the demand for cutting tools will also increase accordingly. In terms of selling price, the price of titanium alloy processing tools will be higher than that of stainless steel or aluminum alloy processing tools.” Relevant people including Chinatungsten High-tech, Oukeyi and others hold similar views.
According to the analysis of the person in charge of the above-mentioned channel, titanium alloy is a difficult-to-process material. The processing time of titanium alloy mobile phone middle frame is about three times that of aluminum alloy middle frame. The consumption of cutting tools for titanium alloy processing is about two times that of stainless steel and five times that of aluminum alloy. , the application of titanium alloy mobile phone middle frames will significantly increase the consumption of cutting tools, and 2024 is expected to usher in a new consumption peak period.
Large-scale expansion of high-end production capacity, grabbing shares from overseas giants
“The company has launched more high-end CNC blade products to benchmark imported substitute products. The overall tool project has begun to release production capacity. The planned average price is 50 yuan/piece, and the overall tool kit including the tool holder is 120 yuan/set. The unit price will be higher High.” A person from the Okoyi Securities Department told a reporter from the Financial Associated Press who called as an investor.
According to him, the company has added 20 million pieces of high-end CNC blade production capacity in the IPO investment project site this year, mainly for high-end tools with higher unit prices in small parts processing, precision grinding blades, and aerospace fields. In addition, the “CNC Tool Industrial Park Project” will build 1,000 tons of rods, 3 million integral tools, 200,000 sets of CNC tools, and 5 million cermet blades. The new production capacity will enter the production capacity launch period next year.
“The company is now expanding production every month. The current comprehensive monthly production capacity of CNC tools is about 350,000 pieces. It is expected that the comprehensive monthly production capacity will be about 600,000 pieces after the expansion in the first quarter of next year.” said the above-mentioned person from Dingtai Hi-Tech Securities Department.
The relevant person in charge of Huarui Precision told a reporter from the Financial Associated Press that in the process of adjustment and upgrading of the domestic industrial structure, the proportion of corresponding tool consumption in machine tool consumption continues to grow. Domestic tools have extended to the high-end market. With the product cost-effectiveness advantages, they have gradually realized the demand for high-end imported tools. The import substitution of products has accelerated the localization of CNC tools.
According to the person in charge of the above-mentioned tool channel, “Compared with similar products from overseas manufacturers, some domestically produced products are 30-40% cheaper. The cost-effectiveness factor is only one of them. For the convenience and timeliness of follow-up services from downstream supporting manufacturers, domestic tool manufacturers It is obviously more advantageous.” Combined with data from the China Tool Association, comparing products with the same commodity code, the price of imported tools is much higher than the export price. For example, the average import price of coated blades is about 2.81 times the average export price, and the average price of uncoated blades It is 4.67 times and that of milling cutter is 2.13 times.
A reporter from Cailian News found that the aforementioned leading tool manufacturers are carrying out large-scale production capacity expansion and will enter a period of concentrated production next year. Will the tool market fall into red ocean competition in the future? In this regard, some people in the tool industry analyzed to reporters from the Financial Associated Press: The top companies have their own advantageous products and different application scenarios, and there is no need to rely on price wars to seize the market; on the other hand, domestic manufacturers have been To do import substitution in the high-end market and increase overseas exports is to compete with overseas giants; in addition, the overall tool solution launched by the tool company is “tailor-made” for the needs of specific large customers and is a long-term contract.
Expanding overseas exports is another direction for tool head manufacturers to seek growth. According to data from the China Machine Tool Industry Association, the global CNC machining china tool market space in 2021 will be 245.157 billion yuan, which is about five times the domestic market space. The overseas revenue growth rates of Oukeyi, Huarui Precision and Zhuzhou Diamond in 2023H1 were 27.57%, 42.99% and 18% respectively.
Previously, the relevant person in charge of Oukeyi told reporters from the Financial Associated Press that the overseas market space is huge, and there is a large demand for tool use in global manufacturing and processing regions such as Southeast Asia, Eastern Europe, Northern Europe, and the Americas. The company’s products have obvious price advantages overseas.
In recent years, Chinatungsten High-tech has also increased its overseas presence in many emerging countries and regions such as Southeast Asia. A person from the company’s securities department said that the company’s export sales currently account for about 30%, and the growth rate is expected to be slower than the previous two years. Now it is mainly adjusting the (export) product structure and increasing the sales of high value-added products. The price will be higher.