China Zhongwang Puts Greater Effort into Domestic Market

A Reuters report said on March 14 in Hong Kong that the U.S. has not concluded yet its anti-dumping probe into Chinese aluminum products. China Zhongwang (1333.HK), the largest maker of aluminum extrusion products in Asia, expects its exports to the U.S. will further decline this year. Executive director and vice president Lu Changqing said in an interview that the company will give priority to domestic sales over export.

Amid the investigation, China Zhongwang s exports to the U.S. took up 29.1% of the group s total sales revenue in 2010, representing a proportion smaller than that in 2009. Currently, the group s domestic sales account for 55% of its total revenue, with the remaining taken up by markets such as the U.S. and Australia.

Based in Liaoning province, China Zhongwang mainly produces high value-added industrial aluminum extrusions. It is gradually shifting its focus from aluminum construction materials, which has a low gross profit margin. As the group strategically enhanced its product mix last year, the overall gross profit margin increased 2.4 percentage points year-to-year to 40.6%.

Lu expected aluminum ingot prices to rise by 10% this year, but he stressed that the group has adopted a pricing model based on current prices plus processing fees, which can alleviate the pressure from the change in ex-factory prices.

While the gross profit margin of China Zhongwang s industrial aluminum extrusions slightly went down last year, it was still much higher than that of the group s competitors. Lu explained that the group has an advantage in the number of large extrusion presses it owns. In addition, there are various types of industrial profiles, which require high level of technology in manufacturing, Lu added.