China’s Industry of Condenser &Evaporator for Refrigerator --Replacement of Copper by Aluminum Goes Smoothly and Trends of High-end Products Are Obvious

Aluminum and copper are main raw materials in manufacturing of condenser & evaporator for refrigerator. In 2011, in order to sieve the initiatives, condenser & evaporator manufacturers began to muscle into the upstream fields of manufacturing of aluminum and copper refrigeration components. Replacement of copper by aluminum went smoothly in manufacturing of condenser & evaporator for refrigerator,making complete machine manufacturers pay more attention to the anticorrosion performance of condenser & evaporator under the precondition of cost reduction. Since stimulation of the policy of “home appliances going to the coun-tryside” on domestic sales of refrigerator dwindles evidently, condenser & evaporator manufacturers started to muscle into overseas markets. As high-end products trends of the refrigerator market gave an impact on the upstream supply chain of condenser & evaporator, reshuffle of the condenser & evaporator for refrigerator industry sped up in 2011.

In 2011, replacement of copper by aluminum went smoothly in manufacturing of condenser& evaporator for refrigerator. The issue has been brought forward long before and substantial progress was made in recent years. Many condenser & evaporator manufacturers sought for technical breakthroughs in this aspect and succeed in applying for technical patents. The procurement director of a complete machine manufacturer said, “As the project of replacement of copper by aluminum advanced continuously, production cost of refrigerator complete machine has been reduced to some extent.Since copper is replaced by aluminum in manufacturing of condenser & evaporator for refrigerator, complete machine manufacturers will pay more attention to anticorrosion performance of condenser & evaporator, and put forward more requirements on coating and salt spray tests of condenser & evaporator.”

Meanwhile, condenser & evaporator manufacturers also strived to adjust their cooperation modes with complete machine manufacturers in 2011. Some condenser & evaporator enterprises adopted dual-sales mode, i.e., the complete machine manufacturer provides raw materials such as copper tube and aluminum foil,etc., while condenser & evaporator manufacturer is only responsible for processing and manufacturing, without troubling about price of raw materials. But this cooperation mode also has disadvantages. Since “Processing on Order” was adopted, the profits of condenser &evaporator manufacturers were further reduced.It is reported that some condenser & evaporator manufacturers adopt the cooperation mode of hedging and relatively fixed the copper and aluminum prices through signing a mid- and long-term contract with complete machine manufacturer. Condenser & evaporator manufacturers themselves purchase copper and aluminum raw materials and participate in trading in futures market. As for the latter cooperation mode, the two parties can adjust supply price of condenser & evaporator by referring to average price of nonferrous metals. It’s a relatively equitable cooperation mode, but slightly hard to operate.

Aluminum and copper are main raw materials in manufacturing of condenser & evaporator.Due to great demands for aluminum and copper, condenser & evaporator manufacturers have been remaining very sensitive to price fluctuation of upstream raw materials.

In order to sieve the initiatives, condenser &evaporator manufacturers also muscled into the fields of manufacturing of upstream aluminum and copper refrigeration components. According to relevant statistical survey, Changfa Refrigeration has, on the basis of its aluminum foil project with an annual output of 30,000 tons, extended the 70,000-ton aluminum plate(foil) project (phase ii) and the highperformance precise copper tube project, which was invested in RMB 0.398 billion and has an annual production of 30,000 tons. On November 3, 2011, Jiangsu Kangsheng held a ceremony for installing cold rolling unit for the aluminum plate & strip project. After half a year’s construction, the main work of the project was completed; it has an annual output of 12,000-ton refrigeration aluminum tube and 8,000-ton aluminum plate & strip . Relevant responsible person of Changfa Refrigeration said: “The formal installation of cold rolling units indicates that the aluminum plate & strip project has fully entered into the commissioning phase.” Previously, Guangdong Foshan Kewely Refrigeration Equipment Co., Ltd. purchased finished copper tubes from Zhejiang for manufacturing of condenser & evaporator.While in 2011, Kewely purchased electrolytic copper directly from Shanghai and entrusted local enterprises in Guangdong to process the electrolytic copper into copper tube, thus saving purchase cost of RMB l000～2000/ton.

In 2011, stimulation of the policy of “home appliances going to the countryside” on sales of refrigerator dwindled noticeably, and there were no reason to be optimistic about the domestic and international economic situations.

China’s macro-control policies on curbing real estate mania also began to work, and refrigerator sales for urban households entered into the“the phase of platform”. Under such circumstances, the refrigerator market came to a halt after years of leap-forward development. According to relevant data of the National Bureau of Statistics of China, between January and September 2011, China’s output of refrigerator stood at 68,265,300 sets, maintaining a growing momentum; According to the retail stores monitoring data of the China Market Monitor Co., Ltd., between January and October 2011,10,779,900 sets of refrigerators were sold in the Chinese market, up by 8.39% y-o-y. However,the growth missed the expectations of upstream/downstream manufacturers of the industrial chain by a mile.

When faced with the depression of the complete machine market, instead of complaining and getting into a muddle as in previous hard times, condenser & evaporator manufacturers in 2011 dealt with the difficulties reasonably and calmly, making decisions in an orderly manner. However, in the slowing down refrigerator market, the situations of condenser &evaporator manufacturers are not the same, and their methods of coping with market changes vary.

Currently, there are approximately 300 condenser & evaporator manufacturers in China,few of which are of large scale. In 2011, the sluggish refrigerator market accelerated reshuffle of the condenser & evaporator industry.Some small-scale condenser & evaporator manufacturers with few product categories have stopped production as a result of lack of orders. “Actually, it is a good thing,” a responsible person of a condenser & evaporator manufacturer indicated, “When the market develops at a high speed, complete machine manufacturers and components manufactures try all out to increase the output and keep product price down Therefore, vicious competitions occurred frequently, causing decrease of profits and fatigue of business follow-up development.Indeed, the condenser & evaporator industry needs to be consolidated. The year of 2011 offers an opportunity for condenser & evaporator manufacturers to spend more time to improve business management level and product quality and regulate competitions within the industry.Just as the fittest survives, enterprises that can adapt to market changes and complete transformation and upgrade will gain vitality.”

It is reported that condenser & evaporator for refrigerator and for air conditioner account for approximately 75% of the entire business of Changfa Refrigeration Co., Ltd (Changfa Refrigeration). In 2011, Changfa Refrigeration was merely slightly affected by sluggish growth of the refrigerator market, and condenser & evaporator production and sales maintained a growth momentum. In the first 9 months, Changfa Refrigeration’s sales of condenser & evaporator for refrigerator and for air conditioner and aluminum foil amounted to RMB l.4 billion. Henan Kelong Group primarily produces condenser & evaporator for refrigerator; its condenser & evaporator for freezer account for 15%～20% of the total output, and condenser & evaporator for air conditioner account for 4%～5%. In the recent 2 years,Kelong Group strived to promote lean management inside the group and made remarkable achievement, and its adaptability to market changes became stronger. Product sales related to condenser & evaporator for refrigerator of Zhejiang Kangsheng Co., Ltd. accounted for approximately 90% of the entire business. Even under the backdrop of sluggish market demand for refrigerator in 2011, the sales volume of Kangsheng condenser & evaporator for refrigerator increased approximately 10% y-o-y.