2017-04-13

Characteristics of Abrasives Industry Operation in 2016

Abrasive industry preliminary achieved the goal of smooth operation, industrial upgrading, innovation and development in the steady development of economy environment in the year of 2016. While this year is a turning point for the abrasive industry to carry on industrial upgrading, product structure optimization, clean production, as well as speeding up the reduction of overcapacity.

Lower outputs but stable sales

The turning point affecting the industrial development was appeared after the July in 2016. In the first six months, the downstream industries steady operated, no big ups and downs occurred in the China coated abrasive industry. After the July, the steel prices grew remarkable, so to promote the iron and steel production into an active period. The increasing steel outputs lead to large requirements of relative coated abrasives, such as black silicon carbide, corundum, white corundum etc..

At the same time, the national environment inspection began, China coated abrasive manufacturers which releasing pollutants into the air are demanded greater rectification efforts, therefore, most of corundum, white corundum, silicon carbide smelting enterprises cut-off productions, resulting in a sharp decline in outputs. Especially in the He’nan province, where was a manufacture center producing large amounts of abrasives, the rectification force is particularly great, corundum, white corundum smelting processing almost all cut-off, so the market supply once was very tension, brown corundum even was out of stock in the October. Under this circumstance, the stocks, products smelting in inspection interval times were the main sources, and this part of yield was not small. All that make the situation of lower outputs but stable sales.

Raw material price grew, but sales price came to a standstill

The strange situation in 2016 was that the raw material prices went up rapidly, while the coated abrasive sales price waved within a small range, which direct impacted on corporate profit margins of coated abrasives manufacturers. The main reason for price changes was the market demand changes, namely was the imbalance between supply and demand, it was oversupply.

Deinventory effect is obvious

Being affected by environmental protection measures, most smelting and processing enterprises had to suspend production for rectification, causing the outputs significantly reduced. In order to met the market demands, enterprises came through reducing stock to supply the market, after years of market running, the manufacturers gradually changed the production plans, made production schedules according to each order, thereby declining the blind manufacture and inventory backlog.

Statistics showed that China coated abrasive manufacturers' stocks fell 6.6% year on year, according to the previous situation of difficult credit recovery, most companies have adopted the methods including reducing production cycles, cash paying, strict implementation of the supply and marketing contracts, reducing the arrears, speeding up the funds recovery, increasing funds turnover, lower financial expenses, cost savings, and accelerating the healthy operation of enterprises. At last, the statistics told us that the net amount of accounts receivable decreased by 5.06% year on year.

China coated abrasives manufacturers or suppliers in the course of business running began to screen the customers, gradually gave up the customers in poor reputations or poor managements, cut down bad debts. At the same time, the phenomenon of bombing market by low-price gradually decreased, and rational business running returned.

Speed up enterprise upgrade, increase industry concentration

As the market competition was more and more intense, the survival of the fittest was the essential law here as well. China coated abrasive industry leaders who determined to develop enterprises were closely tracking the development trend. They made great efforts in comprehensive upgrade and transform, such as the production equipment renovation, technological innovation, management innovation and other aspects.

Good results of research and development to new product

The survival environment for enterprises was in change, and the development of enterprises was in innovation as well, the idea of No innovation, no progress, rooted in most entrepreneurs’ minds. Product homogeneity, low-quality and low-cost competition caused enterprises falling into troubles, and innovation was the useful means help them out of the dilemma.