Talking about the forging industry

Talking about the forging industry today, our enterprises are now able to match their overseas counterparts.

Forged forgings have the characteristics of high load bearing, long life and adaptability to severe working conditions, and can be widely used in oil and gas extraction, wind power generation, metallurgical machinery, engineering machinery, ships, pressure vessels, nuclear power and other industries.

According to different forging methods, the forging technology can be divided into free forging, die forging, ring rolling and special forging. After hundreds of years of history, modern forging industry has formed systematic and advanced forging process and forging technology.

Since the reform and opening up, due to the encouragement of national policies and the development of market economy, our country's forging industry has been developing rapidly, and the level of forging technology and process has been improved rapidly, making breakthroughs in many key casting and forging fields and realizing the localization of major key products.

At the same time, some of our products to break the foreign monopoly and a large number of exports, has been able to compete with similar products in developed countries.

(A) forging industry characteristics

1, product customization

Forging products have customized features, generally non-standard products.

In the actual production and operation process, the forging industry is usually operated in accordance with the "production by sales" model. Forging industry downstream customers are mainly various equipment manufacturing enterprises, the forging industry sales model is generally based on direct sales.

Product sales generally adopt the cost-plus pricing model, according to the cost of raw materials, forging processing costs and a certain level of profit to determine product prices, raw material costs are determined by the prevailing raw material prices, raw material prices are based on raw material market supply and demand, material types and specifications for floating pricing, forging processing costs are mainly determined by the enterprise's process, including forging, heat treatment, rough machining, finishing, testing, etc, Rough machining, finishing, testing and other related factors.

2、High industry barriers

The customization characteristics of forging products determine that the forging industry, especially in the field of large and high-end forgings, has high industry barriers.

(1) Qualification and customer barriers

For different downstream applications, the production and sales of forgings have different qualification access requirements. For example, the supply of marine products need to obtain the corresponding classification society certification, the supply of major oil and gas equipment products need to pass the API certification, while the major equipment manufacturers have a strict supplier certification system.

2）Equipment and capital barriers

The forging industry has the characteristics of large investment and long construction period, and is a typical capital-intensive industry.

In addition, due to the characteristics of the industry, raw materials account for a large proportion of the main business costs, raw materials procurement and production and operation turnover need to take up a lot of working capital.

(3) Technology and experience barriers

Forging products have the characteristics of multiple specifications, multiple varieties and customization. Advanced production equipment, fine quality management and long-term accumulation of production experience are important guarantees for the long-term development of forging manufacturers. In order to ensure the consistency, stability, reliability and advancement of products, enterprises need a large number of professional talents and skilled technical staff, and the cultivation of these professional and technical talents and their technical mastery need a long period of accumulation.

(II) Downstream market development trend

The forging industry will heat deformation processing of metal materials into parts and components with related equipment, its products are not the final industrial consumer goods.

Downstream industry requirements for equipment and forging product precision, performance, life, reliability and other technical indicators of the requirements of the forging industry dominate the technical direction, while the boom of the downstream industry also directly determines the demand situation and market capacity of the forging industry.

We take the recent hot wind power industry as an example to introduce the downstream applications of the forging industry.

First, wind power equipment forgings are the basic materials for important components of wind power equipment, the future development trend of the total capacity of wind power generation will play a decisive role in the installed capacity of wind power equipment, which in turn affects the market demand for wind power equipment forgings.

Second, with the world's energy security, ecological environment, climate change and other issues of increasing importance, accelerate the development of wind power industry has become the international community to promote the development of energy transformation, to address global climate change, the general consensus and concerted action.

According to the Global Wind Energy Council data, the global installed wind power capacity in 2020 is 93GW, an increase of 53% over 2019; the total installed global wind power capacity in 2020 reaches 743GW, an increase of 14.2% over 2019. With the vigorous development of the global wind power industry, the market demand for wind power equipment shows a good development trend, which will drive the growth in demand for wind power equipment forgings, and higher requirements for the production capacity of wind power equipment and parts manufacturers.

Third, wind energy as a carbon-free renewable energy, is an idealized energy alternative to biofuels.

In 2019, our national wind power generation capacity of 466.5 billion kWh, an increase of 15% year-on-year, the wind power industry has become our country's second largest source of renewable energy generation, the steady development of the wind power industry will effectively promote future market investment in the upstream and downstream of wind power.

According to the data published by the National Energy Administration, our country added 3GW of offshore wind power to the grid in 2020, an increase of 54.5% over 2019; by the end of 2020 our country's offshore cumulative installed capacity of 9GW, has jumped to the world's second largest installed offshore wind power country, accounting for 28% of the total installed offshore wind power worldwide (the first is 29%).

Fourth, our country has 18,000 kilometers of coastline, with more than 200GW of installed offshore wind power potential. 2020 our country's offshore wind power installed new capacity for the first time more than 50% of the global total installed offshore.

(C) industry competition pattern

The number of domestic wind power equipment forgings manufacturing enterprises, the competition is relatively fierce, low-end production capacity is abundant, high-end production capacity is scarce.

With the development of the national economy and the country's strong support for high-end equipment manufacturing and important basic components industry, the domestic forging industry is gradually developing in the direction of "special, precise, special, new.

(D) the opportunities and challenges faced

Opportunity one: policy support. Various departments and industries have formulated a number of policies to support the development of the forging industry, encouraging forging industry manufacturers to restructure, upgrade technology and product innovation, guiding enterprises to learn from advanced experience at home and abroad in the face of new competitive pressures, update the development model and concept, seize the opportunity of industrial restructuring and development transformation, and enhance international competitiveness.

Opportunity two: the downstream space is huge. For mechanical parts with higher performance requirements, forging is currently an irreplaceable manufacturing process. With the rapid development of basic industry and our country attaches great importance to basic industry, as well as the increasingly serious technology embargo between external countries, large construction machinery, metallurgy, power generation, dynamic vehicles, ships, aerospace, petroleum, chemical and other key equipment manufacturing demand for domestic forging industry is increasing day by day. At the same time the downstream oil industry, wind power industry, high-speed heavy-duty gear and the rapid development of new infrastructure in the heavy machinery industry also provides a broad market space for upstream forging enterprises.

Challenge 1: Increased competition in the industry. With the gradual strengthening of China's national power, the forging industry has shown rapid development momentum. Domestic strong forging enterprises began to increase investment in scientific research and technology development, to the direction of high precision; part of the steel enterprises with material advantages, capital advantages began to extend the industrial chain, to the downstream forging and other metal processing field development, part of the oil and gas, wind power and other parts production enterprises with customer resources advantage also to the upstream forging field extension, forging industry competition has increased.

Challenge two: the international trade situation is severe. By the international tension and the global epidemic outbreak and other factors, the downward pressure on the world economy continues to increase. In response to the major epidemic, governments around the world have taken measures to restrict the movement of people, isolate related personnel, and delay the resumption of work and school. The implementation of anti-epidemic control measures has caused a huge impact on logistics, production, movement of people and export of goods worldwide, and although the opening has been carried out gradually this year, the industry is still slow to pick up.