I. Cemented Carbide Industry Chain

Cemented carbide is an alloy material with high hardness and good wear resistance made by ball milling, pressing and sintering with tungsten carbide powder (hardening phase) as the main component and cobalt, nickel and other metals (bonding phase) as the binder. Usually, the hardening phase is mainly tungsten carbide, titanium carbide, etc. The hardening phase determines the hardness and wear-resistant performance of cemented carbide, and the binder phase mainly plays the role of bonding, which binds the hardening phase together and contributes toughness to cemented carbide.

In the Cemented Carbide industry chain, from top to bottom, they are the mining and smelting of metal compounds and powders such as tungsten and cobalt, the production of Cemented Carbide in the fields of mining, cutting and wear-resistant, the manufacturing of Cemented Carbide tools in the aforementioned fields, and the application scenarios of Cemented Carbide tools, which are specifically included in the industries of machining, petroleum and geo-mining excavation, automobile manufacturing, and aerospace, and so on.

Schematic diagram of cemented carbide industry chain

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Source: Huajing Industry Research Institute

Second, global cemented carbide industry market status analysis

According to statistics, the global production of Cemented Carbide is 108,700 tons in 2019, with a year-on-year growth of 7.3%, and the global production of Cemented Carbide is expected to reach 115,000 tons in 2020.

Global Cemented Carbide Production and Growth Rate 2017-2020

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Source: public information collation

China is the largest country in the world in terms of cemented carbide production, accounting for about 40%. Currently there are about 600-700 cemented carbide manufacturers in the world (excluding small and medium-sized enterprises below the scale in China).

Global Cemented Carbide Production Regional Distribution in 2019 (Unit: %)

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Source: public information collation

Related report: "China Cemented Carbide Industry Market Panoramic Research and Investment Planning Suggestion Report, 2021-2026" published by Huajing Industry Research Institute

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Analysis of the current market situation of China's cemented carbide industry

China's cemented carbide industry began in the late 1940s, and after more than 70 years of development since the founding of the country, China has become the country with the largest production of cemented carbide.In 2019, the domestic production of cemented carbide reached 43,500 tons, a year-on-year increase of 13%, accounting for about 40% of the global production.

China's Cemented Carbide Production and Growth Rate, 2010-2019

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Source: public information collation

Nanocrystalline, ultrafine crystal and subfine crystal cemented carbide is widely used in cutting tools and other fields due to its high hardness, wear resistance and sharp cutting edge; fine and medium crystal cemented carbide is mainly used in cutting tools and wear-resistant tools and other fields that require hardness and shock strength; coarse and ultra-coarse crystal cemented carbide, which has high impact resistance and wear resistance, is mainly used in mining tools and other fields. According to statistics, in 2019, China's production of different types of Cemented Carbide, the production of cutting tools accounted for 45%, the production of mining tool alloy accounted for 25%, the production of wear-resistant tool alloy accounted for 27%, and the production of other Cemented Carbide accounted for 3%.

China's different types of cemented carbide production structure in 2019 (unit: %)

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Source: China Tungsten Industry Association Cemented Carbide Branch, Huajing Industrial Research Institute collation

Since the 21st century, China's Cemented Carbide has achieved rapid development, but it is still at the middle and low end of the world Cemented Carbide industry chain, and there is still a big gap between scientific research investment, research and development level and ability, process level and equipment level, market competitiveness, enterprise profitability, and product technology, quality and grade, etc., and the international advanced Cemented Carbide enterprises.

At present, some of the domestic cemented carbide products are still mainly of medium and low grade, unable to meet the needs of the domestic high-end manufacturing industry, high-grade cemented carbide CNC blades and other cemented carbide products with high technological content and high value-added still need to be imported from abroad, according to the statistics, the average unit price of China's imports of other cemented carbide knives and blades for metalworking machinery (82081019) is about 6 to 8 times of the export price, and the domestic enterprises are in urgent need of upgrading the degree of deep-processing. The degree of deep processing needs to be improved urgently.

2018-2020 Q3 China's import and export of knives and blades for metalworking machinery made of other cemented carbide

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Source: China Customs, organized by Huajing Industrial Research Institute

According to the demand for the three main applications of Cemented Carbide, the demand for Cemented Carbide in China reached 41,200 tons in 2019 and is expected to reach 45,000 tons in 2020, with a CAGR of more than 13.7% from 2017-2020.

China's cemented carbide demand and growth rate in 2017-2020

Santoku New Material

Source: public information collation

Fourth, tungsten carbide industry competition pattern analysis

China is the world's largest tungsten resource storage country, retained tungsten reserves account for 58% of the global tungsten resources, ranking first, the distribution of resources is mainly concentrated in Hunan, Jiangxi and other regions, in this region, produced to Chinatungsten High-tech, Zhangyuan tungsten industry as the representative of the domestic cemented carbide leading enterprises, the formation of a higher degree of concentration in the industry.In 2019, China's top ten cemented carbide producers accounted for the production of the national total output of 59.02%.

Regional Distribution of China's Top 10 Cemented Carbide Producers

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Source: China Tungsten Industry Association Cemented Carbide Branch, Huajing Industrial Research Institute collation

Kennametal, located in Latrobe, Pennsylvania, U.S., is a world-renowned manufacturer of cemented carbide and cemented carbide cutting tools, and in 2019, Kennametal realized revenues of 16.329 billion yuan and net profits of 1.663 billion yuan. Domestic head participating companies mainly include Chinatungsten High-Tech, Xianglu Tungsten, Zhangyuan Tungsten & Xinrui Alloy.

Cemented Carbide Industry Major Enterprises

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Source: Huajing Industry Research Institute

From the comparison of cemented carbide business revenue of domestic enterprises, according to statistics, the revenue of cemented carbide industry of Chinatungsten High-Tungsten reached 3.963 billion yuan in the first half of 2020, with a year-on-year growth of 2.26%; the revenue of Xianglu Tungsten's cemented carbide products in the first half of 2020 amounted to 0.48 billion yuan, with a year-on-year growth of 55.59%; and the revenue of Zhangyuan Tungsten's cemented carbide products in the first half of 2020 amounted to 0.226 billion yuan, with a decreased by 3.33% year-on-year, and the revenue of Xinrui Alloy Cemented Carbide Industry was 120 million yuan.

Comparison of the revenue of cemented carbide business of major enterprises in China in 2017-2020 H1

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Source: company announcements, Huajing Industrial Research Institute collated

V. Development trend of cemented carbide and tools industry

1、Industry integration process accelerates, and the number of acquisitions in the industry increases

Cemented carbide and tools industry belongs to the middle and lower reaches of the cemented carbide industry chain, with its upstream being the mining and smelting industry of tungsten, cobalt and other metal compounds and powders, and its downstream being the application fields of machining, petroleum and geo-mining excavation, automobile manufacturing and aerospace. Due to the large number of cemented carbide segments and the wide range of downstream applications, there have been certain barriers between the segments for a long time, and the enterprises in the industry generally enhance their market scale and competitiveness through the continuous development of new products as well as acquisitions and mergers within the industry chain.

2. Localization of high-end cemented carbide and tools is the main direction of industry development.

China is in a critical period of transformation and upgrading of the manufacturing industry, and high-end CNC cutting tools, precision parts molds and other key industrial spare parts as a way to enhance the level of manufacturing, labor efficiency, long-term dependence on imports. Among them, high-end CNC cutting tools are used in aerospace, military and electronic information and other key areas, which is related to national economic security and national defense security, and import dependence has become an obstacle restricting the transformation and upgrading of China's manufacturing industry.

At present, some domestic cemented carbide products are still dominated by low-end and homogeneous products, and the proportion of deep processing and finishing of cemented carbide is insufficient. Breaking through the technical barriers of high-end cemented carbide and realizing the localization of high-end cemented carbide and its tools are the main directions for the development of domestic cemented carbide enterprises.

3. The overall service ability of domestic cemented carbide and tool enterprises needs to be improved.

Compared with foreign companies in the same industry, domestic enterprises in the cemented carbide industry are generally characterized by single products, insufficient understanding of customer needs or inability to respond to customer needs in a timely manner, and inability to provide customers with overall solutions, which has led to the export of domestic enterprises being dominated by low-end and primary products, with an insufficient share in the international market and low profit margins. Based on rich product variety and high technological content, the international leading carbide tool manufacturers are able to provide systematic and complete solutions for customers by focusing on customers' systematic needs, and grasp the changes of customers' actual needs in time, actively adjust the product structure, strengthen the supporting services, and change from a single tool manufacturer to a comprehensive service provider. In order to participate in the international market competition, domestic cemented carbide tool enterprises need to continuously improve customer service capabilities, from a single product output into a comprehensive solution output, in order to further enhance the competitiveness of the enterprise, and enhance the profitability of the enterprise.

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