China's Aluminum Factories Are Changing to Escape a Price War

Aluminum consumption is up, but issues are rapid capacity expansion and severe product homogenization

- Bloomberg

For Liang Zhu, who runs an aluminum factory about 100 kilometers north of Hong Kong, there is only one way out of China's vicious spiral of excessive competition: shift away from inexpensive metal for window frames and door handles, and toward specialized alternatives for iPads and airplanes.

Guangdong province has long been a powerhouse of light manufacturing. Today, though, many companies are battling to survive in the era of "involution," a term commonly used to describe the country's intense, self-harming industrial race. China's property boom is over, and has left behind small to medium-sized manufacturers saddled with overcapacity, evaporating margins and a relentless struggle for customers.

"Without sufficient profits, there will be no funds to invest in innovation, research or in finding solutions for society," said Liang, general manager at Guangdong Mingzhu Metal Material Technology Co., a company he founded after returning from Australia. "That's a dilemma for us, so we look for ways to get out of this so-called involution."

Producers of aluminum to be used in railings or furniture thrived in Guangdong from the early reform years of the 1980s up until China's real estate crisis began five years ago. Since then, the region has seen a wave of consolidation.

In July, Mingzhu Metal started up its first production line making items with "7-series" aluminum, a more complex product that's harder to rework and weld, more resistant to heat and easier to crack when cooling. Most importantly, it has lucrative buyers in China's emerging higher-value industries—from aerospace to electric vehicles and consumer goods.