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The State of China's Forging Industry

发布日期:2016年01月04日  浏览381

China’s forging industry has made remarkable progress since 1978. Currently, the annual output of functional forgings reaches 11 million tons, occupying 39% of global production. Taking steel balls, hand tools, medical devices and standard components into account, the production increases to 16.5 million tons. With roughly 400,000 employees, China is the largest global producer of forgings with the most complete forging capacity.

China’s forging industry is striving to produce forgings with higher precision, higher efficiency, more pervasive digitalization, lighter weight and lower energy consumption due to market and government pressure. Many excellent achievements have been seen in forging-machinery R&D and manufacturing, application of simulation, IT application and especially precision forging.

In certain fields, such as nuclear-power and automotive, select forgings from China have been the leader among global peers. China’s forging producers are exploring overseas markets and increasing exports every year.

Similar to world counterparts, this industry is facing a shortage of technical engineers and laborers, especially young workers. In fact, the problem is more serious due to the more rapid expansion in China. Forging robots and automation have been a highlight and a new investment trend in the past three years.

Most Chinese forging companies are small and medium-sized, and their bargaining position is weak compared with strong upstream material suppliers and downstream users. Even the sharp steel price decreases in recent years were deducted by the users.

The automobile industry is a case in point. Following Volkswagen China in April 2015, every manufacturer has dropped prices by 5-15% to reduce inventory. As a result, automobile production may maintain slight growth, but general profit deceases sharply along the whole chain.

High costs of forging machinery and low profits have hindered technological updating and innovation in the past four years. Moreover, stricter requirements from the government on energy saving, lightweighting and environmental protection add a heavy burden. Since the depression began in 2011, many producers are struggling to survive or grow because production capacity for normal product far exceeds real demand.

Although China’s forging industry has built up a complete production chain and mastered many forging technologies, the biggest difference compared with advanced countries is the huge gap between the best forging companies and the rest, which means more industry consolidation is necessary.

The former can afford huge investment for the best machinery, automation, tooling and heat treatment, as well as good welfare for employees. Leaders of the latter companies – usually a poorly educated first-generation founder – would not be able to face poor conditions as well as before. Worse is that their children don’t want to be part of this noisy, tiresome and dirty business. Competition will be fierce, and cooperation will continue to be difficult among forgers.

Work is still needed in the following areas: equipment research and capability, reliability, productivity per worker, business management and marketing. The bad economic conditions force forging companies to pay more attention to management and marketing to reduce cost and increase profit.

China’s forging companies started from a very low point, and they are still struggling for equal payment for equal quality, even domestically. Producers are usually required to sell the forgings 10-20% cheaper than overseas counterparts. Since labor cost has increased significantly and China’s real tax burden is higher than any other country, it’s very difficult to sell lower-priced forgings.

It is also very difficult for China-produced forgings to enter the supply chain for Japanese and Korean cars. The true reason is not related to technology, price and quality. It is basically an undisguised technology or market barrier.

CCMI will organize ChinaForge Fair twice in 2016. It will be held June 2-5 in Dongguan, Guangdong province, to serve South China and Sept. 21-24 in Beijing to serve North China. This fair will showcase and introduce the latest technologies, business management and products to help China forging companies better compete globally.