3. Supply analysis: The supply pattern is scattered, and the enterprise accelerates the production capacity layout
Sufficient supply of raw materials and stable gross profit margin
China is the country with the most abundant reserves of tungsten resources in the world. According to USGS data, the world's tungsten ore reserves in 2019 are about 3.2 million tons, of which China's tungsten ore reserves are 1.9 million tons, accounting for nearly 60%; China's tungsten concentrate production accounts for more than 80% of global production from 2010 to 2020 . There are many domestic tungsten carbide manufacturers, such as Xiamen Tungsten, China Tungsten High-tech, Jiangxi Tungsten, Xianglu Tungsten, Zhangyuan Tungsten, etc. are all large-scale manufacturers of tungsten carbide, and the supply is very sufficient. The average net export volume reached 3720 tons.
The smelting process has excess capacity, and the expansion of carbide tool production capacity is not limited by raw materials. After the tungsten concentrate enters the smelting process, from APT to tungsten powder, tungsten carbide, and finally cemented carbide, the capacity utilization rate of each process is gradually increased, and the upstream smelting process has obvious excess capacity, of which the capacity utilization rate of APT is only 52.5%. In the long run, the capacity expansion of cemented carbide tools will not be restricted by the raw material end of the tungsten industry chain.
The direct material cost accounts for about 40~50% of the cost of carbide CNC cuttingtools, and the price fluctuation of main raw materials is expected to be low. Taking Sinovel's 2019 data as an example, direct material costs accounted for 43.7% of the cost of carbide tools. Among them, tungsten carbide powder/cobalt powder/tantalum-niobium solid solution accounted for 23.2%/2.9%/1.7% respectively. Tungsten carbide powder accounts for a relatively high proportion, but the price is relatively stable, maintaining between 200,000 and 260,000 yuan per ton in the past five years. The proportion of cobalt powder and tantalum-niobium solid solution is relatively low, and the price is expected to remain stable in the future, because on the one hand, the reserves of cobalt and niobium resources are abundant, and the supply side is highly concentrated; on the other hand, the main demand increase for cobalt comes from ternary power batteries, which exist Alternative nickel; niobium is mainly used in steel, there is an alternative vanadium, and the alternative elements suppress the sharp rise in the price of cobalt and niobium.
The price of tungsten carbide powder has a greater impact on gross profit, and the price of cobalt powder/tantalum-niobium solid solution has a weak impact on gross profit margin. Taking Sinovel's 2019 data as an example, assuming the company's product prices, labor costs and manufacturing costs remain unchanged, the fluctuations in the purchase price of tungsten carbide powder, cobalt powder and tantalum-niobium solid solution are 10%, 20%, 30%, and 50%, respectively. Measure its impact on the total profit. Among them, the purchase price of tungsten carbide powder/cobalt powder/tantalum-niobium solid solution increased or decreased by 10%, and the impact on the total profit was decreased or increased by 5.62%/0.68%/0.41% respectively.
Tool companies have strong control over the gross profit margin, which is stable between 40 and 50% for a long time. Affected by the following factors：
1) the proportion of tool cost in the total cost of downstream customers is relatively low, the proportion of downstream customers' tool cost to the total cost is less than 4%, accounting for 77.8% of the total number of enterprises, and downstream customers are less sensitive to blade prices ;
2) The tool is the decisive factor for the machining effect of the machine tool. Downstream customers are more concerned about the cutting performance and service life of the tool, and cost performance is not the most important consideration for end customers. Tool companies are generally able to effectively transmit the impact of rising raw material prices downstream, and have a strong ability to control gross profit margins. From 2017 to 2020, the CNC tools of four companies, China Tungsten High-tech, Xiamen Tungsten Industry, Sinovel Precision and Oukeyi The gross profit margin is basically stable, in the range of 40% to 50%.
