Last week, we visited our lost wax casting suppliers and some potential suppliers. I want to introduce you their current situation:
This year, all lost wax foundry business is not very busy
Compared with the past two years (2017-2018), all most all lost wax foundry businesses have declined, mainly because China’s demand is falling, especially the pump and valve industry demand. Our largest supplier, orders from pump and valve factories are about 50% or more. Since October last year, this part of the order has dropped by about 20%. The most extream case is, we have visited one potential supplier, they even not opened at that time, because their ware house has too much pump and valve parts stock.
But this is good news for us, the foundry now has a stronger willingness to produce our orders, so the delivery will be better than last year.
Despite the more intense competition, the price of lost wax casting products will remain stable or slightly higher,because:
1. Salary have risen slightly from last year. A foundry has around 60 people, the total annual salary will increase by about 200,000 RMB
2. The foundry needs to purchase about 300,000 RMB of environmental protection equipment every year.
3. Affected by environmental protection policy, raw material(such as silica sol) price rose
4. The cost of pickling increases. There can only be one pickling plant in one area. All foundries can’t do pickling in their own factories. They can only send the products to the only pickling plant. so the cost has increased a lot.
lost wax castings price in RMB will remain stable, but the price in US dollars may rise in 2019:
1. The Chinese government lowered the tax refund by 3%.
2. Now USD to RMB exchange rate is 1: 6.7, In the future, If US and China reach an agreement to stop trade war, The USD : RMB exchage rate may be reduced to 1:6.2 or even lower. This will force us to increase our price.