[observation] how long will the hot market of refrigerator freezer last?

The epidemic situation has led to an increase in demand, and the production and sales of refrigerators and freezers are booming.

For the refrigerator freezer and upstream compressors and other industries, 2020 is a special year of ups and downs, affected by the epidemic from a sharp decline at the beginning of the year to the current unusually hot, the whole industrial chain upstream and downstream also fluctuates continuously. According to industry online statistics, the whole refrigerator and freezer industry shipped 96.73 million units from January to October, an increase of 11.2% over the same period last year, while the upstream full-sealed piston compressor industry shipped 169.07 million units, an increase of 10.6% over the same period last year.

On the whole, the long-term spread of the global epidemic has promoted the demand of consumers to store food to a certain extent, and the demand continues to rise, but the production situation is not satisfactory. Looking at the global post-epidemic era, except for the complete industrial chain in China, the rapid recovery of production and good delivery capacity, the recovery of production in most foreign areas, whether the whole machine or upstream production, is relatively poor. As a result, most of the world's orders are concentrated in China. At present, not only the orders for the whole machine are full, but also the supply of spare parts, including compressors, falls short of demand.

He suppressed first and then rose all the way up.

In 2020, the seasonal characteristics of refrigerator and freezer industry showed a trend of first suppressing and then rising, and going higher all the way. At the beginning of the new year, first the Spring Festival holiday, and then the attack of novel coronavirus, home isolation across the country, traffic stagnation, tight logistics, recruitment difficulties and a series of factors have made the entire industry confused, and the recovery of production capacity is not ideal. Specifically, overall machine production fell by more than 20% in the first quarter, and less than 19 million of production can be said to be the lowest in the industry in nearly a decade.

In the second quarter, production began to recover gradually. With the unsealing of Wuhan, the production bases of various enterprises in the refrigerator freezer industry chain have basically returned to normal operation. The phenomenon of consumption compensation after the epidemic in domestic demand and the postponement of early export orders have greatly increased the production schedule of enterprises, and some enterprises have even reached a state of full production. Although the situation has been repeated constantly with the changes of the overseas epidemic situation in the whole process, the overall growth momentum of the industry is obvious. Production grew by more than 10% year-on-year in the second quarter.

There was a sharp increase in additional and new orders in the refrigerator and freezer industry in the third quarter, most of which were export orders, and some enterprises were full of orders. even the previous off-season downtime and maintenance plans have been postponed, and a small number of enterprises have also experienced a shortage of manpower and difficulties in recruiting workers. the direct performance is that the production of the whole machine increased by more than 30% in the third quarter compared with the same period last year.

In the fourth quarter, according to the current understanding of the industry online, the production of the refrigerator freezer industry is still in a strong state, of which November production is expected to reach the highest monthly production since the beginning of this year.

The production trend of the upstream compressor is basically similar to that of the whole machine enterprise, but the difference is that the growth rate is slightly lower than that of the whole machine, mainly because the resumption of production overseas has been poor since the second quarter, which has greatly affected the export of compressors. in the later stage, with the resumption of work in overseas machine factories and poor production of overseas compressors, China's compressor exports have recovered to a certain extent.

"domestic demand has picked up, exports have skyrocketed, and the United States has grown rapidly.

In the past five years, the refrigerator freezer industry has been in a trend of shock adjustment of domestic demand and steady growth of exports, which continues until the end of 2019. At the beginning of 2020, affected by the epidemic, both domestic and foreign sales of refrigerators fell, of which domestic sales fell the most, falling by more than 25% in the first quarter; demand rebounded in the second quarter and began to pick up. Exports have been rising under the dual influence of overseas demand growth and a serious contraction in production and supply. Domestic and foreign sales grew by more than double digits in the third quarter, while exports soared, with an increase of even more than 50%. As a result, the proportion of exports increased to 58% from 51% in the third quarter of last year, an increase of a full 7 percentage points over the same period last year. Export sales are still booming in the fourth quarter, especially exports. From the perspective of export orders, the year-on-year growth is expected to continue to rise to nearly 70%. Affected by the whole machine, the growth trend of domestic sales of compressors is basically the same as that of the whole machine, while exports have reversed the V market because of the poor recovery of overseas production.

In terms of domestic sales, a major feature of the development of the refrigerator freezer industry this year is the further growth of online channels such as social e-commerce and live streaming. It is reported that in the first half of the year, there were more than 1 million live shows in the field of home appliances, with a transaction volume of more than 100 billion. Compared with the previous conversion rate of live broadcast of home appliances, large-scale and strong promotional activities such as "6.18" and "Singles Day" have also promoted consumption in the post-epidemic era to a certain extent. Affected by the epidemic situation, products with large capacity, healthy sterilization, fine storage and other functions are favored by consumers.

In terms of exports, the overseas epidemic continues to spread. with the advent of winter in the northern hemisphere, the epidemic has repeatedly appeared in many places, and measures such as home prevention and control have been implemented in some countries and regions again. while stimulating the rise in demand in Europe and the United States, the production rhythm of overseas factories is also constantly disrupted. All of the above further drive the concentration of global orders to China, coupled with factors such as the Christmas season, refrigerator freezer enterprises are producing at full capacity. Many enterprise orders have been full until the first quarter of next year, and some of them even continue until the middle of next year, but at present, export enterprises are facing a big problem, that is, it is difficult to get out of Hong Kong, the container is difficult to grab, the transportation cost is surging, and the freight cycle is constantly lengthening.

At present, the export of refrigerator freezers is relatively scattered, which is basically consistent with the distribution of global market demand, of which Europe is the largest, followed by North America and Asia. In terms of export growth in the first three quarters, except for a slight decline in Africa, other regions have increased to varying degrees. North America and Oceania have skyrocketed by 75% and 45% respectively. The main driving countries for these two regions are the United States and Australia. Apart from the fact that the base of the United States dropped more in the same period last year due to trade war tariff factors, the epidemic led to an increase in funds available for non-daily consumption in the United States, Australia and other places in 2020, the decline in new home prices and record low loan rates led to an increase in demand for home purchases, as well as an increase in demand for stored food caused by the isolation of homes, all of which led to an increase in the demand for refrigerators and freezers.

In Asia, a new region is also worthy of attention. On November 15, 2020, the Regional Comprehensive Economic Partnership Agreement ((RCEP)) was formally signed by the ten ASEAN countries, South Korea, Japan, Australia, New Zealand and China. According to the RCEP agreement, all 15 member states are required to undertake to reduce tariffs, open markets and reduce standard barriers. If the agreement is implemented, it will greatly reduce the circulation and operating costs among countries, become the "integrator" of regional economic and trade rules, promote the expansion and upgrading of the regional consumer market, and promote the further development of the industrial chain, supply chain and value chain in the region. Therefore, RCEP has created a better regional business environment and created significant market opportunities for the export of Chinese household appliance brands. From January to October 2020, China exported more than 8.21 million refrigerators from RCEP member countries, an increase of 23% over the same period last year, accounting for 15.6% of the global share of exports. The implementation of the agreement will bring some room for improvement. In addition, it is of great significance for the future global production distribution of Chinese enterprises and the transfer of part of the low-end manufacturing industry chain.

The regional distribution of the export of upstream compressors is quite different from that of the whole machine, mainly driven by factors of overseas origin, so the scale of export is the largest in Asia, followed by Europe, and relatively few in other regions. From January to October, exports increased more in South America and Africa. The main reason for this phenomenon is that compressor production in Brazil is greatly affected by the epidemic, and local complete machine manufacturers have to expand new supply channels from China. In addition, demand picked up in some parts of Africa in the second half of the year, and orders for local assembly plants increased.

Freezer and frequency conversion are growing steadily, while the growth rate of commercial use is slowing down.

In the refrigerator freezer industry, the proportion of refrigerator shipments is relatively large, generally about 70% to 80%. In recent years, due to the high retention rate of refrigerators and the rapid growth of the light commercial cabinet industry, the proportion of freezer shipments has increased year by year, affected by the thinking of food hoarding by the epidemic in 2020. Small household freezer products, as a supplement to refrigerator products, are very popular at home and abroad, and the share of freezer shipments has increased to nearly 30%.

Since the implementation of the new energy efficiency of domestic refrigerators in 2016, the rapid growth of frequency conversion products and the gradual release of the production capacity of upstream frequency conversion compressors have further reduced the cost of frequency conversion products, and frequency conversion products have been infiltrated into small and medium-sized products. In addition to the rapid growth of the domestic frequency conversion market, a new phenomenon in 2020 is that frequency conversion exports are also developing rapidly due to the increase in the share of China's export of large refrigerators, and it is expected that with the implementation of new energy efficiency in the European Union and other regions, frequency conversion exports are expected to grow further.

Household products have always been the main force of the refrigerator and freezer industry, accounting for about 90% of the total. In recent years, there has been little fluctuation in the total amount. On the contrary, light business products have grown rapidly with the development of convenience stores, catering and other industries. However, in 2020, due to the impact of the epidemic, tourism, catering and other industries have been greatly affected, the development of light business products has stagnated, while household products have made gratifying achievements against the trend.

However, because of the epidemic, there is a category of light business products worthy of attention, that is, medical freezers. Recently, the news of "Pfizer novel coronavirus vaccine needs to be stored at-70 ℃ and cold storage equipment snapped up all over the United States" has been scanned on moments, and it is expected that products such as low-temperature vaccine cabinets will usher in a wave of growth in the future. However, the threshold of this kind of products is high, and there are not many domestic qualified production enterprises. based on the reasons of being optimistic about such products, recently, many home appliance enterprises have set up a biomedical department to enter this field.

"Brand concentration has been further enhanced, and competition in the industry has intensified.

In 2020, the epidemic reverse stimulated a substantial growth in the refrigerator freezer and upstream compressor industry, which is both opportunities and challenges for enterprises in the industrial chain. Large and medium-sized enterprises give full play to their respective advantages to seize the market. Price war and channel war have not weakened too much because of rapid growth, industry reshuffle is still continuing, brand concentration is also further enhanced. Industry online data show that the concentration of upstream brands is much higher than that of whole brands, and in Dabaidian products, the brand concentration of refrigerator freezers is also relatively low, and the concentration is still likely to continue to rise in the future.

In addition to increased competition, rising costs have also put pressure on companies, with manufacturers suffering between soaring orders and skyrocketing costs. Not only the price of raw materials, the appreciation of the RMB, but also rent, labor and logistics costs are also rising, export containers, warehouses are also very tight. Industry online learned that, affected by the above factors, many enterprises have begun to raise prices, domestic and export sales have risen since October, and some enterprises have indicated that they will start to increase prices in new orders in 2021, and some enterprises will increase prices by about 8 points. Behind the full orders, Chinese enterprises need to overcome the difficulties with domestic and foreign customers. In any case, companies are well prepared to meet the challenges. By increasing production capacity, innovating technology, widening channels, and actively promoting intelligent manufacturing, enterprises can re-shorten the order cycle and increase profits.

The production and sales of refrigerators and freezers are expected to increase by more than 16% in 2020.

With the improvement of the situation in the second half of the year, compared with the worry about the shortage of orders, the backlog of orders and the destruction of orders in the first half of the year, enterprises are more worried about too many orders and unable to work overtime. According to the survey of enterprises conducted by the industry online, the orders of most enterprises remained sufficient in the fourth quarter. Based on the situation in the first three quarters, the industry online expects the cumulative production and sales of refrigerator freezers to grow by more than 16% in fiscal year 2020. Exports, as the main driving factor, are expected to increase by more than 30%.

In terms of full-sealed piston compressors, the core components in the upper reaches of the industrial chain, Industry online expects the cumulative sales growth of about 14% in fiscal year 2020, mainly due to the growth of domestic market demand driving the growth of domestic sales of full-sealed piston compressors. it is expected that domestic sales will reach an increase of about 18%. In terms of the export market, the production recovery of overseas complete machine enterprises in the fourth quarter was slightly higher than before, but it has not yet fully returned to normal. According to the industry's online understanding, compressors exported to the United States are affected by the expiration of tariff exemptions. There are early exports in September and October, and compressor exports are expected to increase by about 8% for the whole year.

How long can the hot market last? The industry learned online that due to the impact of exports, the surge in orders will continue until the Spring Festival next year, and the growth momentum of some enterprises will continue until the first half of 2021, and many enterprises already plan to shorten the Spring Festival holiday and produce at full capacity. In this case, refrigerator freezer upstream enterprises, including compressors, foaming materials and other parts and other supply chain enterprises also respond quickly, providing great support for refrigerator freezer enterprises.

The situation in the first half of 2021 is optimistic, and the situation in the second half of 2021 remains to be seen. Overseas demand may also change with the changes in vaccine, exchange rate, economy, trade policy and other situations. there is good news from the domestic side. The executive meeting of the State Council held on November 18 pointed out the need to promote the consumption of household appliances and furniture. Encourage areas with conditions to subsidize the elimination of old household appliances and furniture and purchase green smart home appliances and environmentally friendly furniture, and also boost catering consumption, starting with expanding county and township consumption to drive rural consumption. the above measures are expected to boost the domestic refrigerator and freezer market to a certain extent. While paying close attention to production, Chinese refrigerator and freezer manufacturers also need to pay attention to adjust the relevant strategies at any time.

Note: all refrigerator freezer products in this article refer to refrigeration products that use full-sealed piston compressors, excluding electronic and semiconductor refrigeration products.