Strong demand for market sales of small compressors

The refrigerator industry experienced a significant boom in 2007, with the small refrigeration compressor sector following suit. According to data released up to November 2007, overall sales in the refrigerator market continued to rise, with total sales increasing by nearly 10% compared to the previous year. Statistics from the General Administration of Customs revealed that refrigerator exports surged by 23% year-on-year during the first three quarters of 2007. Meanwhile, reports from major refrigerator manufacturers indicated that most companies were operating at full capacity. Sales were in high gear throughout the year. A veteran sales manager from a state-owned refrigeration compressor company shared that they hadn’t had a single day off since early 2007, working overtime daily just to keep up with orders. Despite this, many requests could not be fulfilled on time, and the company was only able to guarantee delivery for about 80% of its strategic clients. Industry data showed that sales of refrigerator compressors rose across the board in 2007. For example, Huangshi Dongbei Refrigerator Compressor Co., Ltd. reported a 61% increase in sales during the first three quarters of 2007 compared to the same period in 2006. Garciabella Compressor Company also saw over 20% growth in the first half of the year, while Xi'an Kelon and Qianjiang Refrigeration Compressor Co., Ltd. reported as much as a 200% year-on-year increase in sales. Beijing Embraco Snowflake, Huayi, and Guangzhou Refrigerator each sold over 5 million units in 2007, a substantial jump from the previous year. Industry insiders believe that strong overall demand, especially in rural areas where low-end refrigerators are in high demand, has created great opportunities for smaller compressor companies with less advanced technology. Experts attribute the surge in demand for refrigeration compressors to five key factors. First, due to special circumstances, indirect export volumes of compressors increased, largely driven by the export of 3 million refrigerators to Cuba, which boosted production for companies like Haier. Second, the acceleration of rural construction projects significantly increased demand for refrigerators in the countryside. For instance, a workshop refrigerator factory in Zhejiang produced only tens of thousands of units in 2006 but reached 300,000 units in 2007, all destined for rural markets. Third, the growing use of compressors in non-traditional applications, such as drinking fountains and ice cream machines, has expanded the market. China alone needs 3 to 4 million compressors just for drinking fountains, a market that was previously underserved. Fourth, China’s cost advantage has attracted international buyers, with companies like Electrolux and Japanese firms shifting procurement and even production to China. Lastly, the expansion of supermarkets and commercial refrigeration needs has further increased demand for refrigeration compressors. In response to the booming market, domestic compressor manufacturers have been aggressively expanding their production capacities. Midea Electric, for example, announced plans to develop a new refrigerator compressor business, initially targeting Hefei, Anhui Province. While negotiations are still ongoing, the company is expected to sign a land transfer agreement with the Hefei High-tech Zone. Huangshi Dongbei plans to increase its production capacity by 1.5 million units in its factory and another 1.5 million in the Wuhu plant, aiming for a total annual capacity of 8 to 9 million units by the end of 2007. Guangzhou Cold Machine is also expanding, adding 2 million units in Hefei and 1.5 to 2 million in Qingdao, bringing its total annual capacity to at least 8 million units by year-end.

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