In recent years, the number of high-speed and high-efficiency CNC machine tools and machining centers in China's manufacturing industry has grown rapidly, creating a strong demand for advanced cutting tools. As a result, modern, efficient cutting tools are gradually becoming the dominant force in the market. However, the current imbalance in the tool structure in China is not aligned with actual production needs or market demands. When the tool market structure becomes out of control, focusing on the production of high-performance and advanced tools should be the key principle to bring about significant changes in the industry.
China’s annual tool sales amount to 14.5 billion yuan, yet cemented carbide tools account for less than 25% of that, far from the global standard and failing to meet the rising demand from domestic manufacturers. In fact, within the cutting tools used in China’s manufacturing sector, over 50% are now cemented carbide tools. This mismatch between supply and demand has become a serious issue, leading to an oversupply of high-speed steel tools that are either sold domestically at low prices or exported cheaply. Meanwhile, high-performance hard alloy cutting tools are heavily imported, with import values rising sharply—from $900 million in 2001 to $450 million in 2005 (approximately $3.6 billion).
This structural imbalance means that what is being produced does not match the actual needs of users. For instance, there is a large gap in the supply of carbide tools, yet high-speed steel tools are overproduced. Similarly, there is a significant shortage of high-efficiency cutting tools needed in modern manufacturing, while low-grade standard tools continue to be over-produced.
In developed countries, cemented carbide tools currently hold a dominant position, making up around 70% of the market. High-speed steel tools are declining by 1-2% annually, and their share has dropped below 30%. Super-hard tools like diamond and cubic boron nitride account for about 3% of the market.
China produces approximately 80,000 tons of high-speed steel annually, which accounts for about 40% of global production. This process consumes a large amount of valuable resources such as tungsten and molybdenum. The blind expansion and low-level repetition have led to a surplus of high-speed steel cutting tools, forcing companies to sell them at low prices and resulting in poor efficiency across many tool manufacturers.
China also produces around 16,000 tons of cemented carbide annually, making up roughly 40% of the world's total output. However, the production of high-value cutting inserts—considered the most important part of hard alloy products—is only 3,000 tons, accounting for just 20% of total output. This situation is partly due to insufficient domestic supply of hard alloy tools, and it also means that these precious resources are not fully utilized.
In terms of economic performance, China’s annual revenue from cemented carbide is about $560 million. In contrast, Japan produces only 40% of China’s output but generates $2.633 billion in sales, with 72% coming from cutting tools. This demonstrates how effectively they utilize their resources and achieve better results. Chinese tool manufacturers could learn a lot from this model and strive to improve their efficiency and value creation.
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