4/7/2014
HEADLINES
Taiwan Supply Chain Disrupted By Treatment Plant Closures
XL?s Buyer: Normal Lead Times by Autumn
XL Screw Corporation purchasing manager Tom Bigott said the “situation has been brewing for some time over the past six months and came to a head at the end of February. The major impact has been to ‘special’ items requiring plating above the standard Cr+3 commercial zinc. Delays on these special products can range from one month to two months. Products with Cr+3 commercial zinc are only experiencing delays from one to four weeks, with about two weeks as the average.”
Bigott noted that the “majority of factories are sub-contracting to plating facilities that comply with government waste requirements. The only issue suppliers face is that plating facilities in compliance are being overwhelmed with incoming plating orders due to the shutdown of platers not in compliance.”
“Suppliers which have existing relationships with plating facilities in compliance are being favored with priority for their plating needs,” Bigott added.
The situation has increased costs, Bigott acknowledged. “Over the past six months, plating costs have risen 20% or more due to stricter government regulations, which is a net of 1% to 2% increase in final cost for commercial plated items.”
“Suppliers do not foresee prices to rise above this current increase,” Bigott finds. “However, for special plated items, the plating cost increase will be higher and lead times extended depending on the complexity of the plating.”
Bigott said most Taiwan suppliers “have advised the current turmoil will subside in the coming months and by fall, lead times will return to normal for all types of plated products.”
The closing of some surface treatment plants due to pollution in the Kaohsiung area may cut Taiwan fastener exports by 25% for 2014, forcing fastener manufacturers to seek alternatives.
Forced closure of coatings plants followed illegal dumping of industrial wastewater into a river by Advance Semiconductor Engineering Group.
More than 80% of Taiwan fastener production in is the southwestern area of Kaohsiung.
ASE is the largest semiconductor testing and packaging supplier in the world and was ordered to close down for part of 2013.
Cens.com, the online edition of the Taiwan-based international trade-oriented China Economic News Service, reported the ASE situation “aroused the ire of citizens fed up with industrial pollution of the local environment.”
Subsequently numerous local electroplating, pickling and other surface treatment factories were forced to shut down after inspections by the Environmental Protection Bureau of the city of Kaohsiung.
The closure of illegal pickling and electroplating plants disrupts the Taiwan fastener supply chain. Cens.com estimated a “drop of around 25% in output value, or the equivalent of NT$30 billion (US$1 billion) during 2014.”
Cens.com noted that “with the local government increasingly clamping down on industrial pollution, fastener manufacturers and wire rod suppliers will be forced to spend more resources improving production controls to reduce pollution.”
The results may be less pollution, but “fastener manufacturers and wire rod suppliers will be forced to spend more resources improving production controls to reuse pollution,” according to Cens.com. Increased production costs could mean “a decline in global competitiveness.”
Cens.com reported that after closure of electroplating and pickling factories “paralyzed part of his supply,” a wire rod supplier “has had to take over the handling of waste acid from surface treatment in order to keep up supplies, doubling its cost.”
“This situation could drive a final nail into the coffin of Taiwanese wire rod suppliers that have manage to keep up only meager profit margins,” Cens.com noted.
Legal electroplating plants have continued to produce, but fastener manufacturers are finding tightening supplies and delayed deliveries. “This has prompted most of them to switch from sea to air shipment to keep their customers happy – at 10 times the transportation cost,” Cens.com added.
Fastener manufacturers are seeking to use steelmakers’ facilities to handle waste acid, but it may take six months or more to resume normal schedules.
Taiwan’s largest steelmaker, China Steel Corp., is seeking to set up a waste acid and chemical processing base with fastener suppliers.
CSC vice president J.G. Liu proposed the plan during a Bureau of Industrial Development meeting of Kaohsiung-area steel and fastener manufacturers.
Liu estimated the fastener industry employs 25,000 people in Kaohsiung.
CSC will take a “proactive role in solving the shortage of capacity for processing waste acid and chemicals by providing the resources and talent needed to establish a brand-new processing plant in association with industry players.”
The government-funded Metal Industries Research & Development Centre estimated a Kaohsiung processing plant would costs NT$800 million.
Fastener companies participating in the meeting included Sheh Fung Screws Co. Ltd., Thread Industrial Co. Ltd., Jinn Her Enterprise Co. Ltd. and Boltun Corp.
According to the Taiwan Industrial Fastener Institute, the country exported 1.45 million tons of fasteners valued at US$3.86 billion in 2013. The U.S. is by far Taiwan’s largest fastener customer at 39.56% of 2013 exports. Germany was a distant second at 8.84%, followed by Japan 5.29%, Netherlands 5.27%, UK 3.77%, Canada 3.4%, Russia 2.52%, Italy 2.29% and Poland 2.19%. ©2014 GlobalFastenerNews.com
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