John Wolz

Editor”s Note: The following column is presented by Taiwan-based Fastener World magazine as part of a news column exchange with FIN.
Screw manufacturers in Taiwan have enjoyed great success in the past couple of years, driven by price hikes related to raw material costs. Screw makers have achieved a turnover rate of 30% to 40%, while productivity has soared 15% since 2003.\
Success in the fastener industry has not been limited to Taiwan, however. Manufacturers in China, Vietnam and Malaysia have also done well despite steel hikes.
But wire dumping from China has reportedly begun to erode prices in Taiwan.
Screw manufacturers in Taiwan source their supply of wire materials and wire rod in one of three ways: by obtaining quotas from Taiwan-based China Steel directly; by purchasing materials from companies with authorized quotas from China Steel; or by purchasing wire from importers or wholesalers.
Since global steel prices fluctuate constantly, only those Taiwan manufacturers with direct quotas from China Steel have a stable price and consistent quality so they can deliver orders reliably. Those screw manufacturers selling on the world market routinely turn down orders, even in a bullish market, unable to guarantee a delivery quantity or quality that ensures them a reasonable profit. These uncertain factors keep on troubling those screw manufacturers without quotas from China Steel.
Secure quotas from China Steel are unlikely to increase in the near future. The steelmaker continues to reward longtime customers with consistent supply, leaving little room for new customers to lock in a guaranteed steel source.
Taiwan businesses with established operations in China are discovering that local steel supply has reached a certain level of quality even though prices remain relatively low. Gradually they have increased their usage of steel manufactured in China to make screws.
During the fourth quarter of 2004 screw manufacturers filed a petition to import wire rod from China. The Taiwan Ministry of Economic Affairs agreed to grant the petition special status and allowed 15 wire rod items to be imported from April 1 through September 30, 2005.
Furthermore, China has cancelled the subsidy of tax rebate for export of steel billets and upheld a 13% tax rebate in favor of wire rod exports. Such measures are likely to increase the volume of wire rod imported from China.
Manufacturers have filed an application to import more than 300,000 metric tons of wire rod to Taiwan to manufacture screws. The most direct impact from the China wire rod imports is a lower price. The price per metric ton of wire rod made in China is $50 lower than the per metric ton price of Taiwan wire rod. At such bargain rates, manufacturers using China Steel quotas are expected to be outbid by their competitors who use imported wire rod.
Under such conditions, some Taiwan screw manufacturers are offering “cutthroat” pricing to lure customers from competitors. Fortunately wire rod imports are limited to the production of low-carbon steel screw in small sizes, leaving the price of wire materials and wire rod for larger alloy steel screws unchanged.
The looming price war has some business owners cautioning against selling products at increasingly cheaper rates simply to win an order. Other fastener manufacturers are choosing to focus on high-value fasteners, such as industrial and automobile parts, to offset the possibility of being outbid on cheaper items.
Clearly the quality of wire rod made in China cannot compete with Taiwan wire rod. Manufacturers are urging customers to include the issue of quality in their decision to place orders instead of focusing solely on price. Likewise, it”s uncertain whether wire rod imports will continue after September 30, making future supply an issue when forging a long-term relationship with a Taiwan supplier. �2005 FastenerNews.com