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PERSPECTIVE – Beermann: Tariffs, WTO Raise Questions About Manufacturing Capacity
Editor’s Note: The following are excerpts from a Fastener+Fixing interview of Ekkehard Beermann about the past two tumultuous years for the global fastener industry.
Following fastener tariffs by multiple nations, attempts at trans-shipment to avoid tariffs and the World Trade Organization’s ruling that European Union duties on fasteners from China break international trade rules, the entire industry is looking for indicators on expanding production or adding new facilities, a European fastener importer said.
Fastener companies now don’t know where or when to expand, Ekkehard Beerman of Germany-based Fastbolt told Fastener+Fixing magazine.
“Purchasing has become so much more complicated. There is little evidence of any serious investment in fastener manufacturing capacity around the world. We talk to our suppliers about the strength of demand and what they plan to do to respond. Investment in production in capacity, though, requires longer-term stability.”
The WTO criticized the way the European Union assessed 85% antidumping duties on certain fastener imports from China in early 2009, affirming China’s complaint that the EU unfairly judged China as a non-market economy when it applied the duties. The WTO decision could force the EU to set individual duties on companies instead of imposing a blanket duty for the whole country.
China responded to the European tariffs by placing five-year antidumping duties of up to 26% on steel fasteners imported from the European Union, affecting about EUR 140 million (US$240 million) worth of fasteners.
“Now, no one is clear what implications the WTO ruling will have on the anti dumping situation, or how quickly it might bring another change,” Beermann observed.
“Without that clarity companies are not going to commit serious amounts of money. Added to all that US demand is now recovering, increasing pressure on available manufacturing capacity.”
A Different Market
“It is strange now to think that in autumn 2007 we could not see anything ‘risky’ coming up,” Beermann reflected. “Business was good and looked to be getting better.”
The previous spring Fastbolt had begun to plan a high-bay, fully automatic warehouse in Gronau, Germany. By November 2007 everything was ready to go, approvals obtained and contracts ready for signature.
“Then we had confirmation of the anti dumping investigation against China had started. We could no longer be sure things would remain unchanged.” Beermann told Fastener+Fixing editor Phil Matten. The development plans went on hold.
“From that point on the news was all in one direction. The level of duties ultimately applied was a shock but the direction was always clear throughout the process.”
For Fastbolt, sales continued into 2009.
“We had a lot of back orders in the pipeline, which were shipped out in January, but we felt the dramatic drop in incoming orders. February was just a complete hole in the ground. We checked the fax and phones but it was just that the customers were not contacting us any more.”
It wasn’t until summer that customers felt their inventory levels dropped low enough to reorder. “People were cautious about going to the Far East for big quantities,” Beermann explained. “They preferred to purchase short range from European stockholders and from European manufacturers who held stocks or could take advantage of the deflated steel costs to produce at much lower prices. Of course, everyone’s availability was fantastic – so winning each order was tough.”
“People wanted to buy the right quantity, at the right time. They became more total cost oriented rather than being exclusively focused on the lowest global market price.”
The world supply market had also become far less transparent as a result of the a nti dumping tariffs applied to Chinese imports.
“The option of going to China for a mixed product container had disappeared,” Beermann pointed out.
“September 2009 was the first time we really reordered. From then on it slowly developed that we could sell more to our existing customers,” Beermann recalled. “By November we started to receive more positive feedback from our customers that OEMs were moving from emergency buying to purchasing for definite, if still cautious, production programs.”
By early 2010 Fastbolt had the confidence to plan an expansion. “Coming out of crisis even this intermediate step felt really ambitious,” he said.
“Demand picked up, prices hardened but we could also see a log jam developing in the Far East. After the famine the factories tried to take on too much too quickly – deliveries and service suffered as a result.”
“As we always predicted, which is why we are so opposed to it, once anti dumping had cut China out of the supply equation, and economic conditions had begun to normalize, the remaining capacity was not sufficient to meet global demand. Now we have also seen the added distortion of people illegally trying to access China’s capacity by trans-shipping through other countries.”
The picture across Europe remains mixed.
“What really pulled us out of the crisis was the demand from Germany and from central European distributors,” Beerman observed. “Economic conditions elsewhere in Europe remain uncertain so there is still a much more hand to mouth feel about the business.” ©2011 GlobalFastenerNews.com and Fastener+Fixing
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Related Links:
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