China Cuts Export Rebate On Fasteners To 5% Market Challenging 4% to 8% Price Increases

John Wolz

China cut the 13% export rebate on steel fasteners to 5% along with many other products leaving port beginning July 1, and prices have already jumped.\
“Prices are already up on some items from some vendors,” Bruce Darling of Porteous Fastener Company reported. “Prices have gone up 8%, then down a little, and then up again. Brokers are trying to feel out the market and where the competition is going with their prices. It will take another month to settle down.”
J.P. Park of XL Screw finds price changes are varying among suppliers. “The market function is coming into play,” Park observed. “One supplier raises prices 8%, but begins losing business. Some companies raising prices less are gaining business.”
Other market factors are affecting prices, Park added. A slowdown in the construction market in the U.S. is lowering demand. A shortage of container space is driving up ocean freight costs, though Park noted that XL is protected by a shipping contract.
North American distributors may not feel the full impact of import prices for several months, Park explained. XL frequently prices on “weighted averages” of existing and incoming stock so prices will climb according to incoming shipments.
Taiwan and other countries could benefit from China”s price increases.
Darling predicted Taiwan “will get some business but not a big windfall. Most of the factories have switched from low carbon parts to medium carbon or specials and won”t go back easily. We are seeing some upward movement of prices from Taiwan. Business has been slow and as steel prices have increased they had steel from prior purchases and have not had to raise prices. Even though steel was held firm by China Steel Corp. during the last announcement factories have used up all of their old steel and are having to replace it with higher priced steel. Large factories in Taiwan have been regularly moving their prices as the steel announcements were made.”
The rebate cuts have also forced European importers to accept higher prices to ensure outstanding orders are produced and shipped, Fastener & Fixing Europe editor Phil Matten reported. Concessions on price vary, but the picture in Europe suggests “most importers are having to make immediate and significant concessions, which implies that the inflationary effect of the rebate cut will be felt in the market quickly.”
Matten, who was in China when the rebate change was announced, found one temporary consequence was “a massive rush to try to get goods out of China by June 30. The roads leading to Shanghai port were at a complete standstill.”
“A Shanghai freight forwarding agent reckoned it was taking container trucks a minimum of five hours to enter the port from the Shanghai ring road,” Matten wrote. “The port”s container handling facilities were stretched beyond capacity, adding to the delay and truck queues.”
Matten described the rebate as “part of the Chinese government”s effort to reduce the export rebate tax on most goods. Overall 2,831 categories of goods, accounting for 37% of Chinese exported goods, are impacted. This includes the elimination of the rebate on 553 high energy consuming, high polluting and resource-intensive goods. The rebate was cut on the remaining 2,268 other product types, including shoes, clothing and metal and plastic products.”
Reducing domestic subsidies is aimed at easing the record trade imbalance between China and other countries. During the first five months of 2007 Chinese exports rose 23.7% to $801.3 billion, while imports increased 19.1% to US$357.8 billion. The trade surplus of $85.7 billion surged 83.1% over the first five months of 2006.
Matten reported that China aims to achieve a balance between imports and exports by 2010 as it attempts to boost domestic demand and rein in overseas sales of energy-intensive products.
“Sources (in China) noted potential for trade conflict with the U.S. and Europe and pressure for appreciation of the RMB by as much as 40%,” Matten stated.
Some have argued that other Asian countries with fastener capacity, such as Thailand and Vietnam, could now compete with the price of standard fasteners from China. But Matten noted that many of these countries are largely reliant on Chinese wire rod, so they will see increased costs for their raw material, offsetting fastener price increases from China.
China Fastener Exports Grow 39%
China exports of steel and copper fasteners climbed 39% to 233,481 tons during April, while the monthly export value grew 50.6% to US$288.66 million, Xinhua News Agency reports. The report follows news that fastener exports from China dropped 2% in March to 155,723 tons, though the value rose 5.6% to US$190.15 million.
During the first four months of 2007 China fastener exports rose 40% to 805.89 tons, with the value gaining 50% to US$996.43 million. �2007 FastenerNews.com