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.

Following three years of consecutive price hikes, Taiwan”s China Steel Corp. lowered its list price for the fourth quarter of 2005.
Bar and rod prices dropped $51.12 per ton; hot rolled steel products decreased $73.92 per ton; cold rolled steel declined $36.06 per ton; steel plate slipped $28.87 per ton; electro- galvanized steel plate decreased $23 per ton; and hot galvanized steel coil dropped $36.03 per ton. The list price for alloy steel wire remained flat.
Likewise, Baosteel in China decreased its prices. Hot rolled steel coil dropped as much as $129.71 per ton; cold rolled products decreased up to $98.80 per ton; hot galvanized steel slipped $24.70 per ton; bar & rod were lowered as much as $123.50; and steel plate price declines ranged from $61.75 to $135.85 per ton.
The price reductions from China Steel are likely to boost the profits of steel consumers, including over one thousand Taiwan fastener manufacturers. However the range of price cuts cannot completely satisfy fastener demands, as the list price of alloy steel remained unchanged.
China Steel defended its decision on alloy steel by pointing out that its price remains much lower than that of Japanese and Korean steel makers, minimizing any competitive damage to the domestic fastener industry.
Taiwan Industrial Fastener Institute chairman John Wu noted that wire rod products account for only 18% of China Steel”s overall output, with the majority of that supply serving the fastener industry. Wu said this makes Taiwan”s fastener industry an important client to China Steel. However, the steelmaker”s alloy quality continues to lag behind products from Japan and Korea, accounting for the price discount. Since Taiwan”s large alloy steel products makers routinely import their wire rod supply, the unchanged price of alloy produces minimal damage to the industry.
Taiwan fastener producers face stiff competition from Chinese counterparts who acquire R & K class wire rod more cheaply than China Steel”s CHQ grade wire rod available to domestic customers.
This disparity threatens the survival of Taiwan fasteners manufacturers, prompting China Steel to manufacture MQ class wire rod that is much cheaper than CHQ so that Taiwan manufacturers can compete with China products. With the benefit of low-cost domestic wire rod, China”s fasteners manufacturers pose an increasing threat to the Taiwan industry. This has increased pressure for China Steel to drastically lower its prices.
Taiwan”s Fasteners Industry Future Debated
Successive price reductions from China”s steel producers have allowed fastener manufacturers in China to increase production. Additionally, as many Taiwanese investors set up plants in China to provide experience and technology, the total export volume of fasteners from China exceeded Taiwan”s in the first half of 2005.
Given its constraints on land, resources and a labor force, there is little chance Taiwan can outproduce China”s fastener quantity. Wu said a focus on quality is the only way for the Taiwan industry to maintain its market share.
TIFI chairman Wu indicated that global fasteners represent a $36 billion business every year, yet screws specially focused by manufacturers in Taiwan and China account for 25% of global market, leaving a massive portion of the market untapped.
Those manufacturers trying to capture a portion of the remaining 75% market share often focus on the auto industry at the expense of industrial fastener production.
Wu advised smaller fastener producers to focus on industrial markets in order to improve quality before making the shift to auto markets.
TIFI Urges Cooperation
Wu encouraged Taiwan”s one thousand small fastener firms to merge or form strategic alliances to boost purchasing power to lower material costs through high volume buying. Pooling resources could also lower equipment upgrade and R&D expenditures, as well as manpower costs.
Wu recommended a centralized administrative facility to integrate material acquisition and order processing which streamlines interactions with European and U.S. buyers, while continuing productions at various locations. Wu noted that cooperation will increase order opportunities so that manufacturers can achieve sustainable operations while providing steady work for employees.
Wu also stressed the importance of value-added services to secure orders. “Do that and you will be on the right track to provide what customers want,” Wu explained. Since product quality is maintained at a consistent level, fastener producers must focus on service to win and retain customers. He said giving customers the most convenient and time saving service will ensure a favorable impression.
But service is only one component to success. Wu stressed that manufacturers must keep wire rod costs within 40% to 50% of product FOB selling price to ensure sufficient profit. The best situation is to hold the cost under 25% if possible.
Currently most manufacturers grapple with wire rod costs of 60% to 80%, drastically slashing margins and increasing the likelihood of failure. \�2005 FastenerNews.com