PERSPECTIVE: Steel Prices Rise; U.S. War Hurts Global Economy

Jason Sandefur

Editor�s Note: The following column is presented by Taiwan-based Fastener World magazine as part of a news column exchange with FIN/FastenerNews.com.�
Steel wire prices increase
Wire manufacturers in southern Taiwan increased prices in March once again, with the price on coiled steel wire products being raised by $14.45 to more than $404 per metric ton. Price increases on steel balls vary depending on specifications, ranging from $14.45 per metric ton to $514.
With global demand still high, steel makers expect second quarter orders to remain strong. China Steel Corp. reached order capacity of 1.8 metric tons early in the quarter and shifted a portion of production from exports to domestic supply, increasing average domestic quarterly sales by 13%. San Shing Fastech reported that fastener products helped the company achieve monthly order volume of 7,000 metric tons.
Fastener prices increase
With wire prices rising, many fastener makers are trying to pass increased raw material costs on to their customers. One success story is screw manufacturer Tsun Yu, which persuaded customers to accept price increases. Most Tsun Yu fasteners are exported to Europe as OEM products. Prices of small fastener increased as much as 62.5% to $1,631.37 per metric ton, while large fastener prices jumped as much as 68% to $1,223.53, reflecting the increased ratio of raw materials.
The Ministry of Economy indicated that Asian and European economies grew steadily in March. Taiwan received export orders of $13.49 billion, a record high for the past two years that may signal a global recovery. However, the U.S. war pushed U.S. orders down 8.4%. Orders taken from the Middle East also fell 2.9%, while orders from China and Hong Kong increased 11.4%.
Rising steel prices have led to the Ministry of Economy�s establishment of a mechanism to monitor the export volume of steel products. The move is intended to stabilize supply. To prevent price manipulation, the program will be supported by General Bureau of Custom to collect daily export data on steel. Customs has set up a special steel product task force to coordinate supply analysis. If any unprocessed steel materials are found to be exported, CSC will reduce the supplying quota granted to the parties involved.
US war against Iraq halts heavyweight purchasing
The U.S. war against Iraq severely impacted the global economy. To measure the impact on major industries in Taiwan, the Taiwan Foreign Trade Associate found that the oil price hike impacted plastics, rubber, steel and wire products. The war influenced foreign buyers who planned to travel to Taiwan to cancel or postpone trips.
This shows that under the shadow cast by the war, buyers adopt conservative strategies.
According to Chiang Hsin Steel Works Co., Ltd., suppliers of stainless steel coiled wire in Japan and Korea temporarily stopped supply of their materials starting in the second quarter. Domestic demand in Japan may have contributed to the stoppage, but it is also believed that Japanese suppliers may have seized the huge business opportunity generated from post-war reconstruction in Iraq. The average monthly consumption of new wire on Japanese imported steel material is about 120 to 200 metric tons, accounting for 30% of the production volume, forcing Chiang Hsin and other manufacturers to look for alternative supply sources.
European Union sets up trade agency in Taiwan
The European Union announced the opening of its �Economic and Trade Agency� in Taipei on March 10. This is the first time the EU has opened a permanent office in Taiwan, representing a new strategy to extend its visibility in Asia. EU Commissioner Chris Patten pointed out that the office in Taipei would enhance the business relationship between the EU and Taiwan. Bilateral investments and trade volume have made Taiwan an important EU economic partner.
Taiwan�s five-year investment ratio ranks last in Asia
In comparison with neighboring countries, the ratio of Taiwan�s annual government spending against the GDP is relatively high, with the average savings rate between 1997 and 2001 up to 25.4%, lower than that of Japan, South Korea, Singapore, and Hong Kong. Increased infrastructure and foreign capital have made the ratio of investments by Asian countries higher than most European countries. The average investment ratio of Taiwan during the past five years is 22.5% (the past two years declining to 17.4% and 16.8%, respectively), Japan�s rate is 26.6%, Hong Kong is 28.8%, Singapore is 31.8%, and South Korea�s rate is 27.4%. The extent of trade dependency of the U.S. and Japan in the past five years averages below 25%, and France is at 4.7%, while the rest of the countries are all above 50%. Countries driven by transit trade, such as Singapore and Hong Kong, have the highest ratio, as much as 319.6%. Taiwan�s trade dependency ratio of 97.2% is regarded as a high standard, considering its small market and limited resources. �2003 FastenerNews.com\