Taiwan Fastener Industry Output Drops 7% in Q4, 2012

Export to the USA rises 7% last year compared to 2011

Dampened by the fiscal cliff turbulence in the U.S., a persistently slack market in the EU bloc due to lingering debt crisis, Taiwan's fastener industry saw output value decline 7% quarterly to NT$28.8 billion in the fourth quarter of 2012, according to the latest report commissioned by the Metal Industries Research & Development Centre (MIRDC), a local researcher.

The report shows that the industry's exports totaled NT$26.8 billion in the quarter, down 7% from NT$28.8 billion achieved a quarter ago, with imports of NT$1.1 billion down 3% quarterly. Meanwhile, domestic demand reached NT$3.2 billion, sliding 6%.

For the whole year, the industry's output value and exports totaled NT$121.3 billion and NT$112.8 billion, respectively, both down 4% from NT$126.4 billion and NT$117.5 billion, while imports grew 2% to NT$4.6 billion, shows the report. Domestic market demand shrank 2% to NT$13.1 billion from NT$13.3 billion.

The industry's biggest export outlet was the U.S., which bought 38% of the total output in the year, followed by Germany with 9%, Japan with 6%, the Netherlands with 5% and the U.K. with 4%. Fasteners exported to Japan, notably, averaged the highest price of NT$98 per kilogram among those of the biggest five markets.

The top five import sources were Japan (52%), China (11%, the U.S. (11%), Germany (5%) and the Philippines (4%).

Polarity between U.S. and Europe

MIRDC says that the industry's exports showed polarity between the U.S. and Europe last year.

Despite fiscal cliff concerns, the U.S. was still a robust market for Taiwanese fastener makers, which exported NT$42.4 billion there for a 7% growth compared to 2011.

MIRDC noted that the U.S. saw its unemployment rate hit a four-year low of 7.7% after launching QE3, with the Manufacturing PMI (Purchasing Managers Index) and the NMI (Non-Manufacturing Index) in December standing at 50.7 and 56.1, respectively, indicating economic recovery. IMF (International Momentary Fund) predicts the country's economic growth for 2013 at 2%, helping to brighten Taiwanese fastener makers' outlook this year.

Compared to solid growth to the U.S., the industry's exports to Europe, however, declined 15% yearly to only NT$35.3 billion for a variety of reasons, including waning international trade by EU's major members, impact of the lingering debt crisis, austerity measures by European governments, and worsening structural unemployment, says MIRDC. With the EU bloc's industrial production having been on a downtrend for 15 consecutive months, IMF forecasts the economy to drop 2% in 2013, a warning to Taiwanese makers depending on this market.

Headlines in Q4

China Steel Corp., the industry's largest supplier of steel wires and wire rods, decided to raise the domestic price of its wire rods for delivery March 2013 by NT$818 per tonne to respond to a recovering market for steel.

Since it was reasonably expected to see the steelmaker raise steel prices, most fastener makers accepted the modest price hike, also believing it can help them to drive up sales in the short term.

Worth mentioning is that China Steel's subsidiary, China Steel Precision Materials Corporation, successfully worked out a 9mm steel wire of Ti64, which is likely to enable the steelmaker to supply Apple's iPhone 5 parts in the near future.

To help industry insiders better explore the Chinese market, the Taiwan Institute of Fastener Industry appealed to the government to include Taiwan-made fasteners and thread rolling machines sold to the country for duty-exemption, which has been taken by the Ministry of Economic Affairs into account for the next ECFA (Economic Cooperation Framework Agreement) negotiation.

Presently, imported fasteners in China are still subject to a RMB0.8 duty coupled with RMB0.17 for VAT (Value-added tax) per kilogram, while thread rolling machines are also excluded from the preferential tariff cuts, says MIRDC.

There is good news for Taiwanese makers. The EU Commission is still investigating China's stainless steel fasteners allegedly re-exported to Europe via Malaysia, the Philippines and Thailand to skirt punitive tariffs imposed for dumping since January 2012, according to MIRDC.

In 2011, the EU imported about 94,000 tonnes of stainless steel fasteners, 27% from India, 15% from the Philippines, 14% from Malaysia, 7% from Taiwan and Thailand each, and 3% from China.

Goodbye to Uncertainty

The MIRDC opines that the industry is very likely to leave behind an uncertain market of last year to chalk up solid growth this year, as the U.S. has evaded the fiscal cliff to some extent after a few months of debate in the Congress; EU saw some of its economic indicators turn around despite still weak peripheral economies; Japan's new Cabinet launched the 2 trillion yen economic stimulus package to revive growth; and China's GDP growth trended upward in the fourth quarter of last year to relieve worries about a softening economy. Also, with global economic outlooks getting brighter, global trade is also expected to expand this year to benefit Taiwanese fastener makers.

Therefore, the MIRDC projects the industry's output value and exports at NT$28.5 billion and NT$26.5 billion, respectively, in the first quarter of this year, despite a low season, with NT$123.7 billion and NT$115 billion for 2% yearly growth both for the whole year.

Taiwan's Fastener Industry Output Unit: NT$1 billion
Period	2011	Q4, 2012		2012		Q1, 2013 (forecast)		2013 (forecast)
	Value	Value	QoQ Growth	Value	QoQ Growth	Value	YoY Growth	Value	YoY Growth
Output	126.4	28.8	-7%	121.3	-4%	28.5	-1%	123.7	2%
Import	4.5	1.1	-3%	4.6	2%	1.1	4%	4.5	-1%
Export	117.5	26.8	-7%	112.8	-4%	26.5	-1%	115.0	2%
Scale of Domestic Market	13.3	3.2	-6%	13.1	-2%	3.1	-2%	13.2	1%

Source: Metal Industries Research &

Development Centre