Highlights of Latest Report by Metal Ind. R&D Center in Taiwan

Amid still slowly recovering global economies, Taiwan's fastener industry finished the first half of this year with output of NT$59.6 billion, compared to NT$61.5 billion scored a year ago, according to the latest report issued by Metal Industries Research & Development Centre (MIRDC).

The report indicates that the industry's exports during the period totaled NT$55.5 billion, down 3% year-on-year (YoY), while imports declined 6% to NT$2.1 billion, with the domestic demand amounting to NT$6.3 billion. The industry's average export price stood at NT$78 per tonne.

The U.S., Germany, Japan, the Netherlands and the U.K. were the industry's biggest five overseas markets, which absorbed 38%, 9%, 6%, 5% and 4%, respectively, of the total in the first half of the year. Exports to Japan saw the highest average price of NT$90.7 per tonne among the others, with prices ranging NT$72 to NT$81, shows MIRDC's report.

Japan, the U.S., China, Germany and the Philippines supplied 49%, 13%, 9%, 6% and 3%, respectively, of Taiwan's imports as the top five sources.

In the second quarter, overall exports amounted to NT$29 billion, down 1% YoY from NT$29.3 billion, while imports dived 18% to NT$1 billion compared to NT$1.2 billion a year ago, with the average export price sliding 3.2% to NT$78.5 per tonne.

Uptrend in U.S. and Europe

The industry's exports to the U.S. and Europe fared better relatively.

MIRDC notes that exports to the U.S. totaled about 286,000 tonnes in the first half of this year, up 2% YoY, mostly thanks to mild economic recovery in the country, where consumer spending, housing starts and non-housing investments all trended upward. In June, MIRDC adds, the country's PMI (Purchasing Managers' Index) climbed to 50.9, with 50 typically regarded as the dividing line between positive and negative growth.

Contrasting the slow but stable economic recovery in the U.S., the EU economy remains slack for a variety of reasons, including continuing austerity and tight credit that have seriously suppressed development of local small and medium-sized enterprises, as well as high unemployment, tepid growth of salaries, tax hikes and shrinkage of social welfare spending.

Such dampening factors resulted in the industry's exports to the EU bloc totaling 217,000 tonnes in the first half, down 7% YoY, with the average price of NT$76.1 per tonne

However, the gloomy economic climate may be easing for the moment, as MIRDC indicates that the EU's ESI (Environmental Sustainability Index) increased 1.8 points month-on-month (MoM) to 91.3 this June, a new high this year. Of the five ESI components, local retail trade confidence, construction confidence, consumer confidence, and industrial confidence all grew slightly in the month, excluding service confidence.

Industry Events

China Steel Corp. (CSC), the largest steelmaker in Taiwan by output and one of the major material suppliers to local fastener manufacturers, has successfully developed wire rod of A-286 iron-nickel-based super alloys, which should help Taiwanese fastener industry boost global competitiveness in supplying highly heat-resistant fasteners.

MIRDC reports that A-286 iron-nickel-based super alloy has greater strength and corrosion-resistance at a high temperature of 700 Celsius, and therefore is widely used in production of fasteners and peripheral parts for turbojet aircraft engines and other vehicles. Being able to source locally the super alloy from CSC helps Taiwan's fastener industry with cost and production efficiency, for A-286 alloy had to be imported to incur high cost and long lead time.

Sheh Kai Precision Co., Ltd., a listed fastener manufacturer and the largest supplier of bi-metal screws and screw anchors in Taiwan, has petitioned the EU to remove its bi-metal self-drilling screws from an antidumping lawsuit against stainless steel fasteners imported from Taiwan. The maker claims the screw with a stainless steel head coupled with a shank tapering to a carbon-steel tip is intrinsically different from other stainless steel specialty fasteners involved in the case, in terms of basic physical, technological and chemical characteristics, so should be exempt from EU's antidumping punishment.

Headlines

After cutting its nominal prices of domestically sold steel wires and wire rods by NT$1,363 per tonne for July and August and then maintained the price for September, CSC has decided to raise the overall nominal price for October and November by 1.83% on average, with the good news for fastener makers being that prices of steel wires and wire rods will be unchanged.

On another front, EU has enforced the Construction Products Regulation (the CPR) since this July, which is designed to ensure reliable information on construction products in relation to performances and replace the old regulation of Construction Products Directive (CPD).

More notable is that EU's antidumping penalties imposed on Chinese importers of stainless steel fasteners since January 2009 will expire February 1, 2014. Initially, Chinese importers involved in the case were subject to antidumping duties of either 77.5% or 85% depending on EU's final ruling, but the duties then were reduced to 54.1% and 74.1% in October 2012.

Robust Outlook in Q3

MIRDC opines that Taiwanese fastener makers can expect robust outlook in the third quarter of this year, as U.S.'s economic recovery will be increasingly stable, while Abenomics will continue to pump positive growth momentum into Japan's economy, despite a growth slowdown of the Chinese economy and an uncertain European economy.

Hopefully, MIRDC forecasts, the industry's output will reach NT$31.6 billion in the third quarter, with exports to show a 2% yearly increase to NT$29.4 billion. For the whole year, output and exports are estimated at NT$122.9 billion and NT$114.3 billion, respectively.