Surface Finishing Industry Revenue Climbs 12.9% in Q2

Taiwan's surface finishing industry enjoyed significant revenue growth in the first half of this year, thanks to good business in the upstream metal products sector.

In Taiwan, the industry's main business operations cover coatings and surface treatment. Companies in the industry make money by providing surface processing services to local manufacturers, as well as by exporting and importing such services mainly in the form of processed steel sheets.

The industry's revenue for the first half of this year totaled NT$71.56 billion, up 64.6% from the same period of last year, with NT$31.91 billion generated from exports and NT$48.34 billion earned at home, up 40.2% and 110.4% year-on-year, respectively, according to statistics compiled by the Industry & Technology Intelligence Service (ITIS). Revenues for the second quarter alone rose 12.9% over the same period of 2009, to NT$37.95 billion.

Imports of processed steel sheets amounted to NT$5.04 billion in the second quarter of 2010 and exports reached NT$16.03 billion. ITIS figures show that the top five import sources were Japan, China, South Korea, South Africa, and the U.S., with the first two alone taking up 94% of the total amount. The five biggest export markets were China, the U.S., Thailand, Malaysia, and Indonesia.

New Standards for Anodic Coating
The Bureau of Standards, Metrology & Inspection under the Ministry of Economic Affairs has completed the formulation CNS 8405 standards, which set test methods for anodic oxide and organic coatings on aluminum and aluminum alloy. These standards will allow local manufacturers and surface finishing companies to bring their technologies and products up to international standards, and thus boost their global competitiveness.

Expertise in the properties and processing methods of aluminum and aluminum alloy is key to Taiwan's industrial development, because those two kinds of metal material are widely applied to various vehicles, mechanical and electrical equipment, 3C (computer, communication and consumer electronic) products, military weapons, aircraft, and building materials. Related anodic coatings are now becoming increasingly popular as an industrial process.

Growth Slowdown
However, ITIS also points to a number of negative factors that will likely put a damper on growth in the second half of the year, including China's real-estate-market cooling policies, sluggish market demand in Europe and the U.S., and increasingly keen competition from emerging rivals.

ITIS notes that market demand for steel (including steel coils) in Southeast Asia has been significantly suppressed by China's continuous moves to curb property speculation, and that this has made international buyers more cautious. The euro crisis and lagging economic growth in the U.S. have also caused steel markets in the region to sour.

In addition, China has abolished export tariff rebates on steel and nonferrous metal, excluding cold-rolled steel coils and galvanized steel coils; this is likely to prompt local steelmakers there to turn their focus more toward the production of those two kinds of products, putting considerable pressure on Taiwan's smaller-sized galvanizing companies in the future.

Fortunately, ITIS notes, the growing boom in the automobile and smartphone markets is helping to cushion the impact of the unfavorable factors mentioned above by adding to the demand for coatings and heat treatment of related metal parts. This happy situation is expected to keep the surface finishing industry growing throughout the year.

For the year as a whole the industry hopes to see its revenue soar by 30.5% to NT$141.46 billion, up from NT$108.38 billion in 2009, with exports hitting NT$62.74 billion. The domestic market is expected to grow 11.3% for the year to reach a value of NT$93.38 billion, according to ITIS.

Revenues of Taiwan's Surface Finishing Industry  (Unit: NT$ million)
	Revenue	Exports	Imports
2005	125.89	57.90	15.44
2006	136.27	60.56	14.43
2007	155.99	67.22	14.95
2008	167.74	73.15	15.79
2009	108.38	47.37	8.26
Q2, 2010	37.95	16.03	5.04
1st Half of 2010	71.56	31.91	8.69
2010 (est.)	141.46	62.74	15.26

Source: ITIS