Taiwan Hand Tool Industry Output Up 26% YoY in Q2

Driven by customers' restocking for the upcoming year-end sales peak, Taiwan's hand tool industry turned out NT$15.67 billion of tools in the second quarter for a 26% increase from NT$12.43 billion a year ago, according to statistics compiled by Taiwan's market survey body the ITIS (Industrial Technology & Intelligence Service).

Riding on strong economic rebound, ITIS analysts say the industry finished 2010 with output valued at NT$58.296 billion, for a 25.8% growth from NT$44 billion in 2009, with NT$53.96 billion of which for exports, up 278% year-on-year. Imports came to NT$4.568 billion in 2010, up 62.6% year-on-year. Meanwhile, the scale of Taiwan's hand tool market also grew 19.9% yearly to NT$8.904 billion in 2010.

The strong growth momentum was seen again in the second quarter of this year, when the industry scored a 27% year-on-year growth in export of NT$14.95 billion, and a 43% increase in import of NT$1.29 billion. These two figures are also 12% and 5%, respectively, higher than those scored in the first quarter, in which the industry's overall output grew a sluggish 9% compared to a year ago, and dropped 7% from a quarter earlier.

Drilling, tap and die tools were the industry's hottest-sellers overseas in the second quarter, with exports of the category totaling NT$8.21 billion; while exports of wrenches and hand tool sets also totaled NT$3.82 billion and NT$1.05 billion, respectively, among the best-sellers in the same period.

Meanwhile, about NT$680 million of saws were imported into Taiwan as the most in-demand product, with NT$270 million of garden tools and NT$220 million of wrenches also entering the island, according to the ITIS report.

Strong Demand from Distributors
ITIS analysts attribute the industry's brisk growth in the second quarter to strong demand from distributors as the Test Rite Group, which finished the first half with a 20% growth in combined revenue, generated by rising shipments to its U.S. customers as Wal-Mart and Auto Zone, which have been restocking starting in the quarter for the upcoming Christmas and year-end sales seasons.

The analysts add that the Test Rite Group has mainly benefited from China's credit tightening policies continued through the first half, which had forced out smaller competitors from the U.S. market. As a result, they say, the group effectively captured part of the rivals' shares in the box-type wholesaler segment to order more hand tools in the quarter.

The signing of ECFA (Economic Cooperation Framework Agreement) is also starting to pay off for the industry this year, say ITIS analysts. According to statistics compiled by the THTMA (Taiwan Hand Tool Manufacturers' Association), Taiwan's five hand tool categories exported to China on priority tariff cuts totaled US$12.988 million in the first half, up significantly from US$9.188 million a year ago when the ECFA did not exist.

Separately, the category of pliers, vices and related tools sold to China totaled US$3.344 million, wrenches and adjustable wrenches US$2.462 million, doubling from US$1.182 million a year ago, hammers US$556,209, screwdrivers US$3.838 million and other drilling, tap and die tools US$2.786 million.

Foreign Brands' Orders Return
ITIS analysts say that global, larger hand tool brands are again placing orders to drive growth for Taiwan's industry since the beginning of this year.

Over the past decades, Stanley, for instance, a hand tool giant with own brands including Stanley, Black & Decker, Facom and DeWALT, has contracted numerous Taiwanese companies to design and make varieties of hand tools in customized specifications for the Asian market. To secure more reliable quality and stable supply, the U.S. firm has decided to increase purchases of Taiwan-made tools and cooperation with local suppliers on production and R&D to further explore the Greater China market.

Foreign brands' intention to enhance cooperation with Taiwanese partners to tap Asia- Pacific markets makes sense, especially when China, which turned out over US$70 billion of hardware last year and US$8.334 billion of hand tools, is gradually emerging as one of the biggest markets for hardware and hand tools, a trend to push Taiwan's hand tool industry further ahead in the future.

Meanwhile, Taiwanese hand tool manufacturers are also exploring new markets in Asia, including Japan, India and Vietnam, to offset impacts from grim outlook in the U.S. and Europe due to fiscal woes, high unemployment and sluggish housing markets.

Taiwan'sHand Tool Industry Output
	2007	2008	2009	2010	Q1, 2011	Q2, 2011
	Value	Value	Value	Value	Value	Value	Y-on-Y Growth
Output	59.04	59.45	44.0	58.29	14.47	15.67	26%
Export	56.09	55.89	42.28	53.96	13.33	14.94	27%
Import	3.88	4.29	2.81	4.56	1.23	1.29	43%

Value Unit: NT$1 billion
Source: MIRDC

Exports to China of Taiwan's 5 Tool Categories with Tariff Cuts in 1H 2011
Year	Category	Value
2010	Pliers, Tweezersand Similar Tools	US$3.080 M.
2011		US$3.344 M.
2010	Wrenches andAdjustable Wrenches	US$1.182 M.
2011		US$2.462 M.
2010	Hammers	US$0.361 M.
2011		US$0.556 M.
2010	Screwdrivers	US$2.620 M.
2011		US$3.838 M.
2010	Other Drilling,Threading, and Tapping Tools	US$1.943 M.
2011		US$2.786 M.

Source: THTMA