Global Fastener News

End of Rebate, Dollar Decline Worry China Manufacturers

John Wolz

China manufacturers expressed concern about several “unfavorable factors” impacting the Chinese fastener industry during the Haiyan Fastener Association’s annual conference.

The Chinese government dropped the export rebate from 13% to 5% on July 1, 2007, and the 620 members attending the meeting were told to expect the remaining 5% rebate to be eliminated by the end of 2007.

One attendee told Fastener & Fixing Europe magazine editor Phil Matten that “nearly every factory feels it is like a sword hanging over their heads,” adding “If the rebate is removed many factories will even worry about their survival.”

Another source said the government issued questionnaires during August to a number of prominent factories to evaluate the impact of the rebate reduction, and believed the elimination of the final 5% rebate was more likely to occur in early 2008.

Other factors affecting fastener manufacturers in China include:

* The weakening of the U.S. dollar against the Chinese RMB Yuan.

* Sea freight has increased about 100% this year for full container loads to European ports.

* Cold heading wire prices increased by 30% since January, and attendees predict further increases. Key factors include the closure of smaller, polluting steel mills in China, increased sea-freight costs for raw materials from Brazil and Australia, and continued high steel export volumes from China.

* Interest rates for business loans in China have increased to 11%.

* Wages and welfare costs for workers have climbed by 20%, reflecting increases in the cost of living, notably for accommodation and food.

“Over the past few years, profits for Haiyan’s fastener products have averaged at around 5%,” one managing director told F&FE. “This year the various cost increases add up to about 40%, whereas overall sales prices have only increased by around 25% – this will lead to definite losses for the industry for 2007.” He went on to say, “our factories are having the most difficult time in a decade,” and predicted that as many as one-third of Haiyan factories could suspend production, with some deciding to close entirely. He estimated some 1,500 workers could be laid off. �2007 FastenerNews.com and Fastener & Fixing Europe