Global Fastener News

China Export Rebate Expected to Be Dropped Again; Hex Bolts Up 21% Thus Far During 2007

John Wolz

When China cut its export rebate to fastener manufacturers from 13% to 5% on July 1, 2007, the question was would prices jump the full 8% or would market forces challenge potential price hikes.

Two months later importers report prices are up the full 8% and more.

In addition, the remaining 5% VAT may be dropped by the Chinese government within days or months and the latest price quotes are headed up again.
On August 18, Bao Steel in China announced a 7.2% steel price increase for fastener manufacturers. Bruce Darling of Porteous Fastener Co. calculates that could lead to a 3% to 4% increase in fastener prices. “Expect more increases in the coming weeks,” Darling predicted.

Even before the first VAT reduction a 1/2×4 Hex Bolt was up 9% FOB between January 2007 and mid June. Then in mid June price quotes began anticipating the first drop in the rebate the Chinese government had been giving on many exported products, Darling reported.

Since mid-June prices had risen another 8% and as of September 4 the August steel situation and other factors upped prices another 4% for a total of 21% thus far in 2007.

A 1/2 inch flat washer zinc edged up 2.5% between January 2007 and mid-May. The increase was less than hex bolts because more scrap steel is used in washers.
By mid-June the VAT change drove washers up 5% and there was another 5.4% increase as of the beginning of September or a total of 12.9% thus far during 2007.
In addition to the rebate reduction, Jikyoon Park, director of purchasing for XL Screw, noted that there is a shortage of wire rod driving up steel prices in China.

The latest quotes for fasteners are up 5% to 10%. “It’s going crazy,” Park observed. “People are panicking and increasing prices.”

Though the remaining 5% rebate hasn’t officially been announced, with “everybody expecting it, prices for 90 to 120 day delivery are already anticipating the change.”

An exception to the price increases is stainless where costs are down slightly due to a drop in the price of nickel in the past two months, Darling noted. �2007 FastenerNews.com