70% of fastener companies benefit from lower steel prices

Zhejiang is the largest province in China's fastener industry, and Haiyan County, which is known as “iron sea salt,” is not only the province but also one of the regions with the highest concentration of fastener industry in the country.

In the past few years, due to the economic crisis and foreign anti-dumping, Haiyan's fastener industry suffered a severe winter. Nowadays, the price of steel, which is highly correlated with the price of fastener products, has continued to weaken and has been falling all the way. What impact has this brought to Haiyan's fastener industry?

Manufacturers have zero inventory and less burden

With the economic recovery in Europe and the United States, this year Haiyan County fastener export orders began to pick up. As the price of iron ore dropped, the cost support factor of steel prices weakened, and the domestic steel price also hit historical lows continuously this year. As a result, the price of fastener products has been declining all the way, and the phenomenon of price increases has fallen.

The reporter learned from the Haiyan County Bureau of Commerce that in the first 10 months of this year, 194 self-supporting fastener export enterprises in Haiyan county had increased by 13 compared with the end of last year, and the export value was 438 million US dollars, an increase of 11.5% year-on-year, accounting for the county's exports. The total amount of 32.1%, accounting for 0.2 percentage points increase; accounting for 10.6% of the total fastener exports, accounting for an increase of 0.3 percentage points. In the first 10 months, Haiyan County's fastener export volume was 375,600 tons, a year-on-year increase of 12.9%, accounting for 16.3% of the total fastener export volume in the country, accounting for an increase of 0.8 percentage points, and the average unit price was US$1,166 per ton. Declined by 3.0%.

What is the impact of falling steel prices on companies? "70% of fastener companies have a better day," said Xu Deren, executive vice president of Zhejiang Fastener Industry Association.

In the case of declining steel prices, companies generally do not reserve steel in advance. They usually receive orders for reproduction first. “When companies receive orders, they first discuss the price, and then calculate the cost according to the quotation of the corresponding steel product on the same day. If you can sign the bill and purchase the material after signing the bill, then the price is locked. Then you only need to step by step. As long as you can ensure product quality and deliver on time, even if the profit is low, you will not lose money. Greatly reduced." Xu Deren said.

Xu Deren introduced that when steel prices rise, production companies often need to hoard steel products, which takes up large amounts of liquidity, and many companies have to borrow money from banks. Now that the price of steel products has fallen, companies do not need to sell their products, and the liquidity in their hands has increased. The efficiency of capital use can be greatly increased.

According to domestic media reports, the current domestic steel industry's capacity utilization rate is less than 70%, and steel companies almost all strive for market through price competition. Under the premise of equal quality, steel companies are desperately trying to sell their own products, which is conducive to the development of production companies.

Three percent of companies survive in the cracks

While most fastener manufacturers enjoy low-risk benefits, 30% of companies are still desperate for survival. Of these, apart from some home-based workshops that are themselves too small and products that cannot be eliminated, and only a handful of companies that are dying because of the abnormal business of usury, there are about 10% of companies that are ahead of the others. investment.

Wang Lifeng (a pseudonym) fastener factory faced this problem. More than 10 years ago, Wang Lifeng established a small-scale fastener factory, mainly relying on orders from foreign trade companies. Such days have been systematic and lasted for several years. Five years ago, after graduating from a foreign trade major, the son of a foreign trade major at the university helped to manage the company. At the same time, he began to contact the customer with his orders. After successfully receiving a few business transactions, Wang Lifeng was extremely excited and without investigation. Blindly expand production scale.

As a result, he fought for more loans to expand production from the bank. The advance investment has led to an increase in interest rates for loans, and in order to maintain the loan line, it will continue to produce. Moreover, "We don't have our own old customers." Wang Lifeng said, "When some new customers did not place orders, they may give us a list. Now that the prices have fallen, everyone is robbing them. They will not necessarily list. We have done it for us, and we haven’t necessarily made money. We sometimes have to make a loss for individual orders in order to keep our bank loan lines down or keep our customers.”

The profits of the output are not balanced with the bank's interest. The income is lower than the interest expense. Many small businesses may be shut down, and large companies cannot stop. "According to the current situation of sea salt, similar to such enterprises, especially large manufacturing enterprises, if the banks can maintain the original credit line, there is no problem in general survival." Xu Deren said, "For this part of the enterprise, we Associations, related banks, etc. should give strong support."

Transformation and upgrading is the key to self-help in the industry

Xu Deren believes that the key to the development of the fastener industry is transformation and upgrading. Under the current background, the labor cost of the sea salt fastener industry has multiplied, and the environmental protection cost has also been increasing. Moreover, the industry has obvious advantages in low cost in other domestic provinces and cities and Southeast Asia, and the industrial competition will become more intense.

At present, the high-end products of sea salt production account for only about 40%, which requires companies to have high-end technical equipment, testing equipment and professional and technical personnel, and most companies in Haiyan are unable to do so now. The industry still remains at the low-end level of negative competition, lack of technical content, fierce competition for product homogeneity, and decline in profitability. It is reported that the average export price of fasteners in Haiyan County is 15% lower than that of the whole country, and the unit price of international high-end fasteners is 7-8 times higher than that.

“The regional competitiveness will be reduced and the competitiveness of enterprises will be eliminated. Those enterprises that produce low-grade ordinary products may be phased out within three to five years. To save themselves, we need to accelerate the decline of the industry, upgrade, and upgrade.” Xu Deren said. Low-grade products must be transferred to low labor costs or near steel companies, and transfer should be led by leading companies in the direction of transfer-out and transfer-to-land governments, to form a combination of large and small SMEs in the industry chain, and in an orderly manner. .

The focus of retreat into high should be based on the promotion of a batch and the introduction of a group, and actively cultivate a group of "professional, sophisticated, special" companies and well-known brands. "The future direction of development is to produce high-end products. The only way out is to transform and make high-end products to meet the needs of industrial development." Xu Deren said, "A lot of high-precision fasteners products are now supporting the aerospace and aerospace industries. In 2013, the national export of fasteners was 4.604 billion U.S. dollars, and imports were 2.99 billion U.S. dollars. Why should we import them? Because this part of our products cannot be produced domestically, and this is our direction of development."

"To transfer low value-added products, we must use our own advantages to bring high-value-added products into domestic production. This requires the joint efforts of the government, associations, and enterprises." Xu Deren said, "The government departments must mobilize all forces to increase In order to attract high-end projects, it is recommended to build a fastener import and substitution industry park and specialize in the placement of these projects. Through foreign trade, foreign customers and other channels, the company contacts and discovers foreign advanced fastener companies through cooperation. We use our factory to produce products that we want to import now, and at the same time increase scientific research and innovation, and apply for patents to create our own brand.The association will focus on government decision-making, give full play to its own platform advantages, and do a good job in all aspects of coordination and service. jobs."