Where is China's fastener "loose"?

In 2012, after China’s fasteners grew by double digits, there was a negative growth in exports. In the first quarter of this year, the export volume of Zhejiang Jiaxing, a key exporter of fasteners, fell by more than 20% year-on-year. What exactly is the reason that the fastener industry is in a dilemma?

“This year, the export value of domestic fastener companies has generally declined.” Luo Ben, general manager of Zhejiang Weigao Standard Parts Co., Ltd. frankly stated.

China's fasteners experienced negative growth in 2012 after a double-digit growth, which fell by 1.5% year-on-year. Take Jiaxing, a key city in fasteners, as an example. According to the Jiaxing Fasteners Import & Export Association, in the first quarter of this year, fasteners exported to Jiaxing City were US$45 million, down by 22.94% year-on-year; exports to the EU were US$38 million. The year-on-year decrease was 11.82%.

The reason is mainly due to the irrational product structure of China's fastener industry, low grade, low added value, and difficult price increase. Coupled with the lack of demand in the international market, especially after China's fasteners suffered continuous anti-dumping sanctions, the export volume declined.

At the same time, overseas multinational companies have entered the market, which has brought impact on the domestic fastener market.

In the face of internal and external problems, China's fasteners are still solid?

Skilled workers are in short supply

Talking about the reasons why China’s fasteners are not competitive, Luo Ben sighed: “Zhejiang has labor shortages and rising labor costs. Every year, the company raises the wages of its workers by more than 20% to ensure that it has sufficient manpower.”

The fasteners produced by Luo Ben are mainly used for high-grade parts and are mainly used in chemical and oil refining pipelines. The annual export value is about 2 million US dollars. The products are mainly sold to Europe and the United States, and the domestic sales amount is about 90 million yuan. He told the International Business Daily that due to the rise in cost prices and the appreciation of the renminbi, the traditional advantages of inexpensive and inexpensive Chinese fasteners are declining.

What is even more troublesome for him is that most of the workers he recruits are purely “migrant workers” instead of “professional workers” and companies need to make great efforts to train these migrant workers. “The current vocational school system is too long and practical training is very poor. The graduates cannot come to the factory and can't get started. They also need to be taught by the factory master. The state should increase the effective investment in vocational education because the best machine is Man-made. To enhance competitiveness, talent is the most critical." Luo Ben said.

Supply chain is not perfect

As a leading fastener company in China, Ningbo Jinding Fastener Co., Ltd. has an annual production capacity of 120,000 tons, an output value of over 800 million yuan, and an annual export of 120 million US dollars. However, Xu Pengfei, the general manager, told this reporter that this year's company’s exports have also been hit, particularly in Southeast Asia, South America, and the Middle East, where the market’s demand for product quality is not high and prices are more concerned, while China’s Product prices rose.

Xu Pengfei also said that the more important issue is that the supply chain of China's fastener industry is not perfect. "The overall level of the supply chain is low, and it is difficult to meet the evolving needs in terms of materials, energy, molds, tools, packaging, etc., forming a vicious circle of the industry, forcing fastener companies to do low-end products," he pointed out. In high-end products, the supply of products by domestic companies cannot meet market demand, and there are many cases of dependence on imports.

Low-grade products flooded the dominant market, high-end parts still need to be imported, and the ratio of fastener import unit price to export unit price ratio is more than 6 times, apparently suffering from losses.

Duan Jiaxuan, a researcher in the China Investment Advisor Machinery Industry Group, pointed out that due to the large market gaps in the early days and the lack of relevant technologies in the country, a large number of domestic companies smelling business opportunities can only concentrate on manufacturing in the low-end areas. China's fastener industry has experienced severe structural overcapacity, low-end production capacity excess, and high-end production capacity shortage. The corresponding performance is the lack of patented technologies, poor product quality, and low scale effect.

Endless anti-dumping

In 2011, Ningbo Jinding once singled out the South African anti-dumping review of China’s fastener products and became the only company in China that enjoyed the zero tariff on South African steel bolts. However, when it comes to anti-dumping strategies, Xu Pengfei bluntly said: “Either pull an foreigner to be a boss, or increase the level of technology and management, so that the international market can not be separated from your product.”

Recalling that Ningbo Jinding was preparing to respond in 2010, two inquisitors from Germany and the United Kingdom went to the factory to collect evidence. When asked why the EU should set off this anti-dumping, the two foreigners told Xu Pengfei directly: “Because you are China people."

Duan Jiaxuan stated that in recent years, economies such as Europe and the United States have fallen into a quagmire, and in order to protect the country’s job market, it has set off a wave of anti-dumping against China’s low-end export products. The structural oversupplied fastener industry is undoubtedly affected.

He further pointed out that the current fundamental problem of the fastener industry lies in its own structural excess, insufficient domestic demand, and anti-dumping measures in Europe and the US are just catalysts. Therefore, if the fastener industry wants to improve its competitiveness and truly go out of the country, it needs to work hard in the structural transformation. However, under the influence of the market forcing mechanism, the M&A, reorganization, and in-depth development of the fastener industry will accelerate and eventually be resolved in the market.