Demand from Europe, Australia and the Middle East keeps the line afloat as the US suffers a slowdown.

Tough economic and trade conditions in the US are forcing China suppliers of nuts, bolts and washers to rethink their business strategies. In an effort to keep sales healthy, companies are shifting attention to Europe, Australia and the Middle East.

The US is traditionally the largest market for China-made fasteners. The country’s financial crisis, however, is severely stifling demand from its construction industry.

The situation has already forced suppliers to scale back on US shipments. Customs statistics show that, in terms of value, average monthly exports to the country dropped from more than $50 million in 2007 to $40 million between January and August 2008.

Threatening to dampen sales further is the anti-dumping duty levied on steel threaded rods. In October 2008, the US Department of Commerce imposed a tax of between 70 and 206 percent on models from China. Wary of upsetting demand, companies are shouldering a portion of the additional expenses incurred from the tariff so they can minimize price increases and in turn stay competitive.

To ease the impact of these challenges on the industry’s export growth, suppliers are eyeing more-stable economies.

Most are targeting the EU, where buyer interest has not waned as much as it did in the US and high profit margins are still attainable. In fact, the region has overtaken North America as the biggest importer of China’s nuts, bolts and washers, accounting for roughly 40 percent of total exports. This strong showing is driven mainly by sales to Germany, Italy and the UK.

From $10 million in 2007, average monthly shipments to Germany amounted to $19 million during the January-to-August 2008 period. Revenue from Italy-bound models more than doubled, reaching $14 million.

Exports to the UK have been stable, generating approximately $10 million each month.

But companies are also setting their sights on destinations outside of the EU to ensure long-term viability. This comes as orders from the region are projected to slide once it enforces a 63 to 87 percent import duty on China-made steel bolts and washers.
Owing to steady demand and favorable trade policies, Russia, Australia and the Middle East are emerging as key alternatives.

Shipments to these markets have been on the upswing since last year.

Between January and August 2008, Russia was the fifth largest importer of nuts, bolts and washers from China. On average, $11 million worth was exported to the country monthly, a surge of more than 100 percent compared with 2007 figures.

At $7.7 million, the value of monthly shipments to Australia also jumped by at least 80 percent, making it one of the top 10 destinations for the line.

Absorbing $14.4 million worth monthly, the Middle East accounted for 6 percent of China’s total exports, with the bulk going to the UAE.

Asia remainsan important market, with suppliers catering primarily to countries where the price competition is less fierce, including Japan and South Korea.

China-made nuts, bolts and washers meet DIN, BS, ANSI, ASME and JIS requirements. Standard models constitute the majority of exports. Suitable for use across multiple industries, designs come in regular shapes and dimensions. Pieces are sold in bulk and measured by weight.

In the bolts segment, for example, models usually have hexagonal heads and are sized from M3 to M30.

China’s selection of nonstandard types is limited because such application-specific designs are more costly and complicated to manufacture.

Made according to customers’ specifications, products follow stricter precision requirements. For diameter and length, the common tolerance rating is ±0.01mm.

Labor-and technology-intensive, the nonstandard category commands prices that are 8 to 12 percent higher.

Key price determinants

Prices of nuts, bolts and washers depend primarily on the material and finish used. Besides affecting fastener performance, these two manufacturing inputs account for the majority of per-unit cost.

Metal type and grade influence quotes the most. In fact, with the continuous decline in material costs, suppliers plan to implement cuts during this year’s peak season.

Durable and corrosion-resistant, stainless steel and steel alloys are preferred for high-end models.

General-purpose designs come in stainless steel with mechanical property ratings of A2-50, A4-50, A2-70, A4-70, A2-80 and A4-80. Suitable for heavy-duty machinery, automotive assembly and bridge construction, nonstandard types adopt steel alloys, including 20MnTiB, 40Cr and 42CrMo.

Carbon steel, on the other hand, is the top choice in the low-end and midrange segments because it is less-expensive than stainless steel and steel alloys.

Nonsteel options such as copper and aluminum, which are not as strong or tensile, are employed in low-end designs.

Materials for nuts, bolts and washers are typically sourced from domestic suppliers in Guangdong and Liaoning provinces, and Shanghai. For upscale designs, some companies procure metal in Taiwan, Japan and South Korea.

Another major differentiator of market positioning, surface treatment determines the fastener’s capability to protect against corrosion.

Low-end models are electroplated with chrome and can withstand less than 100 hours of salt-spray testing. Trivalent or hexavalent chromium baths are adopted, although pieces immersed in the former fetch higher prices. This is because using Cr3+ solutions is 15 to 20 percent more costly. It is also less toxic than Cr6+, the adoption of which has been restricted in the EU’s RoHS and WEEE directives.

For greater rust resistance and hardness, midrange designs undergo hot-dip galvanizing and heat treatment. They can endure 100 to 500-hour salt-spray tests.

Geomet plating is applied on high-end models, usually via a dip spin, spray or dip drain spin process. Developed by Metal Coatings International of the US, this water-based inorganic finish is mainly made of passivated zinc and aluminum flakes. It does not contain toxic metal such as chromium, nickel, cadmium, lead, barium and mercury.

When subjected to salt-spray tests, Geomet-plated designs can resist corrosion for 500 to 2,000 hours.

Industry composition

China has an estimated 7,000 suppliers of hardware fasteners, the majority of which specialize in the line.

Companies usually offer at least two different types. Bolts and screws are the most commonly exported.

The bulk of manufacturers work on a small scale, with fewer than 100 employees. Manually operated equipment is often adopted during key production stages. Less than 10 percent of the processes are controlled via computer.

The rest of suppliers employ automatic hot-forging, cold-forming, lathing, threading and welding machines and management systems. QC is performed using salt-spray testers, and carbon and sulfur analyzers.