Steel material shortage to fuel Chin Well’s growth

Group expects strong growth in sales and bottom line

BUKIT MINYAK: The shortage of steel-based raw materials such as hot-rolled and cold-rolled coils will fuel Chin Well Holdings Bhd’s growth in the financial year ending June 30, 2018 (FY18).

Group executive director Tsai Chia-ling told StarBiz that due to the Urban China Blue Sky project, the output of the steel-based product manufacturers would be reduced.

“The affected are those equipped with old production processes, which are unable to cut carbon emissions to meet the requirements of the Urban Blue Sky Project.

“The market has been experiencing a shortage of steel-based raw materials for the past three months, which is expected to worsen by year-end.

“We expect the bulk of the orders for fasteners to come in late-2017,” she added.

Since mid-2016, the price of steelbased raw materials has shot up by 200%.

The price of steel has increased to 4,100 yuan per tonne from 2,900 yuan per tonne in mid-2016, according to the Shanghai Futures Exchange.

Tsai said the group can expect to achieve a double-digit percentage growth for sales and the bottom line for FY18.

“We have adjusted the pricing of our fasteners accordingly to the hike in raw material pricing,” she said.

Two of the subsidiaries, Chin Well Vietnam and Chin Herr Industries, which contribute about 50% to the group’s yearly revenue, are expected to fuel the growth of the group for FY18.

“In Europe and the United States, the demand for our value-added do-it-yourself fastener products is rising yearly, riding on a double-digit percentage growth.

“We have locked in sales from a US company operating in the northern region for our fencing and wiremesh products,” she added.

The group has started to increase gradually its production of grill mesh in Bukit Minyak since April to 450 tonnes a month from the current 300 tonnes.

“This is slightly more than a third of its installed capacity of 1,200 tonnes a month.

“In Vietnam, due to the rising sales of DIY fasteners, we are also looking at increasing the capacity for DIY fastener products,” she said.

Tsai said the sales from the DIY and wire mesh divisions should achieve to achieve a double-digit percentage growth for the 2018 fiscal year.

On the labour shortage, the group is expecting a new batch of foreign workers to come in in September 2017.

According to Tsai, the first quarter of FY18 ending Sept 30 is expected to be flat.

“We should see a pick-up from October onwards,” she added.

“With the new foreign workers Chin Well can look forward to getting in more orders, which will boost its performance for the 2018 fiscal year over 2017,” she added.

According to Freedonia capital goods research manager Ken Long, the global industrial fastener demand will grow 3% in 2017.

“Growth in world fastener demand in 2017 will be bolstered by a rebound in US sales and advances in areas where demand in dollar terms has been adversely affected by a rise in the value of the US dollar,” Long said.

According to Freedonia, the fastest market gains will be posted in China, India and other developing parts of Asia, fueled by increases in durable goods production.

US fastener demand, which declined in 2016, is projected to climb 2.3% in 2017, Freedonia added.

Long’s presentation provides an analysis of the current fastener market conditions and forecasts from two recent Freedonia studies, the Global Industrial Fastener Market and the US Industrial Fastener Market.