Chin Well Holdings Bhd, a Penang-based maker of industrial grade fasteners, sees a strong pick-up in demand next year as clients in Europe stock up in anticipation of a further increase in prices.

“The price of wire rods has gone up by more than 80% since early 2016 because China has cut back on steel production,” Chin Well group executive director Tsai Chia-ling toldStarBiz.

“Customers expect the price of steel to continue to go up in 2017,” she added.

The stocking-up by customers in Europe also coincided with the seasonal surge in demand.

“We can also expect more buying from Europe next spring because that is when a lot of construction activities start to happen,” Tsai said.

“The weakened ringgit will also help to make our products more attractive to customers,” she added.

But an expected resurgence in demand may not be enough for the group to sustain its current production volume.

Tsai said the group was reducing its production of industrial grade fasteners.

“We expect to produce less than 100,000 tonnes of fasteners for the financial year 2017 (FY17) ending next June, which means that the per quarter output of fasteners for FY17 would be less than 25,000 tonnes,” she said.

Meanwhile, the group is increasing its production of grill mesh next April to 450 tonnes a month from current 300 tonnes. This is slightly more than a tird of its installed capacity of 1,200 tonnes a month.

“The grill mesh orders are for a US customer based in Malaysia,” she said.

The European market is expected to contribute about 50% of the group’s revenue for 2017, compared to 52% in 2016.

On the group’s do-it-yourself (DIY) fastener business, Tsai said the plan was to broaden the range of DIY fasteners in 2017 to tap into new markets in Europe.

According to a Global Industrial Fastener Market report from Freedonia, the demand for industrial fasteners in Western Europe totalled US$15.7bil in 2015, representing the third largest regional market for these products behind the Asia/Pacific region and North America.

“Western Europe has large aerospace equipment, electrical and electronic equipment, machinery, and motor vehicle manufacturing industries, all of which are major fastener markets.

“As a result, overall intensity of product use (gauged against durable goods manufacturing value added) is much higher than the global average.

“The western European fastener market tends to be highly cyclical, reflecting the maturity of manufacturing industries in the region. Fastener demand in western Europe grew less than 1% per year between 2010 and 2015, constrained by limited growth in manufacturing markets and declining construction spending,” the report said.

-The 18th China(Guangzhou)Int’l Fastener & Equipment Exhibition