Chin Well gains from US-China trade war

Higher target: Chin Well targets DIY fasterners to contribute to 20% of group revenue in 2020

BUKIT MERTAJAM: A beneficiary of the ongoing US-China trade war, Chin Well Holdings Bhd will ramp up output of its industrial fastener products to 120,000 tonnes from 105,000 tonnes for the financial year ending June 30, 2020, to cater to rising demand.

Group executive director Tsai Chia-ling told StarBiz the ongoing US-China trade conflict created new business for the group.

“Wholesalers and distributors of steel hardware products in the United States have reduced sourcing from China due to the 25% duty that they have to pay for imported China products.

“Most of them have reduced sourcing from China by 30% to 70%. However, they won’t place all their orders with us as the preference is to source from a few manufacturers to ensure there is no disruption in the supply.

“This means they will still source from China and a few other suppliers in Asia that make fasteners according to the US standards and specifications. In the United States, the Imperial system-which measures in feet and inches is still in use.”‌

“Chinese companies are among the few in the world with the capacity to produce fasteners according to US standards and specifications,”‌ she said.

Chin Well is able to tap into the opportunities of the trade war because it is capable of manufacturing fasteners that conform to standards and specifications required by the US customers.

“Therefore there is a need for us to raise production.

“Smaller competitors in the country and region that are unable to invest in the moulds to produce fasteners suitable for use in the US market will lose out,”‌ she added.

She said the group was looking at exporting 20% of the targeted output to the US market in 2020.

“We also want the do-it-yourself (DIY) fasteners to contribute to 20% of group revenue in 2020 from about 10% currently.

“For example, we will be exporting at least 50 containers of DIY screws per month to the United States in 2020, compared to 30 previously,”‌ she added.

Tsai said the group started the production of reinforcement bar connectors in Vietnam this year.

“These connectors could speed up construction work and are used for high-rise buildings. Wires are now used to tighten the rebars, which is not cost-effective.

“The fasteners are targeted at the South-East Asian markets,”‌ she said.

For the 2020 financial year, Chin Well will increase its wire products exports to the Middle East, South Asia and Australia.

“There are potential customers that require wire products in the agriculture and infrastructure sectors,”‌ she said.

The wire products are produced by Chin Herr, a wholly owned subsidiary of Chin Well.

For 2020, Chin Herr is targeting to produce 45,000 tonnes of wire products or 38% of the group’s total output.

On its RM12mil automated warehouse in Shah Alam, Tsai said the facility would operate in two to three months.

“The warehouse, with a built-up area of 25,479 sq ft and 12,920 storage areas, will generate long-term recurring rental income for the group.

“The facility provides one-stop warehousing services.

“Customers in the central region, for example, can use it to store their steel hardware products,”‌ she said.

Meanwhile, according to the San Franciso-based Grand View research house, the global industrial fasteners market size, estimated at US$83.34bil in 2018, is anticipated to expand at a compounded annual growth rate (CAGR) of 4.1% over 2019-2025.

“The product demand in industrial machinery such as construction and mining is expected to expand at a CAGR of 4.4% from 2019 to 2025. “Performance of the machinery depends on the components that go into the construction of this equipment.

“As a result, the selection of the product is done on the basis of environmental conditions under which the machine is required to operate. The demand for the product in lawns and gardening equipment was valued at US$1.46bil in 2018 and is expected to witness a CAGR of 3.2% over the projected period,”‌ according to the report.

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