Surface Finishing Industry's Output Drops 11% to NT$35 Bn. in Q4, 2012

Taiwan's surface finishing industry recorded an output value of NT$35 billion in the fourth quarter of last year, down 11% from a year earlier, according the latest report by the Metal Industries Research & Development Centre (MIRDC), a local industrial research body.

The report shows that the industry's exports totaled NT$17 billion, sliding 18% from a year earlier, while imports declined 4%, to NT$2.7 billion. Domestic demand amounted to NT$20.7 billion, down 5%.

The biggest three sources of the industry' imports in the quarter were Japan (48% of the total), China (27%), and South Korea (16%), while five largest export destinations were China, the U.S., Indonesia, Thailand, and Mexico.

Despite the decline on an annual basis, the industry's fourth-quarter output value was 2.4% higher than the previous quarter, due mainly to the drop in international steel prices, which triggered market demand and generally inspired global buyers to restock inventories. Under this scenario, Taiwanese coating companies saw a surge in overseas orders to more than 80% of the total, and output value rose.

However, in the face of underselling by Chinese and Korean rivals, Taiwanese companies were mostly forced to cut prices to attract foreign orders, noted the MIRDC report. As a result, some Taiwan-made galvanized steel coils were exported at less than US$700 per metric ton in the fourth quarter, imposing a heavy burden on the suppliers.

For the whole year, the industry's output value is estimated to have fallen 10% from 2011, to NT$145.6 billion. Exports were down 4% to NT$75.4 billion, according to the MIRDC report, and imports and domestic sales were estimated at NT$14.5 billion and NT$85.6 billion, respectively.

Technological Advancement

The MIRDC describes several technological advancements that have been made in the industry, boosting its long-term edge in the global market.

One advancement is the application of electroless nickel-plating with dispersed PTFE (Teflon) by a large surface treatment company, Techplasma Technology, in coating to enhance the quality of brake cables and shifter cables for motorcycles and bicycles. This application has been patented as an innovative technology in Taiwan, Japan, and China.

MIRDC reported that the company uses the technology to coat the outer surface of cables with electroless nickel Teflon, boosting abrasion and corrosion resistance and prolonging the lifespan of the cables. This application does not just burnish the company's profile, but also helps to the enhance value of Taiwan-made motorcycle and bicycle parts.

After introducing the state-of-the-art continuous PVD (physical vapor deposition) vacuum coating process from Germany in 2005, Xxentria Technology Materials, also a top company in the line, made another industry-leading achievement by working out an improved continuous evaporation and sputtering technology mainly for the coating of aluminum-plastic composite plates.

This technology, according to MIRDC, gives aluminum-plastic composite products a metal-like surface to boost added value without the use of costly metals like copper, zinc, and titanium. The technology is also eco-friendly, generating no waste water or gas.

More Government Certification

To accelerate the industry's application of nano-tech surface treatment techniques, the Bureau of Industrial Development under the Ministry of Economic Affairs decided in 2012 to include more coated products in its NanoMark certification, including nano photocatalyst antibiotic coating, nano silver coated bath tubs, and nano-tech surface treated heat-absorbing glass.

MIRDC says that in this time of globalization, a wider range of officially certified applications of nano-tech surface treatment can inspire Taiwanese coating companies to develop more competitive products and technologies, and help them to bring about business transformation and production upgrading.

China is also working in this direction. In order to upgrade the surface finishing industry as part of its 12th Five-year National Development Plan, the Chinese government has moved to assist local operators in developing and introducing various technologies to meet the market trend toward eco-friendly production.

The MIRDC notes that the Chinese government hopes to achieve the following goals in 2015: the promotion of the eco-friendly coating technologies of trivalent chromium plating, cyanide-free copper plating, laser-assisted electroless nickel plating, recycling and purification of chromium plating solutions, and non-hexavalent chromium conversion coating; the boosting of the penetration rate of nickel-wolfram alloy electroplating in oil exploration to 50%, and that of cyanide-free gold plating to 20% nationwide; and the construction of demonstration lead- and chromium-free electroless nickel plating and cladding lines.

A Year of Growth

After the hard times of 2012, MIRDC believes that 2013 will be a year of growth for the Taiwanese surface finishing industry.

The research organization notes that Taiwan has already kicked off several large public construction projects this year; these projects are expected to cost around NT$200 billion, stimilating considerable domestic market demand.

China has also initiated a new urbanization plan, which includes construction of railways, roads, airports, and residential buildings nationwide. This will give a huge boost to China's domestic demand for building materials, and Taiwanese surface finishing companies can take advantage of the lucrative business opportunities that this will present.

In metal surface treatment services, MIRDC says, the industry is expected to ride the wave of recovery of aftermarket demand for auto parts in both the U.S. and Europe, as well as the continuously growing global popularity of smartphones and tablet PCs.

MIRDC estimates, therefore, that the industry's output value and exports for the first quarter of this year increased 1% and 2%, respectively, to NT$38 billion and NT$19.7 billion, and forecasts that the totals for the year as a whole will be NT$160.9 billion and NT$78.1 billion for respective increases of 11% and 4% over 2012.