Thursday, December 18, 2008

Rising Tungsten Prices still don't deter Manufactures

The city's location and R&D capability are expected to counter roadblocks, including rising raw tungsten prices.

The tungsten jewelry sector in Shenzhen continues to stay strong even as it faces challenges.

The city accounts for 60 percent of China's total annual exports. In 2007, the latest year for which industry data is available, it shipped $23 million worth of tungsten carbide powder and alloy jewelry. Last year, however, Shenzhen was estimated to export just $18.4 million worth, a reduction of 25 percent. This is attributed to the appreciation of the yuan and the global market slump.

Other factors have played a part in the export slowdown. The price of the metal increases by an average of 15 percent every year, making it less attractive to manufacturers. Another reason is that the government does not offer incentives to boost exports of goods using tungsten since it is a rare metal and a nonrenewable resource.

Moreover, in an effort to curb the consumption of the material, Beijing is expected in coming years to impose additional exportation taxes on products that utilize the material.

In spite of these developments, Shenzhen suppliers see more room for development because China claims 80 percent of global tungsten output and continues to hold the distinction of being the world's top producer of the metal. Ores are extracted from deposits in Sichuan, Hunan and Fujian provinces.

Although the city does not yield raw tungsten nor is it a production or distribution center of the processed material, Shenzhen is in close proximity to Hong Kong, making it an important hub in the downstream processing industry for fashion jewelry.

The city is home to more than 100 manufacturers, 99 percent of whom are small- to medium-scale enterprises that can perform polishing, sparkling, cold pressing and welding in-house. Large companies have the same capability, in addition to alloy powder metallurgy, mold making, molding, electroplating and laser engraving.

Suppliers have strong R&D capability, which is driven primarily by mold making. On average, 20 percent of annual revenue, or up to $2 million, is allocated for this process. The development of new models requires 50 days, with mold making, metallurgy and jewelry processing each taking at least 10 days to complete.

The main product lines coming from Shenzhen are rings, bracelets, pendants and cuff links.

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