​​​​​China has exported more than US$1 billion worth of faucets in each of the past two years and is well on its way to shipping at least US$1.5 billion of the product this year. Figures for the first quarter of 2006 show exports already reaching almost US$332 million. This is an increase of more than 30 percent over the same period in 2005.

Export sales have risen significantly since we reviewed the industry in September 2004. It should be noted, however, that export volume has actually declined, albeit by a moderate 5.3 percent.

The sustained rise in value is due primarily to the fact that suppliers have inflated prices by as much as 15 percent in the past year to compensate for shrinking margins brought about by rising material and manufacturing costs.

The following are some of the key trends we see in China's faucets industry:

• Most suppliers will be increasing faucet prices further in the next 12 months as raw material and component costs continue to rise.

• More high-end faucets will be available in coming months. These will come in complex shapes and constructions, or a variety of surface finishes that provide better protection against corrosion. Electronic features such as sensors will enhance water efficiency and purification functions.

• Investment in factory upgrades will concentrate on the purchase of additional or advanced machinery.

• OEM business will continue to dominate the industry, although more suppliers will be venturing into ownbrand production and exports. OBM trade will continue to target developing markets in the Middle East and Southeast Asia.

• The industry will consolidate further as a new national standard clamps down on suppliers that use substandard materials and manufacturing processes.

This report covers the three major faucet categories produced in China: lavatory faucets and mixers, kitchen faucets and mixers, and shower or tub faucets and combination sets.

The Products & Prices section discusses the key features of these faucet types as well as the factors that influence prices and market positioning of faucets in China.

Production processes have changed little since our last report. Several key developments, however, have emerged that are geared particularly toward the manufacture of high-end craftsman faucets. These developments as well as the different processes in traditional faucet-production and QC are discussed in the Manufacturing section of this report.

China's faucet-manufacturing supplier base has dropped from 3,000 when we last examined the industry to about 2,600. About 85 percent of the makers are small, 13 percent midsize and the remaining 2 percent large. The Industry Overview elaborates on the composition of China's faucets industry, highlighting the key characteristics and capability of the different types of suppliers.

This report profiles some of the major faucet makers in China, a number of which were also featured in our 2004 report.

Industry Overview

China continues to face the difficulties that have shaken the faucets industry in the two years since we last examined it.
Foremost among these challenges is the fluctuating cost of brass, the material most commonly used by China suppliers to make faucet bodies.

The cost of brass has more than doubled since 2004. It is currently on the downtrend, dropping from US$4,685 per ton in January to about US$4,000 in March, and this decline is expected to continue for the next several months.

But with copper costs still on the rise, suppliers are not projecting further cuts in the cost of brass once it reaches US$3,700. Copper is the main component of brass.

Compounding the difficulty is the still rising cost of other components and materials such as ceramic discs and various types of plastics.

Suppliers have already increased faucet prices by as much as 15 percent because of these factors. While some are planning to keep prices stable for the next 12 months, the majority will again adjust quotes if material and component costs continue to rise.

The higher prices of China-made faucets are severely affecting the industry. Many makers had to reduce output by as much as 50 percent after orders slowed down.

With buyers opting to wait out the fluctuations in both material costs and product prices, exports have seesawed between growth and decline that rarely exceeded 15 percent in the last two years.

In February 2006, export volume dropped suddenly by nearly 43 percent and reached only 36.4 million pieces. This was a major blow to the industry since the decline came after shipments exceeded 63.5 million in January, the highest in seven months.

Nevertheless, things are now looking up. March figures show exports soaring an impressive 52 percent to exceed 55.4 million pieces.

Suppliers are expecting business to in coming months as they release more up-market models with enhanced aesthetics and water-saving features.

Despite these difficulties, faucets continue to be a formidable product line, accounting for as much as 30 percent of China's vast household and sanitaryware industry that generated US$4.6 billion in 2005.

Export revenue from faucets has exceeded US$1 billion for the past two years, and is likely to reach US$1.5 billion in 2006 based on the average annual growth rate of 24 percent.

Upmarket shift continues

When we first examined China's faucets industry in 2004, low-end models accounted for 50 percent of output, midrange 40 percent and high-end, 10 percent.

Low-end and mid-range faucets, which have bodies made of brass with a copper content ranging from below 50 to 60 percent, continue to make up most of the country's output at present. High-end models, however, are gaining ground as suppliers hone in-house design capability further in line with efforts to move up-market. These models are made of brass with a copper content of more than 60 percent.

High-end faucets now account for an estimated 12 percent of output while the share of mid-range models rose slightly to about 43 percent. The remaining 45 percent consists of low-end items.

Supplier Profile

Chaowan Sanitary Ware industry Co. Ltd

Established in 1982, Chaowan Sanitary Ware is a mid-size supplier that started producing delay faucets for the mid-range market in 1989 and has since manufactured the metal cartridges that regulate waterflow in-house. The company's other products are flush valves for toilets and urinals as well as plumbing accessories.

Now, Chaowan Sanitary Ware has one of the most specialized cartridge production technologies among Shuikou makers. In 2001, the company expanded its product line to include automatic faucets with infra-red sensors for the mid-range and high-end markets.

The company exports half of its faucet output. Overseas sales are expected to grow more than 20 percent through 2007.

Products

Faucet bodies are made of grade-A brass sourced mostly from China, although a small percentage is imported from South Korea and Brazil.

The bodies of time-delay faucets and their cartridges are aligned precisely to avoid leakage and malfunction, especially under varying water pressure conditions. The two components are priced together as a set rather than stand-alone pieces.

Time-delay models can be adjusted for waterflow and volume and be programmed for preset shut-off times. The line also includes a newly released craftsman series that features models with square or oval bodies produced by milling equipment instead of casting machines.

The eight-member R&D team focuses efforts on improving product stability and prolonging service life. For example, new faucet models will have easy-to-install designs and lower maintenance requirements, while automatic models will be more resistant to humidity.

Chaowan Sanitary Ware also plans to release smaller automatic faucets powered by batteries.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.

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