Monthly reviews help companies avoid losses stemming from the currency conversion.
Under efforts to maintain profitability, suppliers of brooches in China are adjusting quotes more often to account for the continuous appreciation of the yuan against the dollar.
|This zinc alloy brooch from Yiwu Xinghui features epoxy-coated wings. The price is $0.60.|
The local currency, which is $6.38 at the time of publication, has increased in value by more than 6 percent since June 2010. To prevent conversion losses, businesses are reviewing prices every one or two months. In long-term contracts, a stipulation for modifying quotes based on the exchange rate is included. A few companies transact in yuan, but this is not common.
Recognizing that clients may be put off by the revisions, makers are absorbing additional outlay brought on by higher material and labor costs. Profit margins are 15 percent lower as a result.
Metal rates are on an upward trend. One ton of 316L stainless steel jumped 20 percent YoY to $5,750 per ton, while silver surged 116 percent to $1.25 per gram. Zinc alloy inched up 8 percent in the same span.
The cost of rhinestones also climbed, with locally sourced variants now 20 percent more expensive than 12 months ago. Imported counterparts grew 10 percent. Although escalating at a faster pace, domestic pieces are still preferred because they go for only $3.44 per bag. Crystals having the same specifications from the Czech Republic are $3.90, and $43.75 if from Swarovski.
Apart from utilizing China-made gem simulants, companies are creating designs with fewer inlays. For a similar colorful and shiny effect, surfaces are painted instead.
In terms of electroplating, the process is subcontracted to specialists that employ environment-friendly methods. Fees are 34 percent higher, but the coating lasts three times longer.
Moreover, the national government’s new quality and safety rules for outbound shipments of fashion jewelry contribute to suppliers’ woes. For each batch, about $150 more is spent to ensure that products conform to the requirements.
As regards labor, companies have raised salaries 15 to 20 percent this year. Further augmentations will be necessary after the Chinese New Year holiday if the cost of living in the country continues to increase.
With these factors eroding the industry’s pricing advantage, exports have been negatively affected. Overseas sales of fashion jewelry from March to October decreased 76 and 44 percent by volume and value YoY to 26,325 tons worth $365 million. Buyers may be diverting purchases to India and Thailand.
Since they are unable to offer low quotes, makers are trying to come up with unique models to attract orders. Although most companies, including small ones, have an R&D team, creative talents are still lacking. It may take five to 10 years for the industry to fully develop the capability to produce original styles.
Note: This article "Brooch prices rise on strong yuan" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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