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.

Get the complete version of this report.

All information contained in China Sourcing Reports is the result of exclusive, ground-level and definitive research conducted by Global Sources' analysts. Companies featured in these reports may or may not be clients of Global Sources.