This undermount sink from Yuyao Afa of mainland China is made of 16 or 18 gauge 304 stainless steel with a brushed satin finish.

High outlay and dwindling margins force suppliers to raise prices. Sales estimates for the year ahead indicate a slowdown in growth.

With materials spending for kitchen sinks remaining at high levels despite stabilizing stainless steel costs, suppliers in mainland China and Hong Kong continue to be cautious with their price projections.

The cost of stainless steel used by mainland companies currently ranges between $1,400 and $5,700 per ton. Certain grades have more than doubled over the past few years because of strong demand from various manufacturing industries. In addition, the cost of nickel and chrome, which are key elements in stainless steel, has ballooned due to a shortage in supply.

Although the rate that costs have been rising slowed in 2007, Hong Kong makers are still spending about 30 percent more on materials procurement compared with two years ago. Makers often source these manufacturing inputs from Japan, South Korea and Taiwan. A sheet of 304 grade stainless steel measuring 400x400sqft and with a thickness of 1.3mm is now about $140.

Similar to the mainland, manufacturers in Hong Kong attribute the jump to the sharp increase in nickel costs. Pricing speculation, industry monopolization and the resulting closure of some processing plants are putting extra pressure on the volatile situation.

Many suppliers in the mainland can keep prices at current levels so long as fluctuations in material costs do not exceed $290.

Other factors such as the appreciation of the yuan, however, are forcing companies to raise quotes, primarily as a way of shoring up margins.

Moreover, the government reduced the export tax rebate for kitchen sinks from 13 to 5 percent in July last year partly to curb stainless steel consumption and save resources.

Mainland makers are anticipating additional cuts. In fact, several suppliers, including Yuyao Afa Kitchen Ware Co. Ltd, said the tax refund could be canceled this year.

	Hong Kong-based Winnington offers the DP10348S1A model measuring 1,030x480x180mm. The product is made of 304 stainless steel.

Amid the uncertainty over manufacturing expenditure and prices, suppliers are predicting sales to increase further, albeit at a slower pace.

Exports from the mainland have risen an average 50 percent annually since 2003. Only a few companies, however, believe they can match the growth rate this year and many expect revenue to go up between 20 and 40 percent.

Customs statistics support these calculations. Export value between March 2007 and February 2008 increased 36 percent whereas shipments during the same 12 months of the previous period soared 65 percent.

Kele Kitchenware Co. Ltd is estimating 10 percent growth in exports in the year ahead. The company generates $40 million in revenue annually, of which overseas shipments represent 50 percent.

In contrast, Yuyao Afa is expecting export sales to jump by 40 to 50 percent. The supplier specializes in sinks, with models for kitchen use accounting for 95 percent of output. Nearly one-third of the line is sent abroad.

Hong Kong’s exports of kitchen sinks go mostly to the US and Europe, rising 30 percent in past years.

Makers in this report, however, foresee minimal growth in the next 12 months due to the economic slowdown, particularly in the US.

After registering 20 to 30 percent higher export sales in 2007, Winnington Casting Co. Ltd anticipates only a 5 to 10 percent upturn this year. It ships about $800,000 worth of kitchen sinks annually, mostly to the US.

Tong Chi Stainless Steel Engineering Ltd is expanding market reach to include Europe, Asia and Australia but remains cautious with its projections, placing growth at below 10 percent.

Despite a 10 percent upturn in prices, exports at Evolution Industrial Ltd rose 30 percent last year. The company is expecting overseas demand to weaken and, as such, is implementing product-based differentiation strategies to stay afloat.

Although they are currently spending more on materials procurement, suppliers have no plans of shifting to less-expensive variations of stainless steel. Most mainland makers opt for 202 and 304 grades as these are fit for extrusion, the key process in producing kitchen sinks.

Taizhou Kolego Hardware Mfg Co. Ltd sources its requirement from Zhejiang province, while Yuyao Afa purchases 304 stainless steel in South Korea at about $5,200 to $5,400 per ton. Kele procures the same type of material from Guangdong province at slightly lower costs.

Stainless steel in 201 or 316 grade is seldom used in the mainland. The former has low resistance to rust and the latter is too expensive and hard to be extruded.

Tong Chi is one of the few companies in Hong Kong to adopt 316 stainless steel, which is more capable of withstanding acid and oxidation.