Fastener Prices Jump More Than 30%

John Wolz

Fastener price increases in the past three months are startling even to those who have been calling for higher prices.
And suppliers predict prices � which have gone up more than 30% � will continue to climb.

One importer reported paying 28.2% more for 1/2 x 1 1/4 zinc hex bolts this month compared with July 2003.
A 3/4 x 7-inch bolt used in strong ties for construction has risen 41.7% from October to February.
�Prices are changing on a daily basis,� Barry Porteous of Porteous Fastener Co. reported. Though he once speculated prices would rise another 15% to 20% by spring, Porteous noted that each time in the past few months that they have ventured a forecast, even internally, price increases have exceeded their prediction. �I think it could be another 30%. We haven�t seen the likes of this since 1974,� Porteous remarked.
�We think prices are continuing up,� importer Ron Sackheim of XL Screw predicted. �Until the supply increases or demand gets weak, we don�t know where this is going to stop.�
Factories are quoting each inquiry, Bruce Darling of Porteous Fastener reported. �Very few are loading prices into our computer.�
Steel prices are the first cause mentioned for the price increases. Asian wire rod prices have risen at least 36.2% in the past year.
It isn�t just price. Supply for manufacturers is an added problem. �If you want wire rod, you have to pay cash,� Sackheim told FIN.
The supply of fasteners is not keeping pace with demand, Sackheim noted. �We are not getting the number of containers we had expected.�
Importers report they are still ordering, even at higher prices. Some factories are limiting order volumes.
Rob Harris, managing director of the Industrial Fasteners Institute, emphasized that the North American manufacturers organization avoids price discussions because of antitrust rules, but he described the situation as �starting to go critical.�
�I�m sure with what�s happening in the global steel market, prices should be increasing to just cover that added cost. However, in some markets the buyers are refusing to recognize or accept any increases at all.�
One supplier said even North American manufacturers are �booked up� and adding surcharges. They are having to pay as much as $500 per ton for steel on the spot market.
Darling cited the example of low-carbon wire rod prices from last October. Wire rod in China was selling at $348 per ton. By early February that price rose to $474 and �it has moved higher already.�

Sackheim suggested that Asian producers �have learned their lesson about lowering prices� and aren�t going to cut prices easily. �Nobody makes a profit� when prices are reduced, Sackheim observed.
Prices are not likely to stabilize this year, importers agree.
Darling explained that new steel mills in China that were to open in the second half of 2004 and could have increased steel supply have been delayed. Ironically, steel price increases have made the cost of construction too high.
A booming economy in China with construction, automobiles, highways and railways is putting pressure on the supply of steel.
Other factors driving prices mentioned by fastener suppliers include:
� Coke and coal � necessary for steel production � are up 50% in the past year. Coke is up 71% in the past year in China, and coal is up 81%.
� Iron ore is up as much as 267%.
� Ocean freight is up 30% to 40%. Effective May 1, 2004, a charge of $450 per 20-foot container is planned plus a peak season surcharge of $185. The freight costs could add up to 4% to the cost of fasteners.
� Domestic freight is up 30% in China.
� Electricity rates have surged 15% in China. The Taiwanese utility plants are government-owned, and prices have remained constant.
It isn�t just price. Some Chinese factories cannot get the necessary electricity to produce full time.
� Taiwan�s currency, the NT dollar, rose 4.8% in the past year. �That is a cost to them,� Darling said. �Importers buy in U.S. dollars. The weakening U.S. dollar drives them crazy.�
� The export rebate the Chinese government gives dropped 2% on January 1. �To a factory in China that is a real cost,� Darling pointed out.
� China Steel in Taiwan has increased wire rod prices in the past six consecutive quarters, and a large jump is anticipated for the second quarter of 2004. One fastener manufacturer is bracing for 25% to 30% increases during this year.
� Fastener distributors report inventories are low and thus they can�t delay purchasing.
In the End of 2003 FIN Survey about half of fastener manufacturers reported finished goods inventories to be �about the same� as a year before, and nearly 30% were down.
� An improving economy is increasing demand.
Suppliers are telling distributors that prices are subject to availability and cannot be guaranteed for open orders or new orders.
Porteous said end users are generally accepting fastener price increases. �Any OEM who is buying steel components already knows what is happening,� Porteous explained.
Distributors weren�t believing the price increases and thought they were short term. Importers are advising them to place orders, because there is no end in sight to the increases.
One potential problem is that some orders from just a few months ago �possibly will never be shipped� because the manufacturers� costs have jumped.
Porteous said he is relying on long-term relationships with Asian suppliers. �We�re going to work together.� The importer will accept price increases when necessary, while the manufacturer continues to ship fasteners to a long-term customer.
Jim Gordon of FastenerBarn.com said the higher prices affect surplus prices. �I try to keep my thumb on the pulse of the market. People are calling us now. They have outages and want more competitive prices.�
Surplus prices vary �according to what the market will bear,� Gordon noted.
Gordon isn�t complaining about the higher prices. �It�s time. I�ve not seen this in my 20 years in the surplus business.� �2004 FastenerNews.com