Fasteners Imported From China & Taiwan Jump 33.3% to 51% During 2007

John Wolz

Prices of fasteners from China and Taiwan skyrocketed during 2007 and importers predict prices will continue to escalate in 2008. And fastener importers are advising distributors to “buy now.”
The 1/2×4 hex bolt was up 9% FOB between January 2007 and mid-June. Then China cut the export rebate to its fastener manufacturers from 13% to 5% on July 1, 2007. By September the 1/2×4 hex bolt was up 21% for the year. By the end of the 2007 the hex bolt price was up 33.6% over late 2006.
A sampling of prices offered by manufacturers from China and Taiwan showed increases during 2007 of 33.3% to 51% (see chart).
Marty Schneider, president of Continental-Aero, reported prices rose 13% during 2007 for 1/4-20 nylon inserts from Taiwan. “The larger sizes are higher increases,” Schneider added.
Importers predict prices will continue to rise in the coming months.
There was talk of China dropping its remaining 5% rebate in September and again there was speculation that it would happen with the beginning of 2008. “It hasn”t moved yet,” Bruce Darling of Porteous Fastener Company said with emphasis on the “yet.”
Taiwan”s China Steel Corporation announced wire rod price increases during autumn, and another price hike is anticipated for February 21, 2008. The smaller independent steel suppliers are changing their prices “every week,” Darling said.
China Steel is changing its allocation policy, moving to higher-value steel. “They are walking away from low carbon steel,” Darling explained.
The weak U.S. dollar also is driving up prices.

Jikyoon Park, director of purchasing for XL Screw Corporation, forecasts “fastener prices from Taiwan will continue to go up. One of our suppliers just informed me that wire rod price in Taiwan has gone up significantly during the past two weeks and he expects it will continue to go up.”
Park attributes steel cost hikes to (1) a 30% increase in iron ore price imported from Australia and South Africa compared with the year-ago price and (2) anticipation of another wire rod price increase by Taiwan”s China Steel.
“People are expecting CSC to announce another double-digit increase following last quarter”s increase,” Park finds.

“All the construction material in China is in high demand and I do not expect this will change for long time,” Park said. “There”s construction boom in every corner of China and it will continue through the 2008 Summer Olympics in Beijing and 2010 World Expo in Shanghai. As a result, prices from China will remain high for a long time.”
“High steel cost means fastener prices will not be coming down soon unless the global economy cools down significantly,” Park summarized.
Park hopes for some stabilization of prices this year but added that he doubts “we have seen the last of price increase. I think we will see another 5% to 10% increase within the next six months.”
In addition to this fastener price increase, ocean and inland freight will drive up costs. “We are expecting a huge increase in ocean freight starting May “08,” Park added.
Buy Now
Current inventory came in at a lower cost, so Park is recommending customers “buy more now to avoid significant price increase a few months later when higher-cost material arrives to our warehouses.”
Indeed, preliminary results from the End of 2007 FIN Survey show 92.3% of importers anticipate raising prices in the next six months.

Park noted that China”s government “has tightened the monetary supply to control inflation and to prevent overheating the economy.” That triggered wire rod and fastener price jumps in December 2007.
A new labor law effective January 1, 2008, is intended to improve working and living conditions in China”s factories and factory dormitories.
During December steel mills adjusted prices up, citing such cost increases as iron ore, fuel and labor, Park reported.
Since the December price increases, most fastener manufacturers have held prices flat or even lowered 2% to 3% to reduce inventory and raise cash. “I think they will adjust price up again after adjusting their inventory level, because there is still shortage for certain materials and many small factories are not running or some are closed down due to poor financial condition,” Park analyzed.
“Our suppliers agree that steel supply and price will continue to be very bumpy due to many short-term uncertainties, such as monetary supply situation, bank credit control, Lunar New Year effects…etc.,” Park reported.
Factoring in higher prices for ocean freight, iron ore, labor and financial costs leads Park to predict steel and fastener prices may increase another 5% to 10% in the spring.
Park noted that fastener manufacturing capacity in China is not growing any more, and capacity has actually reduced recently because many small factories are not running or closed down due to tighter monetary policy and lack of business.”

Schneider described 2007 as “a year of total chaos and volatility” in fastener pricing. The price quotes he gives potential customers are “valid for only one week.”
“Our master distributors will be severely wounded if they are not allowed to raise their contract prices.”�2008 FastenerNews.com