John Wolz

Steel in China is up 60.4% from the second quarter a year ago and steel in Taiwan has risen 44% and the cost of fasteners is “primarily related to the movement in steel prices,” Bruce Darling told a Western Association of Fasteners Distributors conference.

“We can see a trend to a global leveling of steel prices,” the Porteous Fastener Company vice president noted. “The gap between the steel price from China and Taiwan has narrowed over the years until today there is little difference.”

The combination of common sources of raw materials, the World Trade Organization and dumping duties, an “almost cartel mentality” and “greed” have led to the leveling of steel prices, Darling commented at the WAFD conference in conjunction with the National Industrial Fastener Show/East.

Darling used low carbon cold headed wire rod figures in his presentation. “While different qualities of wire rod differ in cost, all move rather closely together and typically change at the same time.”

The steel players in setting prices for offshore steel are New Nippon Steel in Japan, POSCO Steel in Korea, China Steel in Taiwan and Bao Steel in China. Each has their own policies of when cost changes are announced, but China Steel (Taiwan) has held to a quarterly change announcement.

Steel prices in Taiwan have been rising since the second half of 2006. By the end of 2006, the steel price was set at $549 per metric ton.

At the end of 2006 the difference in steel prices in China were 43% less than Taiwan.

The Taiwan steel price increases slowed and China’s Bao Steel prices fluctuated. By the end of the second quarter of 2007, Bao Steel prices rose to $460, reducing the Taiwan/China difference to 22.6%.

“To our delight, CSC held the price steady for 6 months,” Darling recalled. “After 5 quarters of increases, we have now experienced two quarters of steady prices. China, however, was on a runaway course. Their prices soared to $640 by the end of 2007 and put their price above that in Taiwan for the first time.”
But for the first quarter of 2008 China Steel announced a 17.9% increase to $665, resulting in an 11.6% increase in finished parts. Bao Steel in China moved their price 6.3% up to $680.

On February 26th this year, Bao Steel announced a 20% increase, but subsequently the market price for steel has only increased 8.5% – though changing every day.

On March 5, China Steel announced a 22% increase to $612 per ton, making its steel price 270% above the 2002 price.

Now Taiwan and China are virtually at the same price for steel and “they are closing in on the value of U.S. steel prices.”

Steel prices will continue to rise, Darling predicted. “Taiwan vendors have been telling us for about a month that they expect the third quarter announcement to be large – in excess of 15%,” Darling pointed out. Though China Steel is not saying what their May 29th announcement will be, it has “indicated it will be in the area of $120 to $150 per MT. That will be a 15% to 18% increase very significant, just following a 22% increase announced for the second quarter of 2008.”

China Steel is projecting “no reason for the price to begin to drop for the next two years,” Darling added.

As he forecast that “2008 will be a year of significant price increases in the magnitude of 35% to 40% or higher, Darling asked the audience,”Please do not shoot the messenger. Please heed the message!” �2008 FastenerNews.com