Darling to WAFD: Steel Prices Not Coming Down

John Wolz

Steel prices will “remain strong and are expected to continue a slow increase for the next six months,” Bruce Darling advised the Western Association of Fastener Distributors. \ Zinc prices also will remain high, he added.
“Steel prices aren”t going down anytime soon,” Darling, vice president for materials at Porteous Fastener Company, predicted.
Darling showed how low carbon cold headed quality steel prices from China Steel Corporation of Taiwan rose from $300 per metric ton at the beginning of 2002 to $570 by the second quarter of 2005.
The steel portion of the cost of a fastener is 55% for a cap screw up to 62% for nuts or washers that leave more steel waste, Darling explained.
In the fourth quarter last year China Steel Corporation”s price went down 5.3%, followed by a 10.7% decline in the first quarter of 2006. But prices have risen in the past three quarters and are now 91.3% higher than at the start of 2002.
Darling, who has visited plants in China, India, Taiwan, Thailand and Vietnam this year, noted that steel prices may vary elsewhere and types and grades of steel do not necessarily follow low carbon prices, but “long term they move reasonably close together.”
Being aware of steel prices is important for fastener distributors in timing orders and in pricing inventory, Darling pointed out.
Noting that steel was about $500 m/t in the mid 1980s, Darling showed that today”s prices represent a return to those levels rather than new peaks.
Bao Steel in China also increased prices in the first half of 2006.
Darling reported Bao”s steel prices “might soften a bit in the last half of 2006” while CSC announced a 6.7% increase for the 4th quarter.
China Steel is moving from adjusting steel prices on “whim” or “daily” to quarterly, Darling noted. “Quarterly helps the manufacturer place orders.”
Also affecting steel prices are producers taking furnaces offline for maintenance, creating shortages. CSC will take its only wire rod billet mill offline for maintenance and that will reduce fourth quarter supply 20%, Darling reported.
Zinc Prices
World market increases at the beginning of 2006 lifted zinc prices to 250% over 2002. Then zinc prices jumped 59% in the first quarter of 2006, followed by a 109% increase in May, bringing zinc prices to 522% over 2002. A 26% summer drop was countered this month with a 24% increase and zinc now stands at 478% over 2002.
In just two years the world stockpiles have dropped from 700,000 m/t to about 140,000 m/t.
“More disturbing is the likelihood that this high price is here to stay,” Darling explained. That means higher zinc clear and HDG plating costs.
Zinc ore deposits are widely spread throughout the world, with most ore extracted from China, Australia, Peru, Europe and Canada.
” Also affecting prices was a reduction from 13% to 8% in the steel export rebate credit. By reducing the steel rebate, fastener factories must either absorb the difference or increase fastener prices. This year raw steel prices went up 5% immediately.
” Darling pointed out that conversion to RoHS compliant Trivalent plated parts “is happening and will increase costs.”
Editor”s Note: Bruce Darling will be speaking on “The Rapidly Changing International Marketplace” at a Western Association of Fastener Distributors conference November 15, 2006, in conjunction with the National Industrial Fastener Show/West in Las Vegas. �2006 FastenerNews.com