Fastener Prices Jump As Steel Hike Hits

Jason Sandefur

Following 65% increases for iron ore from Brazil supplied to Asia, steel prices rose around the globe, with producers preparing further hikes that continue to drive up fastener prices.\
The price of a 1/2 x 4 hex bolt has jumped 16.4% since January 1, 2008. The price had already gone up 9% in the previous six months. And suppliers are warning of more price increases.
Rob Harris of the Industrial Fasteners Institute, which represents North American manufacturers, noted steel prices are “going up, up, up!”
“No one can say for sure when prices will stabilize or come back down, unless the rapidly stalling economy reduces demand for everything,” Harris stated.
Major Asian steelmakers agreed to a 65% increase for iron ore from Brazilian miner Vale effective April 1, 2008.
Jikyoon Park, director of purchasing for XL Screw, told FastenerNews.com the iron ore prices will result in “more price increases, a shortage of steel and longer lead times.”
The tight supply will impact factories without large quotas from major steel mills such as Taiwan’s China Steel Corporation and Baosteel of China, Park added. Smaller factories “have no choice but to buy material they need from local wire rod dealers at spot market price,” Park explained.
Subsequently some fastener factories are refusing orders unless customers agree to late August delivery because they cannot get the wire rod they need.
In just one month, Taiwan material costs have risen to $96/mt (11%) for low carbon steel; $120/mt (13%) for medium carbon steel; $96/mt (9%) for alloy steel.
The price of fasteners from Taiwan jumped from 8% to 15% during the first quarter of 2008, with further hikes expected as manufacturers pass along a double-digit increase in steel costs, according to Park.
Manufacturers are seeking another 20% increase following news that China Steel Corp. of Taiwan hiked its second quarter steel pries an average of 19%. The hikes include a 20% increase on low-alloy steel (1035/1045); a 22% increase on low carbon steel (1018); and a 25% increase on medium and high carbon steel (1045). The latest pricing is 34% – 37% higher than the quoted price for the fourth quarter of 2007.
“This increase is much higher than the market expectation of about a 13% increase,” Park explained. “The price increase of CSC in the last two quarters alone will force our Taiwan suppliers to increase prices about 20%, assuming that they have enough quota from CSC.”
Over the last three quarters, CSC prices steel have soared more than 30% to $812.38 per metric ton.
The latest CSC hikes followed news in late February that Bao Steel in China would increase prices 20% as raw material costs surge.
“Both are large and very significant,” Bruce Darling, vice president of materials for Porteous Fastener Co., told FIN.
Chinese fastener suppliers have voided pending quotes to customers in the wake of the hikes, Darling noted.
Locknut prices jumped 18% the first week of March on top of a recent 12% increase, according to Marty Schneider of Continental-Aero.
“There is no end in sight,” Schneider said. “Mills are very rattled on the cost of wire.”
Suppliers who “didn’t buy for all your commitments will be under water,” Schneider cautioned.
A look at steel prices over a 12-month period shows that wire rod outpaced all other steel products in the rate of increase.
Between December 2006 and December 2007, wire rod rose 19%, from $499 per metric ton to $598.
During the same time, hot rolled steel coil gained 13% to $630 per ton, while hot rolled steel plate grew 10% to $837, cold rolled steel coil shot rose 6% to $705 and medium carbon steel shot up 17% to $859 per metric ton.
Industry insiders say the mills have proposed further hikes to $620 per metric ton for wire rod in the near future. Some producers, such as ArcelorMittal Long Carbon North America, have already announced hikes of $40 per ton, according to American Metal Market. Nucor is also said to contemplating a similar increase, while Republic Engineered Products announced a $35 per ton increase and Charter Steel is reportedly hiking prices by at least $30 per ton.
“Nearly everyone agrees, however, that wire rod is in short supply, largely because of the usual suspects: the weak U.S. dollar, low imports and higher prices abroad,” wrote Michael Cowden of AMM.
Wire rod imports from China have declined in recent months, dropping 87% to 14,666 tons in January.

North American Steel
In addition to price, supply of some steel is becoming a problem. Houston fastener manufacturer Tim Malone of Spring Nut & Bolt finds Airbus and Boeing suppliers are aggressively buying A286 taking up the production capacity. Steel for oil field products “is getting second billing. Everybody I talk to says more steel is coming, but orders are taking up supply fast.”
North American manufacturers are shopping the world for A286, with supplies coming from Italy, France and the U.S., Malone noted.
The A286 steel has more than doubled from $7+ per pound to $18 a pound.
Fastener manufacturers have “no choice but to increase prices,” Malone said. “A little bit you can absorb, but double digit you have to pass along.”
“Customers never accept price increases,” Malone finds.

Global Demand
Most price hikes appear unrelated to the U.S. economy, which is wrestling with a housing bust, a slowdown in automotive markets and anemic figures on jobs.
“This is really a strange situation that we have never seen in the past,” Park claimed. “It doesn’t appear that there’s much real demand for fasteners in the U.S. market, but many recent and old developments overseas keep pushing the price higher.”
China’s growing investment in infrastructure development across all sectors is driving demand for steel, along with higher costs for pollution control related to the 2008 Summer Games in Beijing.
Market speculation in Taiwan suggests that CSC will increase steel prices again in the third quarter, completed a full year of consecutive price increases.
There is speculation that CSC, which is owned by the Taiwan government, received pressure to limit its Q2 price increase to minimize its impact on the upcoming presidential election scheduled for March 22, 2008.
Usually 60-65% of the wire rod price is reflected in a fastener price increase.
Prices of fasteners from China and Taiwan skyrocketed during 2007, prompting importers to predict prices would continue to escalate in 2008.
Other factors are expected to drive fastener prices higher in the coming months, as ocean freight and other transportation costs continue to climb.
Park said he sees no relief in the near future.”The direction of fastener prices for the foreseeable future is clearly set: up and up.” �2008 FastenerNews.com