Pacific-West Fastener Association panelists Tim Roberto and Simmi Sakhuja offered insights on nickel pricing, steel costs and freight rates which affect fastener prices – so distributors can explain to their customers what is happening.

Roberto, president of Star Stainless Screw Company, traced the price of nickel from a peak in September 2015, then plummeting to a low in February 2016. The February nickel price of $3.77 per pound was even below the $4.39 low of December 2008.

Since February nickel prices have bounced up 26.25%.

Nickel is the leading indicator of stainless pricing, Roberto noted. It is between 30% and 40% of pricing.  

Nickel is the fifth most common element on earth – following iron, oxygen, silicon and magnesium, Roberto explained. More than two-thirds of nickel goes into stainless steel production.

A major factor in the price reduction at the start of 2016 was an economic downturn in China. A 51% majority of the world’s nickel consumption is by China, Roberto noted.

An uncertain factor in coming months is a possible reduction in nickel production in the Philippines where the new president, Rodrigo Duterte, is focusing on environmental compliance in mining, Roberto said.

Production will continue to lag in 2016 and the low nickel prices limit investment in new capacity, Roberto pointed out. Economists predict a 1.8% global output increase in 2017 with higher nickel prices and moderate demand increase.

Roberto noted fastener buyers need to be aware of more than current stock costs: Calculate the replacement cost of inventory with fluctuating prices.

Freight rates are a major concern in the coming year, Stelfast owner Simmi Sakhuja told Pac-West. 

Among the freight issues are new Verified Weight Requirements as of July, followed by the Hanjin bankruptcy (See Perspective FIN Page 1). Then in September APL and U.S. Lines combined operations.

The weight issue involves stacking containers on ships according to weight – with heavier containers lower. 

An immediate issue is importers “rushing to get product on the water before the Chinese New Year” when factories in China and Taiwan close.

  • The price of steel in China has direct impact on fasteners and by the end of summer the steel cost was 31% higher than at the end of 2015, Sakhuja noted. 

There was a surplus of steel and flat pricing at the beginning of 2016, she noted. But in preparation for the G20 meetings held in September, China reduced production plus Europe started buying steel from China.

Importers can provide distributors with information on freight and steel prices so salespeople “have the tools to educate customers,” Sukhuja said.

Steel and freight prices “will continue to be a concern,” Sakhuja said. 

The uncertainty forces fastener buyers to “use a dart board” for purchasing decisions and “hope for stability,” Sakhuja observed.

A key is distributors creating the “right partnerships” and having the “right conversations with partners.” The supply levels must focus on “what we need for customers, not what we need to fill racks.” Web: Pac-West.org