Pac-West / SFA Panelists: Shortages Will Continue

“‘Just in time’ is dead,” panelist Tim Roberto declared as three panelists agreed shortages and a strong market will continue well into 2022.

“Relief will not be until 2023, at best,” panelist Danielle Riggs told the joint conference of the Southwestern Fastener Association and Pacific-West Fastener Association.

“All signs are that the market is strong,” Mike Bailey finds.

All three panelists emphasized “partnerships” as important in the current market.

Who will gain? Long-term good customers who have developed partnerships with suppliers.

Who will suppliers ignore? Those past customers who bought only now and then when they could get a cheap price.

Nucor, a domestic manufacturer, finds that with “imports strained,” customers are looking outside traditional suppliers.”

Domestic capacity is growing, added Bailey – who has been with Nucor Fastener for 18 years.

Nucor just acquired an existing state-of-the-art coil processing facility in Shelbyville, IN, where four new National Bolt Headers will be installed and begin operating in 2022.

Supply chain problems are across the industry, Bailey pointed out. That starts with raw material.

“Vendor / supplier partnerships will remain critical,” Bailey emphasized.

Bailey said being a supplier has been difficult: “I don’t like not having anything to sell.”

What Nucor does sell will focus on what customers need most, Bailey said.

Nucor Fastener is able to buy steel from Nucor and the fastener division has increased its steel purchasing.  Nucor wants to “strengthen our place as the domestic lead for fasteners.”

Bailey said the heavy truck and non-residential construction industries have been strong for Nucor. He added that infrastruture is strong as is and may be more important as pending legislation “is mentioned in every newscast,” Bailey observed.

Roberto, president of Star Stainless Screw, pointed to a weaker U.S. dollar plus nickel rising 30% and copper 40% for stainless steel fastener price increases.  He finds sea freight averages five times as expensive.

The price jumps follow six years of “relative qualm” for nickel, Roberto observed. The five-year average price for nickel has been $6.09 per pound and the 20-year price $7.31. Recently it topped $9.

Copper averaged $2.64 a pound over the past five years and the 20-year average is $2.96. It has reached $4.30.

There isn’t much price negotiating going on, Roberto said. There are a limited number of wire mills and “what the wire mill quotes you are stuck with it.”

Demand is outpacing supply, Roberto noted.

The unknown factor in nickel pricing are “ghost warehouses,” holding unknown amount of supply, Roberto said.

In addition to higher prices, it is hard to book shipping lanes, Roberto said. What used to take three weeks now takes six-to-eight weeks.

Roberto emphasized it isn’t just a container or ship problem. “There are not enough truck drivers” once the freight reaches port.

Railroads also cut back during the pandemic and can’t just simply hire more. “You just can’t do that overnight,” Roberto said.

China also is using more of its production domestically. The 13% export rebate has been cut making supplying China vs. exporting more competitive.

Roberto’s suggestion on solving supply chain problems: “Let’s just work together”

Star Stainless sees the supply chain shortages as “an opportunity to serve customers better.” The new challenges in supplying customers can become “an expansion of who we are.”

Riggs, managing director of Würth Logistics, summarized the current supply chain situation as a “train wreck.”  For 2021 transportation rates remain high, container space constraints are a “challenge,” plus the U.S. has congestion at ports and inland has transportation shortages.

For example, Würth has had a container stuck in Chicago since July, Riggs noted. “Since July,” she emphasized in October.

There are “one and a half million kilos “that can’t get to a warehouse.”

Würth monitors the Freight Baltic Index in shipping decisions. The Baltic Dry Index is a measure of the correlation between the supply of large super bulk cargo ships and the demand for the freight space on the ships.

“$24,000 for a container?” Riggs questioned. “I never thought I’d see $24,000 for a container.”

Riggs agreed that the supply chain situation “may never fully go back to normal.” And that is why partnerships between suppliers “are key.”

“We’ve found partners willing to guarantee delivery,” Riggs said.

Riggs is based in Indiana near the major east-west Interstate 70 corridor and she notices the massive truck traffic.  “Oh, there’s a car,” she said of sighting an automobile between 18-wheelers.