Roberto At WAFD: Nickel Prices To Drop

John Wolz

Signaling good news for fastener distributors, the price of nickel is expected to decline in the coming months, easing stainless steel margins hounded by nickel”s meteoric rise in recent years, according to a Western Association of Fastener Distributors panel presenting at the National Industrial Fastener Show in Las Vegas.\
Tim Roberto of Star Stainless told attendees of “The Rapidly Changing International Marketplace” conference that labor disputes in the nickel industry should be settled in the near future. This development should lead to an influx of nickel on the market, making stainless steel less expensive. Two-thirds of all the nickel mined in the world is used to make stainless steel, Roberto explained.
“The future looks bright right now,” Roberto stated.
Roberto predicted a drop in price of nickel, currently selling at $13.65 per pound, which should begin reducing stainless steel prices by the second or third quarter of 2007.
However, Roberto characterized his analysis as “rosy,” noting low inventories could keep demand inflated for some time.
“Things could go wrong really quickly,” he emphasized.
The fastener industry can do little to brace for price fluctuations, Roberto pointed out. His advice included linking distributor prices to commodity hikes and selling products based on investment costs, not inventory.
“Keep yourself abreast of what”s happening in the metals markets,” Roberto advised.
Darling: Steel Price Gains To Continue
WAFD panelist Bruce Darling of Porteous Fastener Co. reported that steel prices are expected to rise moderately during the next six months, probably at a quarterly pace of 3% to 5%. Spotty steel shortages continue to keep prices high, Darling stated. “We don”t control steel, we react to it,” Darling said of importers.
Other metal prices are worrisome as well. Darling noted that the price of zinc has soared more than 600% since 2002.
“Zinc is up and it”s not likely to go down soon,” Darling stated.
More disturbing to fastener producers is the likelihood that these “significantly” higher prices are here to stay.
Other factors adding to the rising cost of fastener imports include high zinc prices, domestic freight fuel surcharges of 15% to 20% and conversion to RoHS-compliant Trivalent chrome plated parts.
Darling said Porteous have started receiving a larger volume of quote request from fastener companies in India. “Our past business relationships with Indian firms have not been lasting,” Darling explained.
One exception is a three-year relationship with a threaded rod producer whose quality meets specifications.
India has 214 registered firms doing export fastener business, some of which Darling has visited on his three trips to that country.
“Some are modern and some are old,” Darling explained. “Some have good quality and some not so good. You have to pick them carefully.”
Marzano: Patience Needed For Asia Operations
Tim Marzano of N-D Industries, who has spent the last six years setting up Asian operations for his company, claimed that doing business in Asia can be profitable. On average a U.S. company makes a 42% return on its Asian operations, Marzona explained.
Deep pockets are required to get businesses operational in the evolving bureaucratic landscape in China, where procedure is frequently anything but linear.
“Doing business in China is kind of like a Rubik”s Cube, only the colors keep changing,” Marzano noted. Marzano said N-D Industries has spent about $5 million in the last five years opening businesses around the world.
Marzabi said standard fasteners are what China does best. But the country lacks heat treating and plating technology, as well as knowledge, to move into high-end fastener production at this time.
Concerns about property rights safeguards have also made companies hesitant to share proprietary information.
But domestic transportation is the single biggest issue facing businesses in China, where infrastructure is lacking.
Questions remain about the political landscape as well. Marzano said some businesses are concerned about potential regressions in reform policy after China hosts the 2008 Olympics.
The status of Taiwan is another volatile issue, as many Taiwanese, with U.S. support, wanting to declare independence from the mainland. China has stated emphatically that it will not allow this.
One conference attendee asked about the impact of big boxes like Home Depot and Grainger moving into more in-depth fastener distribution in the U.S.
Marzano acknowledged that Grainger, Fastenal and Home Depot have strong supplier ties in China, but he couldn”t say what impact that would have on U.S. distributors. He did not that those companies have a growing China customer base, a trend seen in the business models of many large multinational corporations.
“We”re looking at (China) as a supplier, but other companies are seeing them as customers.” �2006 FastenerNews.com