3/28/2011 1:06:00 AM
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Simmi Sakhuja at SEFA: “Perception” Important Factor in Fastener Pricing

It isn’t just today’s price of steel. It isn’t just sea freight rates. It isn’t just fuel surcharges or supply and demand or currency.

“Perception” is a key factor in fastener pricing, Stelfast Inc. president and owner Simmi Sakhuja told the Southeastern Fastener Association.

Fastener manufacturers are often calculating prices six months before they will get paid.  So where they perceive those factors will go makes a difference in setting today’s pricing.

“I know today,” said the speaker who prefers to be referred to by her first name. “What is next is speculation.”

While steel price increases are widely publicized, there are more subtle factors involved in determining fastener prices. For example, Taiwan fastener plants were operating on three shifts in 2008 and dropped to two shifts in 2009. Though orders are up this year, Taiwan manufacturers have not returned to three shifts, which limits supply, Simmi pointed out.

“Distributors need to educate customers about what is going on,” Simmi advised. “You need to explain why five to six months from now there may be increases.”

Simmi joined Stelfast in 1996 and went through an eight-year rotation – including purchasing fasteners – before becoming president. 

Thus far in 2011 demand is softer than in 2008, she reported.

One current factor in fastener pricing is the cost of wire rod. Steel makers are not increasing production of rod because it isn’t as lucrative as rebar.

Price changes can vary from one country to another. Steel prices are up slightly in China, but not as dramatically as in Taiwan and other countries.

In Taiwan steel prices have risen 26% from April 2010.

Steel prices also are more speculative in China than Taiwan. China Steel Corporation – a Taiwan company located in Kaohsiung – supplies most if not all the wire rod in Taiwan and announces prices quarterly.  

“We are hoping for gradual price increases,” Simmi said of wire rod prices in Taiwan. 

However, in China there have been more suppliers and more volatility. As most of the Chinese manufacturers purchase their wire rod from brokers and only the largest companies buy directly from the mill.

“We know where the currency is trading today,” Simmi said of China’s set currency, “It makes the future a little more uncertain as it is not controlled only by market forces.”

That creates more speculation and brings up the perception situation again.  “What do company owners think the currency is going to go 180 days from now?”

Another current factor affecting China fastener prices is limited utilities. Last summer plants closed temporarily during rolling blackouts.

Will 2011 be a hot summer with more rolling blackouts that amplify supply problems?

Other factors in determining fastener prices:

• China’s appeal to the WTO over European tariffs remains in process.  “We will see what happens March 25,” Simmi said.

• Inflation in China was up 4.9% at the beginning of 2011. The cost of food was up 10.3%.  The question now is how much salaries will go up to compensate. Higher salaries raise production costs and thus affect fastener prices .

• “Talk to your customers about what is coming,” Simmi advised. “Knowledge is the key and knowledge is power. You’ve got information to share with them.”

“We are fortunate to be in an industry with great relationships,” Simmi finds. “We can call and have honest conversations.”

“Tell your customers now you may need help on price. We need to talk to each other.”

In short, “steel is up and the U.S. dollar is weak,” Simmi summarized the spring 2011 fastener price situation.  ©2011 GlobalFastenerNews.com

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Related Links:

• SEFA