Steel Shortage in China Hiking Fastener Prices

Jason Sandefur

China fastener prices continue to climb amid a volatile steel market as supply tightens and China mulls a quota on steel production.\
Steel prices have reportedly jumped 10% during the past week, prompting concern that the steel shortage situation in China will worsen.
“There has been 35-45% price increase year-to-date on most of the fasteners from China already, and prices from other countries also have gone up at the same pace,” according to Jikyoon Park, director of purchasing for XL Screw Corp.
Park predicted “further significant increase in fastener prices,” as suppliers “are asking higher prices or not honoring recent quotes.”
Speculation on future raw material price increases have made many steel and wire rod dealers unwilling to sell whatever they have in stock. Reports from China indicate steel mills are currently releasing only partial ordered quantities.
One of the main reasons for the price increase is due to iron ore price increase. The supply of iron ore has been very tight in China, and the price has jumped 80% in 2007.
“Worse yet, the ore suppliers had announced a 40% price increase for any new contracts in 2008, which will have a significant impact on steel price next year,” Park emphasized.
Iron ore price has reached the point that using scrap metal for milling is cost effective, causing a sharp increase of scrap metal price and shortage of scrap metal for the production of stamping washers. Depending on the region, the FOB washer price jumped 20% to 45% in less than one month. The increase is more severe in factories near Beijing impacted by the fear of lack of supply when steel mills are scheduled to suspend production next year.
Traditionally more stable than threaded fasteners, washer prices have jumped “significantly” as scrap prices have “gone completely haywire because people are willing to pay higher prices to collect scrap.”
World events are also influencing the market, Park noted.
“The Chinese government is also working very hard to reduce pollution to prepare for the upcoming 2008 Beijing Summer Olympics.”
China has already announced it will suspend production of heavily-polluting factories, including steel mills, around Beijing from March to September 2008, which will have a “significant impact on the steel supply.” �2007 FastenerNews.com