Beaulieu at NFDA on Recession: "It's over."

Economist Brian Beaulieu of the Institute for Trend Research told the spring conference of the National Fastener Distributors Association gathered in San Antonio that the U.S. now has a "viable, sustainable recovery trend" and that it is time for businesses to expand.

Fastener Prices Rise on Demand, Freight and Steel Hikes

Take a look at your inventories, your customers' need and "buy now," importer and master distributor Barry Porteous of Porteous Fastener Co. advised distributors at the Pacific-West Fastener Association spring conference.

Porteous noted that steel in Taiwan peaked at $800 to $875 and is now in the mid $700 range and "headed back up to low 800s."

Bruce Wheeler of Star Stainless Screw said stainless steel fastener prices have already jumped more than 20% in recent months. He estimated the price would go up another 12% to 15% by the end of April.

"The pipeline is leaned out," Wheeler described inventories at all levels of the supply chain from raw materials to steel mills to distributors and OEMs. "Lead times are longer. Stainless steel is requiring five weeks vs. two weeks just six months ago. They are now quoting for August shipments to arrive in October."

How high will stainless prices go? "It depends on demand," Wheeler responded. "At some point in time prices will have to hit the top."

Porteous said domestic producers he has talked to "want to raise prices. They are just waiting for the competition to go up."

The demand in China, India, the U.S. and Europe drove up steel prices in 2007-08. Scrap steel was selling for as high as $800 a pound. All levels of the supply chain were building up inventories until October 2008.

"In November 2008 the market fell off the cliff," Porteous recalled.

Just since the beginning of 2010 "we are starting to see a bit of turnaround."

In addition to increasing demand for product, now there are fewer suppliers of iron ore, coke, coal and steel, Porteous noted. Components of making steel are ?very scarce and the prices are headed up.

Taiwan's China Steel Corp. traditionally announced quarterly prices well in advance. This year a few weeks in advance they are giving two month price, Porteous noted. And recent announcements have prices going up 5% to 18%.

There are shortages of fasteners made in Asia for OEMs and MRO customers and after more than a year of reducing inventories, distributor stocks are low, Porteous explained.

Wheeler said stainless steel is headed up as nickel, molybdenum and copper have all jumped in price on the London Metal Exchange. Nickel was at $4 a pound a year ago and this month hit $10 despite high inventories in relation to demand; copper was $1.70 and is now $3.40; and moly rose from $8 a year ago to $17 currently.

Wheeler pointed out that brass fasteners are 62% copper and bronze fasteners are 96% copper.

Stainless wire producers "are struggling to keep up with demand." One mill has shifted to the more profitable carbon products.

Wheeler advised Pac-West fastener distributors to "look at what you need for your customers going forward. Cover yourself."

But Wheeler cautioned against "panic buying," which creates an artificial demand."

He hopes stainless steel inventories will build back up later this year.

Porteous noted that distributors aren't alone in paying higher prices. "What is happening to you is probably happening to your competitors."

2010 Tide of Sea Freight Prices Rises Again April 1 - Increasing Fastener Costs

Shipping container started going up in January, new charges are being added today and annual contracts for container costs expected to go up May 1.

J.P. Park, director of purchasing for XL Screw, said the result is the price of imported fasteners to North America is likely to climb 3% to 5% due to ocean freight charges.

• Transpacific freight jumped $320 per $20 ft. container January 15, 2010, due to an "Emergency Revenue Charge."

In addition there have been increases such as higher Bunker Charge, In-Land Fuel Surcharge and extension by some carriers of the peak season surcharge through the traditionally non-peak season of September to April.

• Effective April 1 there will be a general rate increase of $240 for 20' containers / $300 for 40' on dry and WC local reefer cargo; and more on other categories. Also the documentation fee doubles to $50.

• The Transpacific Shippers Association is seeking A $640/20' ($800/40') increase May 1 when new freight contracts become effective.

Barry Porteous said the increases result from major carriers losing money. The ships are traveling at slow speed to save fuel and making more stops. Some steamship lines are taking ships offline. They are delaying cargo on the docks even for major Big Box customers, Porteous noted.

One problem for the fastener industry is that a container of fasteners is not as profitable as one filled with consumer products such as televisions, Porteous pointed out.

Beyond price, Park noted that "as a result of capacity reduction by carriers through reduction of their fleets and sailing schedule, getting container space has been more difficult and many shipments are delayed from overseas."

Even exporters are competing for container space, Park added. "Steamship lines are taking full advantage of the shortage of container space to increase rates."

European Prices Up Weekly

• For Europe, Fastener + Fixing editor Phil Matten reports "there are increases coming through virtually week to week."

A problem with this round of increases is they "are not going to be smooth. The reality is demand is not really ramping up and there is still a lot of uncertainty over its sustainability," Matten explained. "Inventory levels have been pulled down hard whether in fastener stockists or raw materials in the factories."

"On the other hand there is a lot of mothballed capacity on the supply side - iron ore and nickel mining for example, steel mills, container ships laid up, as well as the fastener factories themselves. To my mind that means a lot of unpredictability facing the sourcing guys."

"Container rates have been pushing up rapidly as carriers slash capacity in response to economic conditions," Matten reported. "The trend appears set to continue, according to Danske Bank's container rate index, which indicates that Asia-Europe container spot rates will hit US$2,000 soon."

"Shipping companies are still fighting to contain losses as Maersk's recently released results, recording a US$2.09 billion loss, amply demonstrate," Matten pointed out.

The story is more than just cutting capacity "but also, it appears, fundamentally changing approaches to container shipping," Matten said. "Maersk ... has laid up some of its fastest container vessels and adopted 'slow steaming' - dramatic reductions in speed to achieve economies in fuel consumption."

Slower transit times combined with routing that now appears to involve increased stops is likely to impact lead times from Asian factories.

Will Higher Prices Stick?

"Although some steamship lines have slowly started to increase vessels, they are very slow to react to the need of more vessels and sailing schedules to keep pressure on demand," Park told GlobalFastenerNews.com. "As long as a space shortage problem continues, this proposed rate increase by TSA will stick. I do not expect shipping lines will bring back many more fleets into service until new ocean freight contract negotiation is finalized."

Shippers Speak

In December the Transpacific Shippers Association announced the "emergency revenue program" for the first half of 2010 until the contracting season in May 2010. With all major transpacific carriers reporting losses totaling an estimated US$20 billion collectively for 2009, the shipping lines said they could not wait for 2010-11 contracts.

Evergreen Marine Corp. president Jack Yen described the emergency revenue "as a bridge to get carriers through the first half of 2010, recognizing that the current rate levels do not adequately cover the cost of operating assets in this trade."

"The transpacific customer base relies heavily on the container transport infrastructure to provide reliable, time-sensitive, value-added supply chain services," Yen said. "As an industry, we're sending out an SOS to the shipping community with this emergency charge."

TSA members also pointed to an 81% increase in marine fuel prices during 2009 - adding more than $520,000 to the cost of a single Asia-U.S. sailing to the West Coast, and nearly $720,000 to a single East Coast all-water sailing.

And in a related move, TSA said it will amend its agreement on file with the U.S. Federal Maritime Commission to provide members with additional authority to discuss slow steaming or other environmental initiatives to reduce emissions while cutting operating costs. Web: tsacarriers.org

Wire Rod Hikes Ahead

Steel mills in China reportedly have hiked prices for wire by RMB 200 - 400 (US$27-$58) per ton, with further increases expected in the near future.

There are reports from Taiwan that China Steel intends to increase June domestic prices by as much as 12%.

One of the other factors is scrap price and availability. There is anecdotal evidence that European scrap is actually being shipped to the U.S., something that has not happened in 20 years.

Taiwan wire rod maker Quintain Steel indicated it would raise prices to offset higher raw material costs. The hike is estimated to be between TWD 1,000 (US$31.40) to TWD 1,500 (US$47.11) per ton.

Other wire rod makers, including China Steel and Yieh Hsing Enterprise, are expected to announce their own hikes after Quintain Steel reveals its new price.

China Steel is scheduled to announce its June wire rod prices on April 10th.

In February China Steel announced average price hikes of 2.9% for April-May as the global economic recovery boosted demand.

China Steel's third consecutive price hike was similar to Baosteel of China, which raised steel coil prices for March. Baosteel, Ansteel and Wuhan Iron & Steel increased prices for domestic and foreign sales in December 2009.

Global steel prices plunged in Q3 of 2009, but then started to recover, boosting CSC domestic prices.

Until December, CSC reduced its price for domestic sales, resulting from the substantial reduction of steel price in China. ©2010 GlobalFastenerNews.com