The rapidly changing market
We live in a turbulent world where many developments follow each other in rapid succession. Both in business and in private life, we all experience changing circumstances on a daily basis and realise that the world has changed forever. Beyond the COVID-19 pandemic, several factors contribute to the turbulence in the fastening technology sector.
As a fastener specialist, we closely follow the market developments. Here, we will highlight four driving forces that are currently colouring the dynamics in our market:
- Raw materials
- Product scarcity and inadequate production capacity
- Ocean freight
- Threat of anti-dumping duty
Raw Materials
As is likely recognisable to you, we are facing increasing delivery times for products originating from Asia. This development is partly caused by current raw material scarcity and insufficient production capacity.
Influenced by the COVID-19 pandemic, the global economy slowed down in 2020. Several mines mining iron ore or nickel closed. This was not immediately felt when the economy began to recover, but now demand exceeds supply, and this is being felt in numerous sectors.
With respect to fasteners, the price and availability of wire rod and cold-rolled coil, basic materials for many fasteners, are particularly influential. As of Q4 2020, we have seen a significant price increase in these basic materials.
For stainless steel, nickel is considered a key indicator of price trends. Demand for nickel has long been driven by battery production for the automotive industry. In addition, several countries that mine nickel have closed mines due to environmental concerns. Since the mid-2020s, we have seen the nickel price rise; a recent limited decline caused a trend break, while the price of A2 wire rod, the base material for many stainless steel fastener products, is still rising.
Product scarcity and insufficient production capacity
The uncertain situation in 2020 led to understandable caution in many sectors. Stock orders were suspended, maintenance was postponed, and production capacity was scaled down. This situation continued amid the impending European Commission 'Anti-Dumping' surcharge and placed fastener distributors under further pressure to fulfil customer orders. You will understand that this has consequences for the availability and, consequently, the price level of steel fasteners, in particular. The product categories nuts, threaded rods and studbolts are not part of the European Commission's investigation.
European fastener distributors are therefore implicitly compelled to seek alternative channels. This movement began in 2018, when American companies, due to tense US-China relations, began looking for sources outside China. Especially in early 2021, many European distributors followed the same route, and the limits of production capacity outside China were soon reached. Knowing that China holds about 60% of the global bolt production capacity underscores the urgent market situation, where product scarcity and insufficient production capacity reinforce each other.
Ocean freight
The aforementioned effects in terms of raw materials, product scarcity and insufficient production capacity are reinforced by the shortage of sea freight capacity. This effect is, in turn, reinforced by the lack of transhipment capacity in the main European ports. The COVID-19 pandemic has caused such a disruption to cargo and related sea container flows that ocean freight rates have increased by some 500%.
In addition, carriers are tightening their conditions, demanding advance payments and shortening payment terms.
Threat of anti-dumping duty
Although products, impacts and consequences differ, the above developments play a role in many markets. Consumers of powder coating, chips and sheet metal, for example, also face challenging market situations. However, for the fastener product category, an additional complicating factor arises: the likely introduction of an "Anti-Dumping" surcharge by the European Commission.
Although the EFDA European Fastener Distribution Association holds a different view on the matter, we must take into account that the European Commission will impose an Anti-Dumping Duty on steel fasteners originating in China, possibly even retroactively.
Only when the investigation is complete will we know if the EC will take action and what the levy rates will be. Looking at the past, anti-dumping investigations over the last 30 years resulted in the imposition of ADD in each case. The measures in place until 2016 included levy rates of up to 85%.
Pending the investigation, the EC can introduce an interim measure. In addition, once the investigation is completed, the EC can impose ADD retroactively, up to 90 days. This means that we could face a sudden price increase at any time from now on.
Fabory will not compromise on its stringent quality requirements
As soon as the European Commission announced the anti-dumping investigation, Fabory began diverting its purchase orders to suppliers outside China. Thanks to our local sourcing and inspection teams and years of experience working with non-Chinese producers, we managed to find alternative suppliers for most products in a relatively short time. In addition, we are actively managing our inventories, with the availability of products and services to our customers as our priority.
While this reduces Fabory's vulnerability to potential Anti-Dumping Duty, it increases the cost price of our articles.
Due to ongoing market tightness, we advise all our customers to critically review their inventories, with a special focus on significant increases in requirements and critical items. We will be happy to support you in this, so please contact your account manager or Customer Service for help.
We will continue to be your partner in fastening technology, with the products, solutions and services that you have come to expect from us.
Our specialists are closely following the developments in the process and the market. That way, we can inform you of the latest news and the possible consequences for the aforementioned fasteners. Keep an eye on this page for important updates.