Global Fastener News

2008 FIN – Darling Tells WAFD: World Steel Prices Driving Fastener Increases

May 19
00:00 2015

May 29, 2008 FIN – Steel in China is up 60.4% from the second quarter a year ago and steel in Taiwan has risen 44%, and the cost of fasteners is primarily related to the movement in steel prices,’ Bruce Darling told a Western Association of Fasteners Distributors conference.
Now Taiwan and China are virtually at the same price for steel and they are closing in on the value of U.S. steel prices.’
“We can see a trend to a global leveling of steel prices,”’ the Porteous Fastener Company vice president for materials management noted. ”The gap between the steel price from China and Taiwan has narrowed over the years until today there is little difference.’” Darling’s comments came days before China Steel, Taiwan’s top steel maker, raised domestic steel prices by an average of 17.8% for the third quarter of 2008. China steel said it was responding to higher raw material prices and stronger demand.
Prices for bar and wire rod products increased by $158.63 per metric ton; hot-rolled steel prices jumped by $148 per metric ton; and cold-rolled steel prices rose by $142 per metric ton.
The latest increase follows a 22% price hike by China Steel in the second quarter.
The combination of common sources of raw materials, the World Trade Organization and dumping duties, an almost cartel mentality’ and greed’ have led to the leveling of steel prices, Darling commented at the WAFD conference in conjunction with the National Industrial Fastener Show/East.
Darling used low carbon cold headed wire rod figures in his presentation. The Asian steel players in setting prices for offshore steel are New Nippon Steel in Japan, POSCO Steel in Korea, China Steel in Taiwan and Bao Steel in China. Each has their own policies of when cost changes are announced, but China Steel (Taiwan) has held to a quarterly change announcement,’ Darling explained.
Steel prices in Taiwan have been rising since the second half of 2006. By the end of 2006, the steel price was set at $549 per metric ton.
At the end of 2006 the difference in steel prices in China were 43% less than Taiwan.
The Taiwan steel price increases slowed and Chinas Bao Steel prices fluctuated. By the end of the second quarter of 2007, Bao Steel prices rose to $460, reducing the Taiwan/China difference to 22.6%.
“To our delight, CSC held the price steady for 6 months,’” Darling recalled. ”After 5 quarters of increases, we have now experienced two quarters of steady prices. China, however, was on a runaway course. Their prices soared to $640 by the end of 2007 and put their price above that in Taiwan for the first time.”
But for the first quarter of 2008 China Steel announced a 17.9% increase to $665, resulting in an 11.6% increase in finished parts. Bao Steel in China moved their price 6.3% up to $680.
On February 26th, Bao Steel announced a 20% increase, but subsequently the market price for steel has only increased 8.5% though changing every day.
On March 5, China Steel announced a 22% increase to $612 per ton, making its steel price 270% above the 2002 price.
As he forecast that “2008 will be a year of significant price increases in the magnitude of 35% to 40% or higher,” Darling asked the audience, ”Please do not shoot the messenger. Please heed the message!”
Darling cited other factors increasing prices:
• Currency: The Taiwan NTS has appreciated 4% thus far this year and Chinas Yuan has been changing at about 1% per month, which adds pressure on price increases.’ The Yuan started at 7.3 to the U.S. dollar, has dropped to 7.0 and its estimated the Yuan will be at 6.0′ by the end of 2009.
•  Iron ore increased 65% in February and expectations are that coke, electricity and fuel w North American manufacturers are also increasing prices, Darling noted. Nucor went up 5% at the end of 2007 and 6% to 10% in March; Ifastgroupes Distributors Inc. went up 8% in January; Lake Erie just went up 5% and Vulcan Threaded Products 25%.
•  Bruce Wheeler of Star Stainless Company noted that in 2002 nickel was selling at 3.07 per pound. By the end of 2004 it jumped 105% to 6.28 and inventories were about 14.099 metric tons.
During 2006 nickel prices escalated to 12.04 or another 92% and inventories dropped to 10.422 MT. The price peaked at 23.86 in May 2007 and inventories plummeted to 4,674 MT.
Nickel is 8% of the composition of a stainless fastener but currently 35% to 40% of the cost.
When prices peaked in May 2007, the London Metal Exchange noticed traders buying volumes of nickel and re-selling before taking delivery, creating an artificial shortage and driving up the price. Over night the LME changed its rules to decrease the supply of nickel after delivery had actually occurred. This action helped to stabilize the Nickel price and increase inventory levels. By the end of January 2008, prices had fallen to 12.55 and inventory rose to 46,692 MT.
•  Much like nickel, molybdenum price slowly increased from 2002 to the end of 2004. In 2005 the priced tripled, reduced in 2006 and increased in 2007. By May 14, 2008, the price was 33.25 near its peak and more than seven times the 2002 price.
About two thirds of moly production is the byproduct of copper mining. A dormant moly mine in Colorado is being refitted to reopen by 2010 at a cost of about $500,000,000.
The demand for 316 stainless is increasing about 10% per year.
•  Copper is the key element in brass fasteners and about 67% of the cost of a brass fastener is copper. About 96% of the cost of silicon bronze fastener is copper.
From 2002 to today, the cost of copper has risen five fold, even though the available inventory level over the same period has risen 8 fold.
•  Zinc has dropped about 75% from its high of 1.94 in November 2006 to about 1.10 now. This is, however, still about 300% above where it was in 2002. Inventory levels are still low, but slowly increasing.’ ©2008/2015 Fastener Industry News.
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