The rapidly changing marketWe live in a turbulent world where many developments follow each other in rapid succession. Both in business and in private, we all experience changed circumstances on a daily basis and realize that the world has changed forever. Besides the covid-19 pandemic, several factors play a role in the turbulent world of fastening technology.
As a fastener specialist, we closely follow the market developments. Here we will highlight four driving forces that are currently coloring the dynamics in our market:
- Raw materials
- Product scarcity and inadequate production capacity
- Ocean freight
- Threat of anti-dumping duty
As is likely recognizable to you, we are confronted with increasing delivery times of products originating from Asia. This development is partly caused by the current raw material scarcity in combination with insufficient production capacity.
Influenced by the covid-19 pandemic, the global economy slowed down during 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, is particularly influential. As of Q4 2020 we see a significant price increase for 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 where nickel is mined 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 on the other hand the price of A2 wire rod, 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, production capacity was scaled down. This situation continued under the influence of the dimpending 'Anti-Dumping' surcharge by the European Commission and placed fastener distributors under further pressure to fill customer orders. You will understand that this has consequences for the availability and, consequently, the price level of, in particular, steel fasteners. The product categories nuts, threaded rods and studbolts are not part of the European Commission's investigation.
European distributors of fasteners are therefore implicitly forced to actively look for alternative channels. This movement was already started in 2018 by American companies who, due to tense US-China relations, started 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 production capacity of bolts, this underlines the urgent market situation where product scarcity and insufficient production capacity reinforce each other.
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 transshipment 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.
Despite the fact that the EFDA (European Fastener Distribution Association) has a completely different opinion on the matter, we have to 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, previous anti-dumping investigations in the last 30 years did result 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, effectively up to 90 days back. This means that we could face a sudden price increase at any time from now on.
Read more about the anti dumping investigation.