Prospect of fastener prices doubling

"Little sign of inflationary pressures abating," says industry expert.

Fastener industry expert Phil Matten has delivered a hard-hitting analysis of the factors propelling the cost of all types of steel fasteners along the steepest inflationary track witnessed in decades.

Matten, the editor of Fastener and Fixing magazine, told a packed forum at the recent Fastener Fair Coventry that he could see costs across the range of standard steel fasteners being 40% to 60% higher than 2007 levels within a matter of months.

With cold heading wire prices in Europe set to increase dramatically within weeks - one forum participant confirmed that euro250 per tonne would be added to his production costs in July - and Asian raw material costs continuing to ramp up, Matten saw little sign of inflationary pressures abating.

The main contributors were steeply increasing steel prices, driven by extraordinary increases in raw material costs across the world, for example:.

* Iron ore contract prices had increased year on year by at least 65%.

* The cost of coke, an essential ingredient in steel making, had increased by as much as 200% compared to 2007.

Matten went on to detail the impact of bulk sea freight, currency exchange trends, as well as energy and labour costs on the prices of finished fastener products from Asian and European sources.

While current circumstances were exceptional and some level of correction was inevitable, if very difficult to predict, Matten argued that a long term inflationary trend for fastener products appeared an unavoidable reality, leaving the supply industry and its customers no choice but to come to terms with it.

Consolidation meant a more structured steel market, more specialisation, a tighter balance between supply and demand and more robust market pricing, he said.

A small number of powerful mining companies, together with the major steel players had savoured strong profits over recent years, and were intent on holding on to them.

The prospect that the European Commission may, within a matter of weeks, apply antidumping tariffs on an extensive range of fasteners from China, threatened to further exacerbate the situation, the forum audience was told.

A protracted EU investigation, which started in November 2007, meant growing uncertainty for fastener importers as the 9 August 2008 deadline for a decision on preliminary antidumping tariffs drew nearer.

Depending on investigators' interpretation of one of the most complex antidumping cases addressed by the EU, the application of tariffs could, quite feasibly said Matten, mean fastener prices doubling year on year.

One forum attendee seemed to sum up the feelings of many.

"It's tough to hear but this presentation gave me the clearest understanding of these issues I've obtained from any source".

"Phil's final reminder about the cashflow implications of these increases is something I'm taking straight back to my business".

"All we have to do now is get our customers to recognise that fastener companies like mine are on the receiving end of pressures that are simply outside of our control".

The Open Forum at which Phil Matten spoke was an innovation at the UK and Ireland's regular 'must attend' get-together, Fastener Fair Coventry, which took place on 11 and 12 June 2008.

The next Fastener Fair Coventry is scheduled for June 2010.

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