What are the nuts and bolts of the fastening industry right now?
INSIDE:
- An update on the global fastening industry
- How the container crises of 2020 played a role in where we are now
- The impact of increased prices of raw materials
- The question of sustainability for fasteners?
Did you hear the joke about the late shipment at sea?
… I didn’t get it.
Yes, the freight crises that left items stuck at sea in 2020 continues to impact industries across the globe and we are not nearly out of deep water yet.
To recap: Shipping container shortages were at an all-time high when the majority of countries went into lockdown after a state of disaster had been declared in 2020. The Covid-19 pandemic caused a surge in demand for goods like PPE, pharmaceutical products, food, and domestic appliances and electronics. ¹ The standstill also caused shipping containers to do the same. Containers were not returned to suppliers and suppliers could not send any more goods out. This created a domino effect with higher demands leading to a gridlock within the supply- chain industry.
According to the OECD, trade in fuels, aircraft, cars, mechanical machinery and steel plummeted. This directly influenced the fastener industry and major suppliers and buyers in Asia and the UK were unable to trade. An article by the loadstar in 2020 recorded the CAx points for 40ft (12m) containers in China at 0,05 compared to 0,63 in the previous year. CAx points indicate the availability of containers² and anything below 0,5 suggests a deficit.³ The article also mentioned that European exporters to Asia were expected to pay over 5000 dollars to secure shipment. Some customers were willing to pay that amount but boxes were still unable to move as ports were all jam-packed.
The fastening industry has also been greatly impacted by the war.⁴ Since the struggle between Russia and Ukraine broke out, the price of raw materials has also increased. In a May episode of the Fastener and Fixing podcast hosted by Will Lowry and Claire Aldridge, Rolf Ritter, CSO M&A and business development at Bossard mentions that the price of raw materials and energy is still increasing and will continue to do so. This is a compounded result from the freight crises and the war. In a positive light he spoke of Bossard’s multi-sourcing tactic meaning they purchase from multiple countries so as to avoid shortages. This meant that during China’s lockdown they would source from somewhere else and vice versa.
Will Lowry also spoke to Anders Karlsson European Industrial Fasteners Institute who also mentioned an increase in energy prices. The heat treatment finishes are run on gas which is imported from Russia. The cost for heat treatment has gone up by 70%. His positive take away is the opportunity to become greener faster with the use of more renewable energy resources.
In South Africa we have yet to see the inflation spike that is being seen all around the world as we currently don’t have many stock shortages,⁵ according to Cargo Compass South Africa’s CEO Sebastiano Lorio. South Africa’s largest freight trading blocs- China, the Eurozone and US are greatly affected by the rising freight costs which means that we will not be in the clear forever. Creamer Media’s Engineering News released an article in which Lorio explains the continuous rise in the price of imported goods in South Africa. He said that shipping rates from Europe (from which South Africa imports industrial machinery, cars, basic food, fashion and technology) have risen to 33 % over the last two years. .
The takeaways:
The global fastening industry continues to feel the effects of the freight crisis that began in 2020 and the war between Russia and Ukraine have added to this strain. South Africa might see an even further price increase in goods as raw materials and energy prices begin to rise. We too have the opportunity to rely more on local fastener production and as Mahlori Fasteners explore our own production.
- https://www.oecd.org/coronavirus/policy-responses/international-trade-during-the-covid-19-pandemic-big-shifts-and-uncertainty-d1131663/
- https://www.container-xchange.com/features/cax/
- https://theloadstar.com/container-shortages-the-biggest-disrupter-where-are-all-the-empty-boxes/
- https://fastenerandfixing.com/latest-issue/
- https://www.engineeringnews.co.za/article/supply-chain-bottlenecks-here-to-stay-for-2022-goods-prices-to-rise-sharply-cargo-compass-sa-2022-04-06
If you got a nickel for each time this article mentioned price increase…
We wouldn’t end it. See our next article on the impact nickel has on the environment and why the increased price of raw materials has affected its usage.
