I'm sure you are sick of hearing news about the coronavirus, now called COVID-19, but hang in there for a moment. As this news translates to real dollars for our American businesses. Let's explore how COVID-19 is affecting the fastener supply chain.
First of all, according to the London Metal Exchange's data from 2019, ores for alloy steel and nickel (particularly affecting stainless steel) has been on the rise, and prediction were already showing an continued increase going into the first quarter of 2020. Unfortunately, this has only been exacerbated by the supply chain issues being caused by shutdowns due to COVID-19.
While Nickel has always been particularly susceptible to world events, ores for alloy steel have usually been more consistent, but with COVID-19 affecting ore mining, steel production and fastener production, this event will have significant ripple effects across fastener supply chains, therefore we can expect to see an increase in fastener.
According to Paul Wiseman, in Industrial Distribution, the Labor Department said Wednesday that the producer price index jumped 0.5% in January, which is the highest single month rise since 2018. This follows overall increases of 2.1% in 2019.
So far, while prices may have crept up a bit in 2019, I believe we are on the cusp of some more significant increases as master stocking distributors begin to feel the pressures of the current COVID-19 related hold-ups, in addition to other world news (like the continuing tariff war with China, that has huge effects on Indonesia and the Philippines, and flooding in Indonesia, where much of the ore is mined). So far, importing from Europe has not seen as much an increase in pricing relative to Asia, but this may be due to a bearish economy in Europe that have resulted in built up inventories from late 2018 into mid 2019, before prices began to jump most significantly.
This indicates there is metaphorical dam of increasing fastener cost pressures for both alloy steels and stainless steels that is likely to be released relatively soon and realized downstream to American master stocking distributors, importers and ultimately OEMs.
About the author: London Penland, ex-teacher, tutor and educational non-profit leader and current business development director for Eurolink Fastener Supply Service and Social Chair/Educational Director for Young Fastener Professionals, empowers sales reps, purchasing agents and sourcing agents with researched industry-specific educational videos and articles. Click here https://eurolinkfss.com/vlog/ to see all of London’s VLOGs and gain access to download his lesson plans.