FASTENER DISTRIBUTION BIAFD
Freight and steel costs escalate yet again At the beginning of March, BIAFD members were saying “it’s every bit as bad as it was” but, at least, had tentative hopes of gradual improvement in freight costs and availability. That was before the Ever Given blocked the Suez Canal. The horizon for improvement has categorically receded as a result. Meanwhile, inflationary pressure on fastener manufacturing material remains relentless.
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hile March PMIs provided welcome confirmation of widespread market recovery, they also confirmed the global impact on manufacturing and construction of rising costs driven by supply chain disruption and raw material shortages. As a vital supply chain to UK and Irish manufacturing and construction industries, members of the British & Irish Association of Fastener Distributors are seeing these pressures all too graphically. The blocking of the Suez Canal, despite being resolved remarkably quickly, nevertheless unleashed a new cycle of container freight disruption and cost escalation. As the second quarter opened, BIAFD conducted an exten‐ sive survey of its members, including asking them to identify their highest concerns for the next quarter. Market demand, Covid‐19 issues and the aftermath of Brexit understandably ranked strongly. However, top of the concerns were product availability, product costs and inbound freight issues. In all three cases, 90% of respondents said they were either extremely or very concerned, even before the full implications of the Suez incident were understood. Now, those consequences are abundantly clear. The main Northern European container hubs, including Felixstowe and Southampton, are experiencing a surge of inbound container freight and consequent disruption, as ships released from the Suez arrive. There are anecdotal reports that, to avoid the congestion and get vessels back on schedule sooner, some shipping lines will off‐load UK‐bound containers in Spanish ports, adding up to a month before they are received in the UK. Container schedules are already severely impacted, with virtually no Asia‐Northern Europe capacity available during April and, at least, early May – as sailings are ‘blanked’ because vessels are out of position. The world’s largest shipping line, Maersk, warned there should be no expectation of a quick return to normal services after the Suez blockage, saying its ramifications will disrupt global supply chains for weeks. Maersk expects ‘ripple effects’ at least into the second half of May. Freight experts reckon ‘ripples’ is euphemistic and the timescale optimistic. The escalation of freight rates has resumed – with a vengeance. Rates, which had shown signs of slowly easing, are
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already resurging to mid‐February peak levels. Asia‐Europe spot rates are at least 400% higher than a year ago, and freight contracts are being signed to secure capacity, that guarantees inflated levels for the coming year. With replacement inventory urgently needed to meet buoy‐ ant demand across many sectors, importers are ‘biting the bullet’ and accepting exorbitant rates. However, there is little prospect of improving on arrival dates that extend daily. That would be bad enough, were it not also for long lead times and continuing cost‐ratcheting the metals used to produce fasten‐ ers. Steel wire and bar availability is critical worldwide. Lead times were already stretching beyond 20 weeks and now some fastener factories are declining orders as they are unable to secure wire at any price. Costs for nickel, a major value element in stainless steel fastener, remain 35‐40% higher than a year ago, and other metals’ inflation means there is no sign of stainless steel wire costs abating. BIAFD members have always invested heavily in inventory to smooth out the impact of the inevitable headwinds that beset long‐range importing. However, these are not head‐ winds: if ‘perfect storm’ was not an appropriate expression before, it certainly is now. There are unavoidable realities for fastener consumers in all sectors. Shortages have already materialised, in some cases for high volume sizes of nuts, bolts or screws. The freight cost inflation cannot be absorbed by importers and wholesalers, and is being passed on as substantial price increases, with more inevitably to follow. These really are unprecedented times, says BIAFD, requiring fastener consumers to adapt to the realities. BIAFD members’ priority, as always, is to ensure continuity of supply for compo‐ nents that rarely account for more than one percent of the total cost of a manufactured product or structure, but when absent will stop lines and projects. No buyer exposed to the steel or imported material supply chains can conceivably be unaware of the extraordinary pressures on availability and costs. Now is the time for buyers to work closely with fastener supply part‐ ners, and jointly focus on protecting critical supply continuity. www.biafd.org
