May 2021 Market Update

The situation in global supply chains and manufacturing has gone from bad to worse in the past few weeks. The spike in Indian COVID cases has further stressed supply chains already dealing with high demand, lack of raw materials, and an explosive freight market. The domestic hardware market has started to react over the last 2 weeks, with some national chains stockpiling any material they can find, stocking out factories until October and November on common items. The trends we have been following since 2020 are now impacting every level of the global supply chain, and we are urging all customers to review inventory now and cover themselves for the next 8-12 months to avoid stock outs.

New Trends

Raw material shortages are at critical levels. With the sharp rebound in demand over the past few months, raw materials have been increasing in price across the board. Recently European manufacturing has picked up and factories need to replenish stocks (much as the US did in the Fall 2020) and with it there is even more demand in Asia for hardware. Our factories have rejected quotes simply because they cannot acquire material. Much of the raw wire that is used for hardware comes from smelters in India, and with the recent COVID spike factories have been ordered to divert oxygen to medical use. With the diversion of oxygen and workers returning home for safety, raw material supply is expected to become even tighter. Just to acquire raw steel wire factories must wait 60-90 days right now. The impact for 410 and 18/8SS will be even harder than the impact on steel availability.

Domestic stock-outs are here! Many of our top domestic suppliers are completely out of common items until October and November. Others that have material have implemented quotas to protect material as large national fastener chains have sought to purchase all available material in expectation of the chaos to come. This means any of our customers that normally purchase material with a 1-2 Week lead time may find it extremely difficult to get material at all, unless it is in our stock or on order from overseas. Domestic factories are offering lead times of 10-22 weeks depending on the item, and some have started canceling existing open orders as they cannot keep up with demand. This fact does not seem to be understood by most manufacturers or consumers yet, so it will undoubtedly be harder to find items locally in the coming weeks.

Global Demand for goods and material from Asia is increasing as vaccine rollouts improve. Over the past few weeks European countries have begun easing their spring lockdowns, and our factories are telling us that they are seeing increased orders from European customers to replenish stocks, much as the US did in Fall 2020.The worst bottlenecks are at secondary processors such as platers and painters. Our factories have been listing these as significant components of increased costs and many processors are fully booked until January 2022. Looking further out, the recently proposed infrastructure plan coupled with ambitions pledges to reduce greenhouse emissions will further stress the availability of metals like steel, copper, zinc and cobalt if followed through on.

While the global freight market appeared to show signs of easing last month, the high demand and Suez Canal blockage has caused a “tsunami” of freight to back up. Demand is essentially 50% higher now than the same period in 2019, and the freight situation is expected to continue through 2021. The blockage at the Suez canal affected millions of TEU and those containers will be late returning to Asia for the next trip. We are seeing rates of over $10,500 per container to lock down available space 4 weeks in advance, up from the standard $2,000-$2,500 we were seeing pre-pandemic. The only winners here are the shipping lines, which are reporting record profits this year.

Worse than incredibly high pricing is the lack of available space. Even paying huge premiums freight is backed up 4 weeks or more now. Speaking with our larger multinational customers who bring in thousands of containers per year, many have told us they can only book 1/3 of the containers they have ready to ship. The backlog is so large that the lack of availability likely will not subside until 2022.

The Solution

Just as the world is beginning to turn the corner regarding COVID, the effects of re-opening economies and complex global supply chains means the challenges we face will likely be with us into 2022. With these numerous risks in a global supply chain due to COVID and its associated effects and the solution is still to plan much further in advance than you have historically to account for unpredictable events. It is also crucial to have transparent communication from all members of your supply chain. We will successfully navigate 2021 together with foresight and planning.

If you have any questions on how to mitigate these risks or concerns, please reach out to us at 1-800-535-2800 or email sales@uneedabolt.com

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