Fasteners market faces highs and lows

by | May 16, 2022

For every bit of ‘good news’ about the building sector’s post-pandemic recovery, there seems to be an equal and opposite force undoing all the good work! John Power investigates the highs and lows of the fasteners market as we negotiate our way through 2022 and beyond.

It is many years since our economy felt so ‘manipulated’, and the artificial constructs underpinning the current building market are generating some interesting – and not always welcome – sales conditions.

Yes, the overall economy is bouncing back following the doldrums of the pandemic… but legacies such as trickling supply chains, expensive freight movement, high metals prices, materials shortages, as well as rising interest and inflation rates, are stifling the recovery.

And, as we argue below, inevitable market transformations – such as the shift to ‘work from home’ dwelling/workplace spaces, the need for increased local manufacturing, as well as a new wave of technical innovation – are being hampered in the process.

The good news

The good news: most of the world’s economies are striving to bid farewell to the pandemic and revitalise traditional industries. However, the world’s major economies have been on steroids for the past two years, and the overdose is now evident in rising inflation rates in the US, Europe, and Australia. These hyper-energised conditions mean homeowners and small commercial builders are directly affected by rising costs for basic building materials and related trade services.

Costs aside, supplies are not always available even if clients are willing to pay a premium.

“With very few fastener products made locally, the [Australian] industry has had a large interruption to supply,” says merchant Mick Lawlor from The Fastener Factory in Melbourne.

“Due to continued lockdowns, there are still major delays in manufacturing in China, and other countries are still suffering manufacturing delays due to high demand. Shipping is also a major issue, not only with time on the water, but also with processing through the docks. We have heard that some ranges are now taking six to nine months to arrive from the date of order, which might have taken three to four months beforehand.”

While Mick believes that price hikes relating specifically to the fasteners sector have not been as severe as those affecting other sectors, it is equally clear that price hikes or product shortages within any individual building materials sector will necessarily affect all others. For example, there have been reports of delays in the delivery of timber trusses, along with price hikes of up to $10,000 on truss orders for a single home, resulting in postponed work schedules, order cancellations for associated fittings like fasteners and fixings, heightened price sensitivity across all product categories, and upward pressure on staffing costs – everything is interlinked in the building game. 

The Australian Engineered Fasteners and Anchors Council (AEFAC), a commercially independent consortium of industrial and academic leaders, which aims to set standards for the specification, selection, design and application of anchors and fasteners in Australia, agrees that supply issues continue to be problematic.

A person installing chemical anchors during AEFAC training. (Image courtesy AEFAC)

“There has been a significant issue of availability and costs of shipping containers for sea transport,” says Professor Emad Gad, AEFAC Board Chairman, and Dean of Engineering at Swinburne University of Technology. “Due to increased demand globally, there is a squeeze on available resources which is exacerbated by disruption and congestion of ports, which add to delays and therefore costs. In addition to this, marine fuel costs have gone up significantly. There are reports that shipping costs have increased by more than four times.”

Prof. Gad says pricing pressures run deep, extending to increases in the costs of base metals commonly used in the fabrication of fasteners.

“Most fasteners are made from steel,” he explains, “and the prices for steel of various grades have gone up significantly. In looking at the cost of steel production, one would need to consider not only iron ore, but also other minerals such as Nickel and Chromium, which are used in making stainless steel, and of course Zinc, which is used in galvanised fasteners. Energy costs are also a key factor in processing the raw materials and in factory production. Some of these have hit their all-time peak (or close to peak) prices in the last 12 months. All these affect the cost of the final product.” The current Russia-Ukraine conflict, he notes, is another matter of concern to the fasteners sector, as both countries are steel producers.

In addition to overseas supply interruptions, domestic factors are contributing to bottlenecks and delays in the delivery of products nationwide. These factors, Prof. Gad says, include the recent floods in New South Wales and Queensland, as well as increases in the costs of wooden pallets due to timber shortages.  

In general, Prof. Gad says the fasteners and fixings sector is handling supply problems in a mature fashion, with clients adapting to market uncertainty with great understanding.

“Suppliers with in-depth knowledge would be able to work with their customers to optimise outcomes for specific applications by balancing product availability and cost, installation requirements, and overall performance,” he says.

Short-term frustration

The abovementioned cost and supply pressures, one might argue, highlight Australia’s intense vulnerability to complex overseas supply chains.

While the local market ‘wants’ to unchain itself from the effects of COVID and restore normality, our market has frustratingly little control over its own destiny due to our over-dependence on Chinese manufacturing. As stated last year by University of Sydney academic David Uren in The Strategist, a publication of the Australian Strategic Policy Institute (ASPI), “China supplies 40 per cent of Australia’s imports of nuts and bolts, but that share will be closer to 100 per cent for some specifications.” In broad terms, he continues, “Dealing with the wholesale interruption of supplies from China would likely require the invocation of national emergency powers beyond those included in newly updated legislation, which was primarily designed to deal with natural disasters.”1

Our current manufacturing fairyland – in which our dominant supplier is simultaneously our principal political adversary – even has consequences in product research and development.

“There isn’t much happening in the fastener market in terms of new technology,” Mick Lawlor notes. This is hardly surprising, as most industrial attention is on the straightforward completion of projects rather than experimentation with novel systems and supplies.  

Longer-term frustration

A longer-term frustration with current market conditions is the market’s slow pace in embracing significant building sector reform. A good example is our newly minted ‘work from home’ revolution. This reform, though not yet broadly evident in the retrofit world, will undoubtedly influence the fasteners markets greatly in years to come, as it will involve a dramatic increase in office conversions throughout our capital cities and major regional centres to accommodate more dwellings. 

The assumption in most mainstream media to date has been that ‘working from home’ means working from houses in suburbia. However, the real growth as far as building works are concerned will be in inner-city living, which will involve greater numbers of people living and working in Central Business Districts (CBDs). Not all existing office structures are ripe for conversion into dwellings, but with 35 per cent commercial office occupancy rates in Melbourne, and 50 per cent in Sydney, for instance, there are few alternatives to these kinds of conversions if buildings are to be used effectively. The implications for the fasteners sector are huge – whereas initial office construction has typically involved whole-building project management by large companies, often using their own privately managed supply chains, conversions will involve far more unit-specific customisation and personal fitout from smaller specialist companies: hence likely increases in demand for large ranges of products across all fastener categories. 

Already there has been positive speculation2 from experts such as Stephen Walters, Chief Economist to the New South Wales Treasury, that widespread CBD office-to-dwelling conversions make social and economic sense.

By contrast, general suburban renovation work to refine ‘work from home’ fitouts is increasingly subject to cost-of-living pressures along with the difficulty of finding tradespeople – trades across the board are handling massive blowouts in demand, leading to an influx of DIY work to implement less sophisticated, more affordable projects. 

As mentioned above, Australia’s emergence from the pandemic has exposed our over-reliance on foreign supply chains in a clear and direct fashion, with the fasteners sector at obvious risk of ongoing interruptions from a mix of political, health and/or economic forces.

The mantra of ‘Buy Australian Made’ has never been so important.

Footnotes

  1. No easy fix for Australia’s supply-chain dependence on China’, David Uren, The Strategist, 2 Mar 2021.
  2. Chip off the old blocks: would Australia’s empty office towers be better off as housing?’ The Guardian, 7 May 2021.