ANALYSIS
the wholesale level could be seen across Europe. The effect of this behaviour seems clear: inventory increases this year partly supported fastener demand and for the coming months one can assume that inventory reductions together with cautious purchasing will make an extra negative effect on market demand.
Anti-dumping EU anti-dumping is still an on-going topic. It is very difficult
to use the expression ‘free-trade organisation’ when talking about the EU. There should already be enough experience and knowledge to draw the conclusion that AD measures have not created new fastener manufacturing in the EU. There are no winners, but the EU as a whole is a clear loser. In the global competitiveness race the European machinery industry has another cost handicap. The real challenge is the control of anti-dumping and
possible circumvention. EU countries are very diverse as we have seen also with current economic crises. Although we have common rules the interpretation of anti-dumping measures and commitment to their effective application are clearly very different in some eastern and southern EU countries compared with those in the North. Fastener anti-dumping is a duty initiated by the Commission, but the collection and inspection are on national level. This leads to an incoherent practice especially in the field of circumvention. Anti-dumping is not a matter that only the fastener wholesale-
importers face. It is, or at least should be, a topic for industrial fastener users as well. There should not be regulations that: are ineffective; cannot
be controlled; lead to unfair intra-EU competition; weaken EU industrial cost competitiveness; and do not comply with international agreements (WTO).
Increasing cost and price level is probably healthy Although critical about artificial cost increasing (AD) I take
the opinion that increasing prices are good for business. In 2009 when unit prices were falling I analysed past trends in sourcing: from Japan to Taiwan to China to ”Jungle”. If a bolt cost, say, 10 cents in 1970, today it might cost 1 cent. In the same period a lot of service and activities have been built around the product. A lot more value adding is taking place, which means expenses. If prices go down and costs go up it is a dangerous road business is moving on. Even a 95% margin is no help if the product value is one euro: not enough revenue to cover costs. The answer is higher unit price, which is necessary for the whole supply chain of the fastener industry to remain profitable. Customer behaviour during the last recession (2008-2009) was
also significant. Revenues dropped fast, but order lines did not. It was not a question of losing customers, but a situation where each order was smaller, because of worries about financing stocks or activities. As wholesalers we found ourselves doing record levels of activity, but much less turnover than before the crises. This may well be the near future also, when customers turn their attention again to working capital management.
Rawmaterials and energy an issue It is difficult to see drivers that will turn raw material or energy
prices downwards in the near future. Environmental awareness is a main driver for cost increase also in the fastener business. EU decisions on reducing CO2
emissions mean higher steel
prices. New innovations and investments are necessary to comply with standards. One thing in common for all forms of new renewable energy is higher costs. Inevitable changes in the energy sector also present opportunities
for fastener business. It may not be clear what the future form of energy production will be, but clearly a need for change exists.
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Significant capacity is produced using nuclear power, on which attitudes are contradictory. Wind power and solar energy both create fastener and fixing demand. Even if we stick to nuclear energy renewal of older capacity as well as development of new, also creates demand. So for the fastener industry the energy sector will be a price driver but also an opportunity for new business.
Russian potential and challenges The role of Russian market is still a question mark. On one
hand the Russian economy is performing much better than Europe in general. Russia has no budget deficit problem like most Eurozone countries and the USA. Russian banks are not exposed to low-rated Greek or Italian bonds. Russia economic activity is good, the oil price high and the upcoming Olympics and World Cup initiating large construction investments. However, things are not so clear for European fastener players. As Russia is not covered by EU anti-dumping measures, EU suppliers cannot match local importers’ price levels. Customs are still completely unpredictable and credit risks real. In the Russian market the service elements of the fastener supply model are not the same as in Western Europe.
Generation Y Traditionally fasteners have not been a very “sexy” business.
Compared to Internet media, ICT and mobile telecommunication, fastener companies have relied on traditional thinking and processes. New college graduates have usually found their way to more interesting businesses. In the coming years the fastener business really faces the
young generation born since 1985 – the PlayStation generation or Generation Y. These young people have lived with the Internet from childhood, digital technology being a matter of course, travelling the world and taking a view that work is a part of a life that must be fun. This generation is about to graduate and enter working life.
They have completely different idea of work methods from the generation that will retire in the next few years. During the coming years managing two completely different generations working at the same time will present one of the main challenges. It is not only about internal organisations of fastener companies. The same is going on with the end customer. Older sales people facing a new generation of purchasers or vice versa. The “Generation Y” issue is not unique to the fastener business.
However, it surely means a change in thinking. It requires new managerial talent and lot of understanding. Facebook and similar cannot be ignored. It will be part of business even though a good share of people may not want to see this happening.
Ferrometal way: Innovations At Ferrometal we are strongly committed to shaping our
own future with system and process innovations in the fastener business. Two years ago we introduced the Kanban RFID concept in the market. Later we saw followers and our system extended Europe-wide through Würth Industrie Service, relying on the Ferrometal patent and innovation. In 2011 we took the first steps in linking smart phone
technology and the fastener supply-chain. FM One is a smart phone application taking advantage of NFC technology – the first in the market to introduce a replenishment system that is extremely easy to use and combines something everyone has in the pocket: the mobile phone. “Touch the rack or product label and the system knows the rest: what to supply, where and how much”. In Ferrometal we see strong growth through innovations that produce cost efficiency and security of supply for our customers.
Fastener + Fixing Magazine • Issue 73 January 2012
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