Nail Price Pressure Continues

Remember when it was easy to take nails for granted? It is true that nail supply problems have come and gone in our industry, but for the most part they have not been a major issue. A year ago truck load quantities of loose nails often sold in the $17 to $18 a box range. Hardly any pallet companies had nail concerns on their radar screens. What a difference a year can make!

            Last fall the pressure started to build for higher nail prices and tighter supplies. The winter season brought some of the sharpest increases in nail prices our industry has ever witnessed. Postings on our Pallet Board chat site suggested that some people thought nail suppliers were taking advantage of market conditions to fatten their wallets. After what our industry had already gone through over the past year, people should understand that market conditions can be beyond their suppliers’ control. Certainly pallet manufacturers did not cause hardwood prices to go higher, and eventually most understood that they had to raise pallet prices to cover higher costs.

            It is well documented that world steel prices have gone dramatically higher since last fall. Most pallet nails come from a few domestic manufacturers and from imported sources, primarily the Pacific Rim. Korea, a major supplier of bulk pallet nails, buys much of its steel rod, the raw material used for manufacturing nails, from China. We are acutely aware today that China is going through massive construction projects. It is rapidly expanding its manufacturing capacity in the global marketplace, which requires huge quantities of steel.

            Much of the world’s steel is refined from scrap steel materials. To feed its appetite, China has put the global supply of scrap steel in short supply, which has driven steel prices globally higher. Every market has been impacted.

            The bottom line is that rod prices, and hence nail prices, have gone dramatically higher. This summer, heavier pallet nail inventories and some leveling in the global supply temporarily relieved the pressure. However, this fall it appears that supply problems are again exerting upward pressure on steel prices. Chinese wire rod appears to be leading the charge for higher prices.

            Higher ocean freight costs have added to the pricing pressure since the market is truly global in the sense of shipments of both raw materials and steel products.

            Bulk pallet nails in tractor-trailer quantities are now reportedly moving toward the neighborhood of $24-$26 a box for suppliers that are adjusting to higher rod prices this fall. One nail supplier indicated that the most recent changes in steel prices will reflect itself as a $2 per box increase for bulk nails. Of course collated nails are higher proportionately, as are LTL shipments of one skid or more.

            I am not trying to prognosticate about tomorrow’s nail prices. Rather, I am pointing out how dramatically the market has moved in less than a year. There is no reason to panic. Pallet people have survived the onslaught, and pallet prices have been moving higher to cover the higher costs of both wood and nails.

            Our Pallet Profile Weekly report has kept readers abreast of the changes that have developed so that readers know what is happening. Our first lead editorial piece on the nail situation appeared last December 12, a major update appeared on March 4, 2004, and a summary appeared in the Special Report that we published on climbing raw material costs. To keep abreast of this and other important industry issues, you can subscribe to the Pallet Profile by calling Jeff at 800/805-0263.