Insight

A review and preview of the global fastener industry

A wide cross section of global fastener business leaders have contributed their retrospective of 2015 and thoughts on the prospects and challenges for 2016. We asked them to consider not just economic and financial issues but also technology drivers for the fastener industry and to identify priorities for the upcoming year. Here is Grupo CELO's article:

Grupo CELO
Ramón Ceravalls, general manager

In my opinion the most important change of the year has been a stronger US Dollar. For many years the exchange rate of the euro to US Dollar was around 1.35. At the end of 2014 it was at 1.25 and the average of this year will be close to 1.10.

A 20% devaluation of the euro makes a big difference in our business, and to one of our customers. I am quite sure that it will not influence the import of basic commodity fasteners, but will improve the European competitive position in the most technical fasteners. It will also increase the interest of our customers to produce in Europe, especially in eastern Europe and Turkey.

The lower price of oil also changes the balance of trade and the economic prospects for main importing and exporting countries. I know several companies in the fixings market that have been very seriously affected by the reduced purchases of Russia and Middle East countries.

Another important factor affecting the fixing industry is the reduction in steel prices. It seems that the excess capacity of steel mills in China and iron ore mines in Australia will last for some time. This price reduction has been reflected in reducing import prices, in US Dollars, from Taiwan and Asia – partially compensating the US Dollar revaluation. Although I have no figures to support it, I have the impression that most European fastener companies have decided to keep stable prices and use the lower steel prices to improve their profits.

Other factors include interest rates, which in Europe are at the lowest level ever – raising the question of whether you should be taking advantage of the opportunity to invest and if not now, when? There is also the extension of the anti-dumping regulation on steel fasteners from China. A year ago I was not so sure that this would happen. Is Europe really changing to protect our middle and small companies to defend against unfair competition from subsidies?

In summary the markets keep growing. For instance, the construction market in Spain has stopped decreasing, and we are slightly growing at +3% – although from a level of more than 60% lower versus 2007. However, it is good distributors are more confident and are rebuilding stocks.

Imports should not exert pressure to reduce our prices. Orders and production volumes increase, overcapacity is reduced. Many companies learnt in 2009/2012 how to live more lean. Profits increase, interest rates are really low, and I see some market leaders taking advantage of this momentum to invest in their future – new technologies, new machines, and new markets. This is either through internal investments or through acquisitions. Others may think that with good balance sheets and improved P&L to show, this is the right time to sell.

For 2016 I expect a scenario similar to 2015. I have budgeted +10% in sales and profits and we will continue to invest to improve our productivity; to access new production capabilities; and new markets. However, 2009 is still in the back of my mind and we will keep a reduced debt to equity ratio.