Market update march 2025
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We are now several months into 2025, and we would like to update you on the latest market developments. We will discuss production in the Far East, transportation to Europe, and developments in the Netherlands and Europe, including the impact on our organization and our relationships.
Production in Southeast Asia
Prices for fasteners have remained relatively low in recent months, mainly due to the persistently low order intake from Europe and weak demand in China, where the construction sector is under pressure. This has resulted in an ample supply of raw materials, semi-finished products, and production capacity.
Margins across the entire supply chain are minimal or hovering around cost price. While we are currently seeing a slight increase in prices, these are largely offset by declining sea freight rates.
Furthermore, there are some notable developments in China. The Chinese government is focusing on sectors such as 5G, electric vehicles, stable economic growth, domestic tourism, healthcare, and carbon reduction. This has led to government measures to curb steel production and reduce CO2 emissions. This includes the downsizing and closure of blast furnaces and a reduction in the export of steel products such as wire rods and fasteners. It is expected that steel production will shift to other countries in the Far East.
Transport to Europe
Shipping companies still opt to sail via the Cape of Good Hope. The longer transit times of approximately eight weeks are now factored in and no longer pose a significant hindrance.
Since the peak in July 2024, sea freight rates have declined to around $1,600 for a 20ft container. Before 2022, prices ranged between $1,200 and $1,600. However, the strong price fluctuations make cost calculations challenging.
Market Developments in Europe
Many companies in the construction and industrial sectors are facing declining demand, which is also evident in our orders. Order frequency is increasing, but order sizes are shrinking. As a result, transport costs per order are rising, in addition to increasing costs due to inflation and the electrification of vehicle fleets.
To manage costs, we are increasing the use of our own trucks and optimizing delivery agreements with customers to reduce the number of small orders.
Anti-Dumping Investigation
The European Union launched an anti-dumping investigation in Q4 2024 into "headless screws" from China (ADD718), including threaded rods, studs, and U-bolts (GN codes 73181542 and 73181548). This product segment was previously part of an AD investigation (ADD676) but was excluded at the time.
An ADD investigation can take up to 14 months, but based on previous cases, we expect an accelerated process. If a tariff is imposed, it will apply for five years and may be implemented retroactively. In past cases, import duties of more than 80% have been established. We anticipate a similar tariff will be applied.
This threat is already causing price increases due to uncertainty and scarcity. To mitigate risks, we are now placing new orders primarily with European manufacturers, despite the higher costs. This prevents unexpected surcharges. As a result of this development, we will adjust prices for the affected products as of March 24, 2025.
Carbon Border Adjustment Mechanism (CBAM)
Since October 2023, the CBAM (Carbon Border Adjustment Mechanism) has been in effect. This European system ensures that importers of certain carbon-intensive products, such as cement and steel, will have to pay for the CO₂ emissions generated during production from 2026 onwards. This prevents companies from relocating production to countries with less stringent climate regulations. CBAM is being implemented in two phases:
Two Phases of CBAM:
- Transition Phase (October 2023 - End of 2025):
- Importers report the CO₂ emissions of their products quarterly, without incurring costs.
- Definitive Phase (Starting January 2026):
- Importers must purchase CBAM certificates annually based on their products' CO₂ emissions.
- Any CO₂ costs already paid in the country of production will be deducted to prevent double taxation.
Impact on Kobout
For Kobout, CBAM entails additional administrative burdens and costs. We are closely working with suppliers to gather the required data. From 2026, we will be subject to an actual CO₂ levy, the exact amount of which remains uncertain. Estimates range between 5% and 20%. This will have a corresponding impact on our sales prices.
Availability and Inventory Management
Our inventory levels are stable, thanks to long-term relationships with manufacturers and the dedication of our procurement team. Recently, SLIM4 software has been supporting our inventory management, and we are steadily expanding our stocked assortment. In 2025, we expect to increase our inventory by 2,500 SKUs.
Sustainability
More and more companies are required to report under ESG (Environmental, Social & Governance) regulations. Unfortunately, a uniform EU reporting standard is lacking.
At Kobout, we use EcoVadis to measure our sustainability performance. Last year, our sustainability score improved further, and we received the Commitment Badge in recognition of our efforts. Driven by our corporate vision and the principle of stewardship, we remain committed to further sustainability initiatives.
More Information
For questions or further information on market developments, please contact your Kobout representative.