December, 2007

To All of Our Customers:

Looking back on this year as we approach the last few weeks of 2007, the only thing that can be said is … what a year this has been.  We have never seen the demand for domestic material as strong as it has been in the past twelve months.  Even though cheap imported fittings and flanges continue to concern domestic manufacturers, the savvy buyer realizes that having a good domestic supplier with unquestionable product quality is the best way to proceed in this business.

People are calling to ask what we think 2008 will bring.  While we have no crystal ball to look into the future, and only talking about welding fittings and flanges, all indications seem to be that 2008 should be about as good as 2007. 

A recent article in American Metal Market predicts that import steel prices will be rising because the bulk freight rates are going up 40-50% after January 1^st, and on some steel products they suggest that the imported steel will be delivered here at a higher price than domestic.  With the considerable bulk rate increase, and considering the weakness of the dollar, the article indicates that there is no real incentive for anyone to ship to the United States.  The article also recommends that if you don’t have a relationship with a domestic mill, get one.

We understand that the price for met coal, which is used in the steel industry, is shooting up almost daily.  Countries that were exporters of this material, such as Russia and Poland, are buying the met coal for their own steel industries, and in countries like India, demand cannot be satisfied.  In recent weeks, prices that were around $90 a metric ton have now risen to $145 per metric ton FOB.  The demand is far exceeding the supply. 

We have also been told that bulk carriers do not have enough freighters to meet the demand, and the freight costs on this type of cargo are also rising.  In addition, scrap demands are expected to increase after January 1, 2008. 

With all this outside pressure in mind, all the major pipe mills have notified their customers that prices are going up $50 - $75 per ton for pipe.  This is roughly a 6% increase for seamless pipe, the only pipe we can use to make weld fittings.  We will be reviewing our own costs after the first of the year, to see what price adjustments we might have to make.  Our costs for transportation have definitely risen over the past year, along with increases in electricity and gas.

When welding fittings and flanges start to get in short supply, people tend to get desperate and buy unknown product to satisfy their customer needs.  In the past few months, we have seen imported fittings and flanges fail at a very low pressure.  Just this week an American chemical company put out an alert to their people about a Chinese flange that failed at their company plant in France.  The reason it failed was because it was made from plate with a piece of tubing welded in to look like a weldneck flange.  The French government has gotten involved in this investigation as a fraud case and possibly a terrorist action against their country.  What supplier needs this type of scrutiny, but this is the same problem that our industry faced back in the early 1990’s, when The National Board of Boiler and Pressure Vessel Inspectors compiled a special report concerning failures of flanges from China.  (If you would like a copy of this report, we would be happy to mail a copy to you.)

We have consistently warned our customers about the very cheap welding fittings and flanges coming into the United States, some quite possibly having been transshipped from China with fraudulent country of origin markings.  These cheap prices are appealing, but the first thing you have to consider is quality.  Weldbend spends many thousands of dollars a month having independent laboratories check all types of incoming steel into our plant to assure us and our customers that what they are getting is what they have ordered. 

Finally, although this year has been a banner year for business, it has been a very sad year for our family with the passing of my father on July 4^th.  My father loved this business and enjoyed coming to work every day.  He had the utmost respect for the jobbers and the vital part they have in our supply chain.  We miss him very much and will strive to uphold his high standards in the manufacture and sale of our product to our customers.  You can be certain his push for quality domestically manufactured product will continue at Weldbend.

Wishing you and your families Happy Holidays, and a healthy and prosperous 2008.

James J. Coulas, Jr.
President

You can depend on Weldbend!

www.weldbend.com