PART II: Wire Filament Suppliers
By Bob Lawrence
Ask anyone outside the brush industry what wire brushes are used for and most will cite menial tasks such as grill cleaning, having no realization that they’re essential in most major industries producing products and services ubiquitous in their lives, from aerospace and automotive to agriculture and telecommunications. As such, it’s a high-growth segment of the brush industry, according to a July 2023 Business Research Insights analysis of the global wire brush market. The findings: it’s expected to grow from over $553 million (USD) now to $784 million at a compound annual growth rate of six percent by 2028. This bodes well for wire filament producers and distributors as well as wire brush manufacturers, both of which are, and have been, dealing with all the major issues associated with doing business in their home countries and globally. To gain insight from their perspective, Brushware posed questions in a two-part article. Here’s our Part II conversation with two prominent industry wire filament suppliers.
What country or countries supply the raw material for your production?
Ralph Rosenbaum, president, Stainless Steel Products, USA: We receive raw materials from mills in the United States, France, India, Taiwan and China. But we are de-emphasizing China because of the high import tariffs being increasingly added in the U.S.
Josh Deligdish, vice president of sales, Deligh Industries, USA: We directly source a wide variety of wire/raw materials from approximately 20 countries. The three largest groupings are primarily across Asia, Europe and the Middle East.
When buying raw material, do you stay with particular sellers or do you shop the global markets?
Josh Deligdish: We maintain strong and longstanding relationships with our partners, with many relationships spanning 20-50 years. We believe this foundation and trust is irreplaceable in weathering unforeseen obstacles, and this principle proved its value over the last three years. That said, we supply a variety of markets ranging from highly technical to commodity products, and we are continuously exploring alternative sources of supply for many items. There is rarely a downside to having more qualified partners.
Ralph Rosenbaum: We like to stay loyal to our current vendors. However, because of the China situation, we are open to potential new vendors for the limited products we buy from there.
A June report by Reuters’ Beijing bureau says China is set to export the most steel this year since 2016 due to the weakening yuan, competitive prices, and weak demand in that country. In the first five months of this year, Chinese Steel exports were up 41 percent compared to a year ago. Given that, do you expect lower prices for China steels will trickle down and impact brush wire?
Ralph Rosenbaum: I believe most of that increase in steel is going to other countries in Asia, the Middle East and Africa. South Korea is the largest importer of Chinese steel. In the U.S., steel tariffs and additional China tariffs are really placing American companies at a major disadvantage versus other countries. For example, South Korea pays a flat 10 percent VAT tax on all imported goods, including Chinese steel. On the other hand, the U.S. pays 25 percent steel tariff PLUS an additional 7.5 to 45 percent China tariff depending on the actual steel product. That is a minimum disadvantage of 22.5 percent and as much as 60 percent from what I have seen. This is in addition to higher freight rates for the longer journey to the U.S. versus South Korea. I do not believe imports of steel from China will have a positive impact on lowering prices of materials in the U.S. brush industry. On the contrary, I believe the U.S. steel tariffs in general and additional China tariffs are placing US manufacturers at a disadvantage when competing globally.
Josh Deligdish: There is a general misconception regarding “steel” and its relationship with wire products across multiple industries and applications. While there absolutely are commonalities, equating the two is overly simplistic — especially within the more specific segment of brush wire. Major metrics for steel exports are generally composed of flat products (hot rolled coil, cold rolled coil), pipe and tube and sheet. There are a multitude of factors from both manufacturing and economic standpoints which cause these items to behave dissimilarly to more specialized brush wire. Any price improvement would more likely come from a currency standpoint, but labor and energy costs as well as other market conditions may offset that to an extent.
Where do you see raw wire materials costs going for the rest of the year and on into the next year?
Josh Deligdish: This is dependent on the item in question. For more common items which are less specialized, we have already experienced cost reductions which we have passed through to our customers. For these items, any additional cost reductions would likely be minimal. For more specialized products it is difficult to say, but we expect pricing to remain stable.
Ralph Rosenbaum: If you believe the economic “soft landing” will be pulled off by the Fed, as I do, then I do not see prices dropping much from current levels. If the U.S. falls into a recession, then perhaps prices may continue falling a bit further. Chatter in our industry says order and production levels are now similar to before the pandemic, as opposed to the spike witnessed over the last year or so. Nevertheless, pricing for nickel, and therefore, stainless steel will most likely rise about 4-5 percent annually as demand outstrips supply due to the increasing demand from electric vehicle production and reduced Russian output from the war in Ukraine. Likewise, copper-based products should see a steady rise in prices due to increased global demand over the next year or two. I have seen estimates at 50 percent higher for copper prices versus 2023
by 2025. Nevertheless, one major variable in all of this forecasting is going to be the strength in demand from China for its production.
What have you experienced on costs for raw materials over the last few years?
Ralph Rosenbaum: The pandemic has really created a see-saw effect on raw material prices. Initially, prices fell as demand plummeted. Then prices rose as freight costs and labor shortages ensued. Demand came back strongly keeping prices high. Now with governments around the world raising interest rates, in order to curb inflation, economic activity is slowing down as borrowing gets more difficult, inventories have been built up, and many shortages are beginning to dissipate.
Josh Deligdish: Again, this can be item-specific. In general, there have been significant and relatively sustained cost increases for many items over the last three years due to a multitude of factors (raw materials, energy, transportation, labor, etc.). In many cases for more specialized and low-volume products, mills have either been forced to close or discontinue those challenging/low-volume items. They have concentrated their limited skilled labor in the most efficient method, focusing on longer production runs and less labor-intensive products. This has resulted in a more concentrated supply base with increased demand, while labor shortages/diminished skill levels have exacerbated production challenges. For more common items, the return path to lower costs is simpler — though inflationary pressure makes specifics difficult to forecast.
In the past two years, have there been any impediments to acquiring raw materials?
Josh Deligdish: Yes, we have experienced impediments on nearly every front.
Ralph Rosenbaum: Steel tariffs are an impediment; but, U.S. consumers have absorbed this. Added tariffs on Chinese products are further impediments and I believe these are still in the process of being fully absorbed into the U..S economy. Much of our company’s raw materials come from India and we have been fortunate with minimal impact on supply chain issues. Freight costs have normalized as well. Our supply chain issues only surfaced initially when the spike in demand and freight costs rose in early 2021.
How have you overcome those challenges?
Ralph Rosenbaum: We are forced to pay the tariffs and higher freight costs and we had to reflect these costs in our inventory and pass the costs to our customers. We try to source where tariffs on materials will be minimized.
Josh Deligdish: The simple answer is that we devoted a tremendous amount of time, resources, and expertise to micro-managing every detail in our supply chain to an extreme. We tapped our strong partnerships around the world to assist each other if necessary, while at the same time developing additional sources to meet increased demand. We acted quickly (April of 2020) to build a deep inventory and establish a larger buffer than most would anticipate, and attempted to act proactively in every respect.
Do you think it would be advantageous for supply chains to shift to more countries in order to diversify?
Josh Deligdish: We have most frequently seen increased diversification in Southeast Asia with the intent of de-risking from Chinese exposure. We believe this will continue and hopefully have a stabilizing effect on the global supply chain. However, the past three years have taught us that global factors have the potential to be unpredictable, and this has caused an increased emphasis on sourcing domestically. It remains to be seen whether the increased costs of operating domestically will be borne by the market.
Ralph Rosenbaum: In the long run, yes. Diversifying from China, for example, would be advantageous. In the short run, there are always issues including a learning curve on both sides of the equation. Those hidden costs are what create inertia for change. Buyers and sellers need to learn how other countries operate in terms of culture, operating requirements, productivity, and general business practice. It takes months and sometimes years to fine-tune.
Have there been increases in production costs during the past two years?
Ralph Rosenbaum: Oh yes. In addition to the aforementioned raw material costs, labor costs have risen as has the cost of commercial
real estate and rents.
Josh Deligdish: Yes, nearly every cost has increased and remains at high levels with the exception of ocean freight in certain lanes.
Has inflation impacted your business?
Josh Deligdish: In the sense of increased costs, yes.
Ralph Rosenbaum: Yes, especially on labor costs and rents. The spike in real estate costs and rents interfered with our goals to expand our production capacity and inventory. As a result, we moved our brush wire production to Pennsylvania since real estate is more affordable vs. New York and Long Island in particular.
What effect has that had on your customers?
Ralph Rosenbaum: We have had a real growth in our customer base. The impact of the last few years for many of our customers has been that certain existing suppliers are either exiting from making previously existing products or have such long lead times that consumers are forced to look elsewhere. It is one of the main reasons why we are expanding our production capacities and capabilities in ways that will serve our customer base well in the medium and long term.
Josh Deligdish: From a supply standpoint, we have largely been able to shelter our customers from the level of supply disruptions we have experienced and maintained a stable source of supply. I imagine they have had similar conversations with their customers regarding the increased cost of doing business and raw materials in general, but I cannot speak to how our particular raw material cost increases have affected their business as a whole.
Are there any problems in meeting your customers’ needs?
Josh Deligdish: Challenges absolutely remain in segments of highly specialized items, but we believe we are weathering them effectively and shielding our customers from the brunt of the impact. As mentioned earlier, the supply pool has shrunk for certain markets and U.S. manufacturers frequently have extremely specific specifications which are less commonly produced globally. We have mitigated this by leveraging our strong relationships with our partner, consolidating production across multiple product lines and stocking extremely large volumes across literally hundreds of items to account for unforeseen obstacles. When it comes to brush wire, I do not believe that the breadth or depth of our inventory can be matched by any other distributor.
Ralph Rosenbaum: We are viewing 2023 as a transition year for us. We have moved a large portion of our production and inventory to Pennsylvania. This is mainly for brush wire processing and distribution. We did this to lower overall costs (versus New York) and to add capacity. So, as we are building our capacity, due to increased customer demand, there is a lag between what we can produce and when customers want their products. Our crimped wire capacity should more than double by the end of this year. And we are looking into new technologies for next year in order to increase our throughput in general. Our lead times should shorten to more normal levels by the end of this year. The company started as a distributor from stock so fast delivery is in our blood. We need to get back to that and that is our goal, i.e., higher production capacities with short lead times.
What are the dominant types of wires that you provide for the brush industry?
Ralph Rosenbaum: Our forte has always been stainless steel wire, mainly due to the name of our company, i.e., “Stainless Steel Products.” However, more and more brush customers have learned about our diversity of product and service offerings. We are finding a large area for growth is demand for straight and crimped steel wire as well as copper-based wires such as oil tempered, brass, nickel silver, and phosphor bronze. These will be in sizes of between 0.0030” and 0.023” mostly.
Josh Deligdish: This can be broken down into retaining/staple/core wire, stem wire and fill wire. Stapling wire is a “bread and butter” item used throughout the entire staple set/strip brush industry, it is relatively standardized and as “basic” as it gets. This material is dominant in the sense of its consistent usage and widespread application. Stem wire is comparable within the twisted brush industry, though manufacturers do have a wider array of specifications and raw materials than we find for stapling wire. Fill wire is the last piece of the puzzle, and this has the widest variation in terms of material type and specifications. It is also the most prone to adjustment based on continuing innovation in raw materials and
Do you supply other industries with your wire filaments?
Josh Deligdish: We supply approximately 40 industries, primarily under the following categories: agriculture, automotive, brush, communication, construction, food service, filtration, material handling, medical, mining, stamping/forming and spring.
Ralph Rosenbaum: We do supply many other industries. But we are not limited to filaments. Other industries include energy, agriculture and OEM, such as springs and heating elements among others.
Do you have any wire filament innovations for brush making in development that you wish to disclose?
Josh Deligdish: Not at this time.
Ralph Rosenbaum: We have consulted on many projects such as filtration, high heat, non-magnetic environments, super fine particle removal and others. Our Application Engineering Assistance is an active part of our appeal to certain customers who are aware of our capabilities in this regard. We do not have any specific wire filament innovations in development. But we are always looking internally how to produce more, better, faster.
Stainless Steel Products: www.stainlesswires.com