The Top 100 Metals Service Centers: Buyers spend 15% more with top 100 in 2005
The 14 biggest processing and distribution firms now control 26% of the $115 billion metals supply network.
By Tom Stundza -- Purchasing, 5/4/2006 2:00:00 AM
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Buyers spent a record $47 billion with the top 100 metals service centers in North America in 2005, a 15% increase over the previous high of $41 billion of 2004. Some the escalation came from a revived metalworking economy that boosted the nation's need for metals but much growth can be traced to inflated prices for steel and nonferrous metals.
Overall, Purchasing calculations show that the U.S. and Canadian metals distribution industry generated $115 billion in 2005 net sales, a record that is 35% higher than the $85 billion in 2004 net sales. Service centers comprise the largest single customer group for North American mills, buying and reselling about 30% of all the carbon, alloy, stainless and specialty steels, aluminum, copper, brass and bronze, and superalloys produced in the U.S. and Canada each year.
The metals service center industry experienced a significant recovery during 2004 and 2005, due to global economic factors including increased demand from China and the U.S., decreased imports, a consolidation among domestic steelmakers, and a rebound of the U.S. manufacturing sector—all of which combined to substantially increase metals selling prices from 2003 levels. Looking ahead, the service center chief executives generally project steady growth in demand but are uncertain whether supply will be loose, balanced or tight.
The top 14 companies processed and sold in excess of $1 billion worth of ferrous, nonferrous, specialty and precious metals in 2005, as compared with 10 when the annual survey by Purchasing began with 1998 sales data. These leading metals distribution companies generated $29.7 billion in sales, a gain of 25% over their sales in 2005 than the year before. It is estimated that these 14 firms accounted for approximately 26% of total industry sales of $115 billion in 2005.
Again leading the pack is Chicago's newly renamed Ryerson with $5.78 billion in sales through the now-consolidated firms of Joseph T. Ryerson & Son, Ryerson Canada, J.M. Tull Metals and Integris Metals (purchased early last year). The second-largest metals service center is Reliance Steel & Aluminum of Los Angeles at $3.37 billion, which will get bigger since it just completed the buy of last year's seventh-largest firm, Earle M. Jorgensen Co. of Lynwood, Calif., which had 2005 sales of $1.74 billion.
The other Service Center Giants for 2005 are Samuel, Son & Co. of Mississauga, Ontario at $2.68 billion; ThyssenKrupp Materials North America of Southfield, Mich., ($2.35 billion); Russel Metals of Mississauga ($2.12 billion); Worthington Industries of Columbus, Ohio, ($1.81 billion); Macsteel Service Centers USA of Newport Beach, Calif., ($1.7 billion); O'Neal Steel of Birmingham, Ala., ($1.61 billion); Metals USA of Houston ($1.44 billion); McJunkin of Charleston, W. Va., ($1.43 billion); Carpenter Technology's distribution group ($1.31 billion); PNA Group of Atlanta, ($1.25 billion) and Namasco Corp. of Roswell, Ga., ($1.12 billion).
Outlooks are mixed
"So far in 2006, business conditions remain favorable," says Neil Novich, chief executive of Ryerson, but he declines to be pinned down definitively on a full-year outlook. Actually, looking ahead at 2006, metals distribution executives are divided on their forecasts: 43% of those polled see supply and demand in equilibrium this year; 31% believe robust purchasing will outpace supply, and 26% suggest strong demand will keep supplies tight in the first half but reduced sales will loosen supplies in the second half.
Since Reliance Steel & Aluminum expects demand and supply to be more balanced in 2006 than either 2005 or 2004, Dave Hannah, chief executive, says the second-largest steel and nonferrous metal service center chain "also expects less pricing volatility."
Lawrence Burr, president of Atlas Steel Products of Twinsburg, Ohio, an aluminized steel specialist, also projects demand and supply mostly in balance.
"We forecast a solid, reasonably strong marketplace throughout 2006, says Joe Dombrowski, chief executive of Pennsylvania Steel, a multimetals distributor in Bensalem, Pa. "We see no significant supply problems in 2006." Similarly, David Dickens, president of Three D Metals, expects the demand from automotive, appliance, electrical and construction industries to remain the same in 2006 as in 2005 and sees no trouble with supply of the copper, brass, carbon steel and stainless steel products from the Valley City, Ohio-based firm. Of course, that's partly because he has tripled supply from foreign firms in recent years.
Norman Katzman, president of Kenwal Steel's Canadian branch in Toronto, sees a strong North American market for steel mill products in the first half with higher prices and a shortage of inventory. However, he also forecasts "a softening in the market, prices sliding down and lots of product available in the second half of 2006."
"There will be no problem with supply, so prices will drop through the second and third quarters," agrees Jerry Barr, president of flat-rolled distributor Center Steel Sales in Allen Park, Mich.
On the other hand, "steel supply will be tight through July," asserts Scott Jones, president of steel, aluminum and copper service center Novamerican Steel in LaSalle, Quebec. "So, if demand continues to be robust, prices should be firm all year." Paul Quayhackx, treasurer of Lee Steel in Detroit, says that 2006 demand for the steel sheet products it processes and ships is "unusually strong" so the firm's inventory is at a very low level. "Leadtimes are increasing from the domestic mills and import offerings are more expensive and less available," he adds.
Kevin Beckman, president of Trident Steel in St. Louis, says that demand for oil country tubular goods and line pipe "will be exceptionally robust" this year, but the panic buying that followed last summer's hurricanes is over. "Business this year will be good," he says, "but more on the normal side." He also maintains that more balance in the pipe and tube supply side "will eliminate the pricing spikes that have been prevalent over the past two years."
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