North America has a new No. 3 metals service chain. NAMD Inc. of Minneapolis, which operates Vincent Metals Goods in the U.S. and Atlas Ideal Metals in Canada, is merging Nov. 1 with Reynolds Aluminum Supply Co. (Rasco), which makes it a company with roughly $2.15 billion in annual revenues.

BHP Billiton of Australia (NAMD's owner) and Alcoa (Rasco's owner) each own 50% of the new company. In 2000, Purchasing had ranked NAMD as the eighth largest service center in North America while Rasco was in eleventh place.

The new venture is expected to have its greatest impact in aluminum and stainless steel although the company also sells copper and brass. It will join only three other metals chains doing $2 billion or more in annual distribution business. That top tier includes Ryerson Tull Inc., Chicago, Thyssen Inc. (North America), Detroit, and Metals USA Inc., Houston.

According to analysts, creation of this super-sized service center may reignite a consolidation trend in distribution that lost momentum in the current market slump. At least eight other chains are on the brink of $2 billion in annual sales.

The merger bolsters a view on Wall Street that the metals distribution industry is segmenting into either specialized local operations or heavily capitalized national and cross-border organizations—with mid-sized service centers caught in-between. "It doesn't leave a lot of room for the $500-million distributor that is struggling to compete with the biggest chains," says analyst Scott Morrison at investment house Credit Suisse First Boston in New York. "It continues a trend to consolidation among major mill customers," adds analyst Aldo Mazzaferro of brokerage Goldman Sachs in New York.

Don Cowles, president of RASCO, agrees that, "The metals distribution portion of the supply chain management industry is in a period of change," triggered in part by the current manufacturing malaise in North America and the excess of service center locations. "We feel that combining RASCO with NAMD will result in the best outcomes for customers, employees, suppliers and owners," says Cowles, who is heading up the integration.

Harry Jones, chief executive officer of NAMD believes, "There are opportunities to leverage technologies and synergies in processing equipment, information systems, engineering, technical support and the expertise of our combined workforces.''