The Top 100 metals service centers are...Click here to find out.

However, buyers say they are most interested in seeing their service center suppliers expand and upgrade processing capabilities and increase such value-added services as inventory management and cost-control programs. Buyers use metalcenters to shape large metal mill products into usable shapes, assemble small metal pieces into components and provide various supply chain management services.

Roger Schulz of Monroe Truck Equipment Co. in Monroe, Wis., is one of many purchasing managers who relies on service centers to supply him what he needs quickly—in his case, with $10 million worth of carbon and stainless steel flat-rolled products every year. "Our in-house inventory of raw materials is extremely lean (so) there is heavy reliance on suppliers that can respond quickly and reliably."

But, when service center companies can have as many as 125,000 customer accounts, buyer-supplier relationships can be challenging: "Customer service levels are declining," complains Michael James, senior purchasing agent, Rocore Industries, Franklin, Wis., which manufactures radiator cores and other heat transfer products for the construction, truck and industrial markets. "Two of my longer-term metal suppliers are starting to treat me like I just started buying from them yesterday—sneaking in skidding charges, extra fees for packing and banding materials on a pallet—without notifying me and not telling me when orders will be late."

Despite complaints like that, buyers spent a record $54 billion with the Top 100 metals service centers in North America in 2006, the second consecutive year that expenditures increased by 15% with these supply leaders.

Most of this recent monetary growth can be traced to inflated prices for steel and nonferrous metals. That's because shipments of carbon, alloy, stainless and specialty steels, aluminum, copper, brass and bronze, and superalloys from processing distributors in the U.S. and Canada have been stuck around 61 million net tons for three years now.

Service centers buy, hold, process and resell about 35% of all the metals used in the U.S. and Canada each year. Overall, Purchasing calculations show that the U.S. and Canadian metals distribution industry generated $126.5 billion in 2006 net sales, a record that is 10% higher than the $115 billion in 2005 net sales—and almost 49% higher than the $85 billion of 2004 before the metal price inflation gained its recent traction.

There were 14 metals distribution companies that processed and sold in excess of $1 billion worth of ferrous, nonferrous, specialty and precious metals in 2006; in fact, the Big 14 generated $34.2 billion in sales, a gain of 15% over the $29.7 billion generated by the top 14 in 2005. Interestingly, the Top 25 service center companies generated $43 billion in sales—equal to 80% of the Top 100 total and 34% of the total industry sales of $126.5 billion.

Analysts project that buyers will rely ondistributors for some time to come.

Lately, though, such buyers as Sherry Penland at IV-S Metal Stamping in Thomasville, N.C., are citing service center shortages of such specialty material inventory as hot-rolled carbon steel angles, stainless steel plate, aluminum plate and extrusions, copper shapes and tubing, nickel-based alloys and titanium metal grades. "There are distributors of copper and nickel-based products who don't want excess products on hand that they can't sell if the market moves down," says the purchasing manager of a metal machining company in Ohio.

Despite the occasional bumps in the road, buyers continue to rely on service centers "to help reduce raw material and finished goods inventory," notes Joseph DeSantis, purchasing manager at medical device company Synthes USA in West Chester, Pa. And some service centers are listening to buyers: Roy Berlin, CEO of Berlin Metals in Hammond, Ind., says he has "just purchased a new coil slitting line that will make us faster and also allow us to process a wider range of material thicknesses and widths."

James Chain, president of Almetals in Wixom, Mich., says the firm "plans to invest in technology to help our sales and customer service personnel better serve our customers." He says the firm already has invested "in machinery that runs more efficiently with little or no downtime, and we've put better processes in place to handle our customer and supplier needs."

Norfolk Iron & Metal in Nebraska has implemented systems to provide certification of all steel shipped, increased cold-reduced processing of sheet and plate and installed global positioning system (GPS) tracking on all 115 of its delivery trucks. "On-time supply and no disruption in our customers' supply chain are of high concern," says Mike Jedlicka, sales vice president. "So, we maintain a fleet of company owned trucks to handle the tonnage demand. Quality steel ranks up there as a key customer concern as well; so, we store all our steel indoors and buy it to be delivered to us in covered rail cars and tarped trucks."

A major issue is global competitiveness of metalworking companies. "The major concern of our customers is being cost competitive with China and other countries," says Mike Kruse, vice president of marketing at Heidtman Steel Product in Erie, Mich. "So, we will continue through mill and joint-venture partnerships to provide the buyers with cost-effective solutions." One of those solutions is the firm's new leveling, multi-blanking sheet-processing facility in Mississippi adjacent to the new SeverCorr steel mill.

The largest service center company remains the beleaguered Ryerson Inc. of Chicago with $5.91 billion in sales through the 100 branches that have come together from the consolidations of Joseph T. Ryerson & Son, Ryerson Canada, J.M. Tull Metals and Integris Metals. However, business hasn't been all that easy for the industry giant lately.

Investors led by Harbinger Capital Partners, a $5 billion hedge fund that owns a 9.7% stake in Ryerson, have been unhappy with the profit returns from the company and have been looking to change management or find a private equity buyer that might boost profits. Executives at Ryerson, realizing they are in the cross-hairs of profit-hunting investors and disgruntled shareholders, have pushed back indefinitely a May 11 annual meeting that would have involved a proxy vote to replace its board. Instead, they have put the company up for sale and are hoping to find a buyer who keeps existing management in place, an outcome that appears challenging, according to analysts.

Meanwhile, the second-largest metals service center remains Reliance Steel & Aluminum Co. of Los Angeles, whose 2006 sales volume skyrocketed 61% in one year to $5.47 billion after it merged with another billion-dollar distributor, Earle M. Jorgensen Co. of Lynwood, Calif., and such smaller service centers as Industrial Metals and Surplus Inc. in Atlanta; Athens Steel Inc. of Athens, Ga.; Yarde Metals of Southington, Conn.; and Crest Steel of Carson, Calif. Looking ahead, CEO David Hannah tells Purchasing his plans are "to continue internal growth through industry-leading levels of service and quality and through additional acquisitions." Already this year, he has bought the net assets and business of the Encore Group of metals service center companies which includes Encore Metals, Encore Metals (USA), Inc., Encore Coils, and Team Tube headquartered in Edmonton, Alberta.

The other members of the Top 14 service center giants for 2006 are ThyssenKrupp Materials North America Inc. of Southfield, Mich., at $3.18 billion; Samuel, Son & Co. of Mississauga, Ontario, Canada ($2.7 billion); Russel Metals of Mississauga ($2.32 billion); O'Neal Steel Inc. of Birmingham, Ala., (which jumped to $2.3 billion after its purchase of Transtar Metals in Torrance, Calif.); Metals USA Inc. of Houston and Macsteel Service Centers USA of Newport Beach, Calif. (both at $1.8 billion); McJunkin Corp. of Charleston, W. Va., ($1.7 billion); Worthington Steel Group of Columbus, Ohio, ($1.64 billion); PNA Group Inc. of Atlanta, Ga., ($1.56 billion); Namasco Corp. of Roswell, Ga., ($1.2 billion); A.M. Castle & Co. of Franklin Park., Ill. ($1.18 billion) and Carpenter Technology Corp.'s distribution group in Reading, Pa. ($1.17 billion).

On the doorstep of the Billion Dollar Club are Olympic Steel Co. of Bedford Heights, Ohio, whose 2006 sales were $981 million; Marmon/Keystone Corp. of Butler, Pa. ($952 million) and Steel Corp. of Grand Rapids, Mich. ($910 million). Tim Spatafore, executive vice president of Marmon/Keystone, says the firm this year "plans to add additional stocking locations to better serve markets" through greenfield construction—such as the new metalcenter in Wisconsin—and further acquisitions, such as the 2007 buyouts of Victory Tube of Cleveland and Koons Steel of Parker Ford, Pa.