Buyers sourced record $61 billion in metals from distribution giants
The biggest processing and distribution firms now control 43% of $143 billion metals supply network.
By Tom Stundza -- Purchasing, 5/8/2008
Even though they bought substantially fewer tons in 2007, buyers spent an all-time high amount of money for steel and nonferrous metals from service centers. In fact, buyers spent a record $61 billion with the Top 100 metals service centers in North America in 2007, a solid 13% increase over the previous high of $54 billion in 2006.
The value of metals bought soared even though buyers in various metalworking industries bought 6.6% less steel, aluminum and brass mill products through service centers than the previous year. The 2007 total of 57.3 million tons distributed in 2007, as reported by various service center industry associations, compares with 61.3 million tons shipped in 2006.
Purchasing magazine calculations show that the U.S. and Canadian metals distribution industry generated record revenues of $143 billion in 2007 net sales, up from $126.5 billion in 2006, with the increase being primarily due to increased prices for nonferrous and specialty (especially aerospace-grade) metals. The Top 100 service centers generated 43% of the total revenues. Actually, the 20 largest service centers generated 32% of the entire industry’s revenues—and 75% of the sale of all Top 100 firms.
Service centers comprise the largest single customer group for North American mills, buying and reselling more than 40% 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. However, the metals distribution industry remains highly fragmented and competitive even though ownership consolidation has reduced the number of parent companies to around 1,200 firms from 1,300 in 2003.
As some firms have disappeared into other firms, other companies have taken their place. That’s why 40% of the Top 100 service center companies posted this year weren’t on the initial listing a dozen years ago.
There are almost 3,500 intermediate steel processors, metals service center facilities and stock depots within localized areas or regions throughout North America. While that is a decrease by half from approximately 7,000 locations in 1980, many industry insiders say more need to disappear to relieve profit-margin pressures on the remaining firms.
Still, as the face of the metals distribution industry has continued to change, buyers have been forced to adjust to new owners, managers and product offerings. In fact, there is a new number-one service center company supplying metals buyers in North America. Los Angeles-based Reliance Steel & Aluminum with $7.26 billion in 2007 sales revenues surpassed the previously biggest distributor, Ryerson of Chicago, which reported $6 billion in the year it was bought by the Platinum Equity investment firm.
Reliance Steel & Aluminum experienced a 26% increase in sales in the year in which it bought such new subsidiaries as the Encore Group of metals service center companies in the U.S. and Canada; Crest Steel of California; Industrial Metals and Surplus and Athens Steel, both of Georgia, and Clayton Metals of Illinois.
There’s also a new third-largest metals distributor, McJunkin Red Man Corp., with sales of $3.95 billion after the merger of McJunkin of Charleston, W.V. with Red Man Industries of Tulsa, Okla. This dropped ThyssenKrupp Materials North America of Southfield, Mich., to fourth place with $3.2 billion in sales—although Samuel, Son & Co. of Mississauga, Ontario, followed closely in fifth place with sales of $3.15 billion.
There were some other slight movements in the rankings among the two dozen listings. Overall, the individual average change in 2007 sales was 13% over 2006, as sales increased among 72 of the Top 100 metal distributors over the past year. Twenty-eight-percent of the listed companies’ sales were flat or decreased, compared with 9% the previous year.
But the most significant finding may be that the largest got even larger, since 18 service center companies reported sales in excess of $1 billion last year, the highest number ever with sales that large—and 10 more that were that large a decade ago.
So, the next group of metals service center giants for 2007 are O’Neal Steel Inc. of Birmingham, Ala., ($2.5 billion); Russel Metals of Mississauga, Ontario, at ($2.4 billion); Macsteel Service Centers USA of Newport Beach, Calif., ($1.9 billion); Metals USA Inc. of Houston ($1.85 billion), and PNA Group Inc. of Atlanta ($1.63 billion).
Then come Namasco Corp. of Roswell, Ga., ($1.56 billion); Worthington Industries of Columbus, Ohio, ($1.46 billion); A.M. Castle & Co. of Franklin Park, Ill. ($1.42 billion); Carpenter Technology Corp.’s Distribution Division in Reading, Pa. ($1.418 billion); Steel Technologies, Louisville, Ky. ($1.29 billion); Marmon/Keystone Corp., Butler, Pa. ($1.25 billion); Olympic Steel Inc. of Bedford Heights, Ohio ($1.03 billion); and Alro Steel Corp. of Jackson, Mich. ($1.02 billion). On the verge of being a billion-dollar sales organization are #19 Edgen Murray Corp. of Baton Rouge, La. ($925 million) and #20 Novamerican Steel Inc., Lasalle, Quebec, ($801 million).
The smallest companies to be included in the Top 100 reported sales of $25 million—Southern Aluminum Finishing Co. of Atlanta, and Tico Titanium Inc. of Wixom, Mich. But even they agreed with their larger colleagues that corporate strategic direction this year would include a variety of metals stocking and processing initiatives to create value-added services for customers and to improve their own profitability.
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