Why do-it-yourself distribution won’t fly . . . or die

Oct 01, 2008 | 06:55 AM |

Despite one recent notable exception, domestic steelmakers haven't given much reason for industry to expect they're looking to move into the service center business. Still, it's a topic that just won't go away, and few mill executives are willing to shut the door on a strategy that has proved more popular in Europe than in the United States.

"We're not taking a position on this," said Keith Busse, chairman and chief executive officer of Fort Wayne, Ind.-based Steel Dynamics Inc. (SDI). Busse, who is also chairman of the American Iron and Steel Institute, noted that "there are still some (service center) executives who will tell you the European model isn't correct for North America." But he doesn't believe they've made a clear case why it won't work.

When the topic of domestic mills owning service centers comes up, the discussion invariably turns to U.S. Steel Corp., Pittsburgh. In 2003, after losing more than $100 million in less than two years, the company shut down its Straightline Source division, a "technology enabled" operation described as a "virtual" distribution unit that—despite U.S. Steel's denials—a number of service centers viewed as competition.....