Analysts see a lot more upside upstream of distribution

Oct 01, 2008 | 06:58 AM |

If there's a cheering section for mills interested in buying service centers, it's not on Wall Street.

While some distributors continue to look over their shoulder at the possibility of mills moving into their home turf, securities analysts who follow steel and other metal producers don't see much support for such a move in the equity markets.

"I guess anything is possible, but I'm not hearing an awful lot about it," said Leo Larkin, equity analyst for the Standard & Poor's division of the McGraw-Hill Cos. Inc., New York. Like others, Larkin pointed out that producers such as Nucor Corp., Charlotte, N.C., and Steel Dynamics Inc. (SDI), Fort Wayne, Ind., have instead been either going upstream to secure in-house supplies of scrap and metallics or, when they travel downstream, look for fabrication or processing operations. While he's aware of the theory that mills could turn to distribution once "there's nothing left for them to buy," Larkin still thinks....