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Revenues up but some challenges still remain

Jul 31, 2015 | 08:00 PM | John Ambrosia


AMM’s annual survey of service center revenues and business planning  shows that although revenues are up slightly this year over
last—just as 2014 was over 2013—the more significant growth rates seen in 2010 and 2011 as metals emerged from the Great Recession do not appear likely to be repeated in the near term.

Also, a review of recent monthly Steel Buyers Index results shows that longer-term levels of inventory on hand have been volatile
so far in 2015, and that most service centers operators consider those levels to be just about right for current economic conditions.
Inventory is one of the few ways service centers have of controlling at least a corner of their own destiny.

What all of this means is that service centers are under considerable pressures these days as they attempt to balance the needs of
their customers against the realities of profit margins. Service centers have not escaped the flat economic results that other sectors of the steel and ferrous scrap industries are experiencing.

So the past 12 months have been at times good for metals distributors. Good, but not great.

First, the bad: In each month from February through May, shipments of both steel and aluminum decreased on a year-over-year
basis. Inventories did not increase in every month. Steel prices have been a bit volatile of late, creating some uncertainty for distributors. But some of those factors were small and, while not robust, the market also at least seems to have stabilized for a period.

Now, the better: Despite the continuing economic uncertainty and an often-volatile market for steel products, most survey respondents said they had added facilities and upgraded equipment during the past three years and plan to grow over the next three
years through mergers and acquisitions, greenfield construction or expansion at existing sites. Distributors also said they hope the
expansions will improve their service capability and geographic scope as well as broaden their product lines.

So some form of forward movement on the part of distributors seems to be the best balm for the challenges that the overall economy,
and more specifically the metals sector, present to the service center universe. It is in these choices made that the make-or-break
point of business is defined.



 

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