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Tough times do not have to be simply tough luck

Jul 19, 2016 | 12:13 PM | John Ambrosia

Tags  service centers, distributors, recession, steel buyers forum, downturn, top list, inventory??


According to the old chestnut, “when the going gets tough, the tough get going.”

A corollary could just as well be “tough times make for tougher folks.”

Just two summers ago, in mid-2014, steel prices were as high as $750-$900 a tonne and ferrous scrap prices were cresting near and above $400 a ton. Today both are significantly below those levels. General economic trends remain stagnant or slow, adding to the woes of one of the weakest recoveries in U.S. history. And service centers have felt that pinch.

AMM’s annual survey of service center revenues and business planning shows that revenues are down this year over last, the first time that has happened year-over-year in three years. The more significant growth rates seen from 2010-2012 seem like a distant memory right now, and do not appear likely to be repeated in the near term.

For example, of the 56 distributors that reported their revenues to us this year, 43 saw declines, while six increased and five were even (a few others were new to the survey this year).

A review of recent monthly Steel Buyers Forum results shows that longer-term views remain positive, however, as few participants expect sales levels to drop off significantly through the remainder of 2016.

Most service centers operators consider inventory 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.

For those showing some acumen blended with perseverance, 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.

Correction

• An editing error in the June issue of the magazine on page 49 in the article “For many in steel, move is to innovation nation,” suggested that Primetals Technologies was involved in the construction and operations of Big River Steel. It is not.



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