A number of factors affect how
service centers tailor their approaches to customers, the
market in general and the establishment of best business
When it comes to prices, for
example, steel pipe and tube have followed separate paths in
recent months, with energy tubulars generally recording gains
while non-energy pipe and tube tags continue to suffer.
On a more general front, some
service center executives said the daily headlines, though
accurate on unemployment and the lack of consumer confidence,
are much gloomier than actual demand for metals would indicate.
In fact, 2012 could be a strong year for pipe and tube
In non-energy products, the
exception continues to be specialty items, such as cold-drawn
seamless mechanical tubing, which have maintained solid prices
and long lead times thanks to limited capacity and steady
demand from the industrial and heavy equipment markets,
according to buyer sources.
On the energy side, while
commodity-grade line pipe and oil country tubular goods (OCTG)
may have experienced small price moves up or down, alloy
material is continuing its upward price trend as strong demand
from shale plays drives drilling activity.
Distributors have a variety of
opinions on how those price increases might play out on their
side of the industry. One Midwest service center source argued
that any increase might be hard to push through, given
continued short lead times, especially from tube mills.
Another service center source
largely agreed, saying that it might prove more difficult for
mills to put through price increases early in 2012 than it did
during the same period last year. Still, he argued, prices were
likely to firm up again this year.
On the energy front, one
distributor said it was still too early to say whether
announced price increases for OCTG would be collected for at
least a few more weeks. The announcements at least create
a sense that prices could firm up, he said, adding that
any gains might prove difficult to maintain without raw
material prices rising as well. OCTG mills planted the
seed of possible price stabilization, but it will take a lot of
nurturing for it to grow up, he said.
Hollow structural section (HSS)
buyers expect prices to increase in 2012, but just how long
that trend will last remains to be seen, with some predicting
that the run-up could lose steam by the end of the first
quarter. The expectation of rising HSS tags comes as tubing
mills continue to see prices for their main input
materialÑsteel coilÑpick up speed. Coil mills,
which produce the substrate used to make welded tubular
products such as HSS, have been relatively firm about holding
the line on price hikes, forcing tube mills to try to do the
same, sources said.
You are going to have
peopleÑsome flat-rolled, some tubing, some
barÑthat will actually see their prices go down in the
first quarter while everybody else is seeing prices go
up, another distributor said. Its a strange
A third service center source
said that the coil and subsequent HSS pricing run-ups could be
short-lived, predicting a repeat of 2011, when prices jumped
early in the year before swooning in the summer months.
He said that when mills came
back from the end-of-year holiday, some of them said,
All the rollings are booked for January; youd
better get in now if you want to make February.
That will help any February increases stick, he said, and in
turn that should make it possible to increase prices in March
But the outlook beyond March is
iffy, the third service center source said. (Mills) will
get you for (a possible) March increase . . . but
then its the same game, he said. By that
point, the stocking season is over. Theyll try to get
increases in April and May, but then some (mills) will say,
Hey, I dont need the increase. I might even lower
your price. Just give me the business.
Meanwhile, confidence in service
center business is spilling out beyond U.S. borders.
Chicago-based Ryerson Inc. has opened a new 80,500-square-foot
facility at one of the largest industrial parks in Tijuana,
Mexico, as it pushes to provide full-service metals
distribution and processing services to major markets in that
The facility, Ryersons
second service center in Mexico, will supply bar, tubing, coil
and plate in carbon, aluminum and stainless steel to customers
in the Tijuana region, as well as Ensenada, Mexicali, Rosarito
and Tecate. Processing capabilities at the new location will
include cut-to-length, laser fabrication and state-of-the-art
bar-cutting equipment. Officials said the facility will provide
same-day delivery and same-day will-call service with its
warehouse operations and an onsite sales team.
As Ryersons U.S.
customer base continues to invest in Mexico, we intend to
support that growth, as well as the growth of Mexican-based
manufacturers, Phil Wylie, president of Ryersons
Southwest region, said in a statement. Ryerson also operates a
56,000-square-foot facility in Monterrey.
Reliance Steel & Aluminum
Co. chairman and chief executive officer David H. Hannah said
he believes that the energy, aerospace and defense,
semiconductors and electronics, and heavy equipment end markets
will grow fairly strong on their nascent recovery.
We think aerospace will be
quite a bit better. The build rates are improving on commercial
lines like the (Boeing Co.) Dreamliner and (Airbus SAS) A380
that were bogged down in certifications and manufacturing
processes. Including defense, its very positive,
Hannah said about the Los Angeles-based companys
Energy is probably the
brightest spot (and) we think it has legs into the
future, he added, citing developing extraction
opportunities such as fracking, horizontal drilling and tar
sand sites in Canada. We hope we will get some new
activity on deep-water drilling.
Olympic Steel Inc. chairman and
chief executive officer Michael D. Siegal, who projects a
5-percent increase in steel demand and larger market-share
growth for the Cleveland-based company in 2012, echoed
Hannahs sentiments, adding that media headlines
dont accurately reflect the metals market.