CHICAGO Timken Co.s
Steel Group is targeting growth in business activity of 5 to 10
percent this year even as its special bar quality (SBQ) product
customers remain on controlled order entry.
The Canton, Ohio-based
steelmaker expects strong 2012 margins based on higher average
pricing to contract customers, which represent around 90
percent of sales.
"The end-use requirements look
very strong and solid," steel group president Salvatore J.
Miraglia Jr. said Wednesday during the companys quarterly
earnings conference call. "As we speak to customers, there is
no expectation of any lack of demand."
By managing the order book,
Timken pulled its lead times in much closer and they are more
predictable than last year. "Throughout 2010 and last year,
customers attempted to restock and wanted everything all at
once. The supply situation was tight. We negotiated with
customers and restored service levels with reliable lead times
and on-time deliveries," Miraglia said. "We expect to stay
there without overloading assets by any stretch."
Steel orders could slow slightly
during the second quarter, he said. "Some customers overshot
their inventory targets, and the tight supply attracted
imports. That will need to be mitigated as that inventory finds
To maintain lead times that are
now out to five weeks for large-diameter hot-rolled bar and six
weeks for small bar, Timken is keeping customers "on allocation
in order to avoid getting overcommitted. We now have reasonable
lead times and are operating at pretty high levels. We ran at
close to 90 percent of capacity in the first quarter, which is
about full," Miraglia said.
For the industry as a whole,
"some competitors are still on a one-year lead time, especially
for small diameters serving automotive. Some others are in the
12- to 16-week range," he said, compared with quotes of "six
months to 12 months-plus at any time last year."
The largest consumers of
Timkens bar continue to be the bearings business, gears,
shafts and seamless tubing used in light and heavy vehicles,
off-highway equipment, oil and gas extraction and general
industrial applications. Most are in North America, but many
sales are offshore, with $50 million in Asia alone last