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Timken eyes steel growth of up to 10%

Keywords: Tags  Timken, steel, allocation, special bar quality, lead times, Salvatore Miraglia, corinna petry

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 company’s 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 a home."

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 Timken’s 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 year.

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