U.S. and Canadian service
centers are experiencing strong demand, just as they had
predicted. Healthy demand from customers pushed aluminum
product shipments up in March, the most recent figures
available, but optimism also was displayed heading into
"Our customers and our
competitors are both saying theyre extremely busy. More
quotes are turning into actual orders than six months ago," one
service center source told AMM.
Overall business activity has
improved from last years levels, with monthly reports
showing strong increases in service center shipments, some of
the largest North American metal processing and distribution
But as the year progresses,
improvements are expected to be slight because a number of
factors still worry players in the industry: a depressed
construction market, the European sovereign debt crisis and the
volatility that typically accompanies a presidential election
These concerns were buried
beneath the surface of first-quarter shipments. U.S. and
Canadian service centers shipped a combined 149,800 tons of
aluminum in March, up 4.4 percent from 143,500 tons in
February, pushing the first-quarter total to 413,200 tonnes, up
marginally from 412,700 tons in the same period last year,
according to Metals Service Center Institute (MSCI) data.
Although North American
consumers are busy, few have begun restocking, sources
"Just from talking to our
customers, people are busy but they dont want to forecast
too far ahead. They dont want to make commitments too far
ahead, but everything they need, they need it right away," the
first service center source said. "People are frantic (but) it
doesnt feel like anyone is stepping up to the plate to
There is also hesitation in the
markets, he said. "Its an election year. Theyll
keep pumping juice into the market. I think (business will)
continue for the foreseeable future, but there is still
uncertainty out there. Europe isnt great, Asia is not
growing as quickly as expected and the U.S. still has
problems," he said.
But because the MSCIs
first-quarter aluminum shipment statistics were outpacing last
year, some optimism remains in the market.
In flat-rolled steel plate,
service center sources confirmed that business was steady, and
while volumes werent back to pre-recession levels they
said they were still buying and selling steel on a daily basis.
"Its steady. I dont think its crazy, but
people are buying," one distributor source said.
"Business is stable. Its
not great, (but) its not bad," the owner of warehouses in
Michigan and Indiana said.
"Nothing has changed out there.
. . . But there is no cause for concern. (Business
activity) wont go up 5 or 10 percent, but we are seeing a
steady, slow climb in value and tons so far this year.
Its building momentum," one southeastern distributor told
"February was less than January,
but it was darn close on a tons-per-day basis. In both January
and February, tons shipped in Canada were better than any month
except March last year," according to the chief executive
officer of a large North American distributor. "We think there
is still upward momentum and expect a modest improvement for
the rest of the year."
One Gulf Coast steel distributor
said that from his standpoint demand was "really good" in the
first two months of the year, and he had to replenish tons that
he had stocked in December and early January. "Demand is still
good, but not great," he said.
"Our inventories are holding,
not increasing," the leader of a western Great Lakes company
said. "We have a steady booking of orders. Its just a
matter of how well pricing holds up after the first
The Michigan service center
operator said he had been reducing inventory somewhat. "We have
a good amount of stock, so we are taking a conservative
approach," he said. "Competition is so damn keen. Its
The southeastern distributor
said he, too, was keeping inventories lean. "There are too many
unknowns, particularly as it relates to what domestic producers
will do to stave off foreign competition. We are being very
cautious in purchasing," he said.
Earlier this year, some service
center executives set the template for the 2012 outlook by
holding to some optimistic viewpoints.
"Its clear by now that
automotive is outpacing GDP (gross domestic product)," said
Lourenco Goncalves, president and chief executive officer of
Fort Lauderdale, Fla.-based Metals USA Holdings Corp. "We see
more upside than downside potential. We saw improvements in
2011, and even more improvements are expected in 2012."
Those improvements are expected
to follow a more traditional seasonal pickup this year after
years of volatility. "The typical seasonality of our business
is back," Goncalves said.
David H. Hannah, chairman and
chief executive officer of Reliance Steel & Aluminum Co.,
Los Angeles, said he believes that the energy, aerospace and
defense, semiconductors and electronics, and heavy equipment
end markets will grow fairly strongly. "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," he said.