Its a case of good news/bad news for steel
service centers right now. The good news is that distributors
experienced a healthy first quarter, with shipments growing 6.3
percent over the same period in 2011. The bad news is that many
service centers have seen a slight softening during the second
We continue to see good demand in the vast
majority of sectors, and pretty much everywhere throughout the
country, Metals USA Holdings Corp. chairman, president
and chief executive officer Lourenco Goncalves said during the
companys quarterly earnings conference call in April.
We dont see mills interested in raising prices, and
we expect prices to be range-bound during the second
U.S. and Canadian distributors shipped 16.93 million
tons of steel products in the first four months of 2012, up 6.1
percent from 15.95 million tons in the same period last year,
according to the Metals Service Center Institute (MSCI). But
April shipments of 4.07 million tons were down 7 percent from
4.38 million tons the previous month.
Our March shipments were strong, but bookings
are a better story of whats going to happen, a
source at a Michigan flat-rolled distributor said.
Theyre definitely slower, and that includes the
automotive segment. I dont think theres as much
optimism. The price of steel was raised to $700 (per ton), then
to $720, but were in for a flat market. They might wallow
for a while.
Many buyerseven those who need to replace
inventorieshavent been easily enticed into placing
orders, despite some mills offering to roll minimum quantities
at around $10 below list price.
The first quarter was a little better than last
year, but it ended with a bit of a sputter, a source at
an Illinois sheet distributor said. Everybodys
still on the fence with where pricing is going. Did (announced
hikes) stop the drop? Quoted prices are up from the mills, but
closed deals arent that drastically changed.
Producers are getting $700 or close to it, but in spots,
with open schedules, theyre making a few
The Illinois source was one of several to say that
theyve been quoted lead times of three to five weeks, but
material is arriving sooner than that. The competition
(at the distribution level) is not raising prices as you would
think they should, with two published increases and a third on
its way, he said, citing chatter about price increases
reportedly coming from mini-mills. People are going as
lean as possible.
One large Gulf Coast operator called March a
scorcher, the best month in two years, and said he was on
track to surpass that in April. He cited the continued strength
of the natural gas sector, noting that the effect of prices at
$2 per million British thermal units hasnt rippled
through the supply chain. Theres still a lot
of pipe in the import yards, and a normal amount is
still scheduled to come in, he said. Although margins
arent good, we feel pretty good about the second
An executive at a national long products distributor
also said he saw a slight slowing in April. Its
nothing to panic about, but its not as good as March on a
daily shipment basis, he said.
Peers he met with in April also told him they were
seeing softer bookings in the United States and Canada. I
was surprised by the hollow structural section (HSS) price
increase, he said, referring to hikes announced by HSS
mills (AMM, April 17). Demand does not justify
it at all.
One corporate example of the market strength in the
first quarter was Fort Lauderdale, Fla.-based Metals USA, which
saw net income jump 31.5 percent on a pickup in demand.
Demand improved across most sectors we
serveparticularly automotive, aerospace, and oil and gas
field services, Goncalves said. He forecast higher
profits for Metals USA in the second quarter because its
pricingmuch of it on committed volumeis based on a
lagging index, and first-quarter price increases will be
realized in the second quarter.
Asked about the ability to get material quickly,
Goncalves said that mill lead times dont really
translate the entire story. In our committed high-value-added
business, we normally deal with one or two suppliers. In
other words, Metals USAs negotiated lead times dont
enter the wider pool of commodity rollings. Lead times quoted
to the larger purchasing pool are more of a reference of
overall order books, Goncalves said. We dont
play the game of delayed buying. We keep our (inventory) in
good shape to take care of business. We dont
Of the wide range of commercial and industrial sectors
that Metals USA supplies, only construction continues to be
weak. Do I see more bidding activity? Yes. Do we see more
beams being purchased? Not yet. Is it coming later in the year?
We havent seen any evidence of that yet, Goncalves
said, describing the situation as more of the same,
staying around the bottom.
Despite the lagging construction sector, Goncalves
said he believes the U.S. economy is performing better than is
reported. We need more confidence, he said.
Manufacturing is driving the recovery. That is our
reality. We basically touch everything everywhere in the
country. Construction is the only negative.
The pipeline for acquisitions in the distribution
market continues to be strong, he said, adding that the company
is in talks with several hot sellers. Cautioning
that it doesnt mean the deals will close,
Goncalves praised business owners for being more willing to
engage and for being realistic about price
Goncalves cited the Gregor Technologies LLC
acquisition (AMM, March 12) as an example. We
were able to come to a closing on a real quality company,
he said. We have more to come for the balance of the