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Service centers facing tough times: Goldenberg

Keywords: Tags  ASD, Association of Steel Distributors, Delaware Steel, Lisa Goldenberg, steel distributors, steel service centers, steel companies, steel prices Chris Prentice

NEW YORK — Service centers have been plagued by thin margins and low volumes in the second half of 2012, and there’s little on the horizon to suggest that will change in 2013, a service center executive told AMM.

"I think next year looks like this year," said Lisa Goldenberg, president of Fort Washington, Pa.-based Delaware Steel Co. of Pennsylvania and president of the Association of Steel Distributors. "I think ’13 might be a little tougher because we’re getting worn down."

Goldenberg said that despite signs of life in major steel-consuming sectors, distributors’ margins are still squeezed, exacerbated by low volumes.

"I don’t think we’ll come back from the New Year (holiday) to a robust market," she said. Many in the market feel demoralized by uncertainty and the lack of any sustained business growth. "The price increases are helping, but between lower margins and lower volume, it’s challenging," Goldenberg said, pointing out that prices haven’t followed the traditional pattern of rising over the summer, entering an autumn lull and then rising once again.

Domestic sheet mills announced three rounds of price increases in the final quarter of the year, but while the moves seem to have helped push prices higher, the upswing lost steam in early December amid minimal spot buying, market sources told AMM.

"In October, I would have said we were following the same pattern (toward strong demand and pricing in the first quarter), but now what I’m seeing is more a question mark," Goldenberg said. "The puzzle to me is (that) the numbers in each industry over the last three years are progressively better. Even in nonres(idential) housing, the numbers are terrible but progressively better. So why aren’t we feeling it? We should be feeling some improvement in demand at the service center level."

Amid the uncertainty, businesses likely will continue to focus on making investments with existing reserves rather than working with bank partners, Goldenberg said. "Cash is your partner." That mentality will keep service centers hunkered down with their purse strings tight in 2013, she said.

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