Industries Inc. is managing steel spot market risk by securing
long-term supply contracts with customers, performing more
value-added services and hedging steel futures more
proficiently, executives said during a quarterly conference
call with analysts.
"The economy is on somewhat more
solid ground than the suspended uncertainty (of) last quarter,"
chairman and chief executive officer John McConnell said,
adding that he expects many segments of the economy to grow
moderately this year. "The election is behind us ... and some
action has been taken towards resolving our debt crisis."
Worthington kept inventories
tight in the latter part of 2012. Days supply is "running
in the low 60seven less when you exclude some of the
forward buy activity," vice president and chief financial
officer Andy Rose said.
Worthington does "a lot more
hedging than (it) used to do," president and chief executive
officer Mark Russell said. "Most of our business is contract
and most of that is on fixed price ... and (hedging helps)
Because of its experience with
hedging and forward contracts, Columbus, Ohio-based Worthington
has found more counterparties willing to enter such contracts.
"Id say the growth is exponential," Russell said.
Worthington isnt "at critical mass yet, (but) we now have
a lot of counterparties and we can give multiple quotes and the
spreads are tighter, so its getting much more
The companys focus on
value-added services is preserving and improving margins, the
executives said. For example, it does not perform much straight
slitting on a stand-alone basis any more. "Its almost
always in conjunction with another value-added process,"
Russell said. "If were going to slit it, we are also
going to pickle it, galvanize it, cold-roll it, so we have a
lot more value-add than we used to in our portfolio and the
amount of commoditized business is reduced."
However, Worthington is facing
challenges with some joint ventures it owns with steelmakers.
One example is Spartan Steel Coating, a joint venture with
Severstal North America in Monroe, Mich. Last year, Severstal
built an in-house galvanizing line in Dearborn, Mich., where it
is headquartered. "They (Severstal) are going to prefer (to
use) that (Dearborn) whenever they can. Right now, theres
not enough volume to fill both of them up," McConnell said.
"But its a situation that can be addressed; its
temporary" because Spartan will solicit new business
In addition, Southfield,
Mich.-based ThyssenKrupp Steel North America Inc. has put its
share of Monroe, Mich.-based Tailor Welded Blanks Co. LLC on
the sale block. "That obviously affects us, because were
their partner," McConnell said. Worthington doesnt have
the right of first refusal to purchase the remaining stake.