HOUSTON Steel price
volatility, market fragmentation and increasingly demanding
customers have made inventory management increasingly
challenging, according to steel pipe and tube market players
and industry observers.
A wave of consolidation swept
through the steel pipe and tube industry from roughly 2004 to
2007, but the sector might now be entering a period of
fragmentation, a development that could impact pricing, Rick
Preckel, principal at St. Louis-based Preston Publishing Co.,
said Feb. 5 during a panel discussion about inventory
management and distribution at AMMs 6th annual
Steel Tube and Pipe Conference in Houston.
Industry consolidation has meant
reducing production when necessary instead of lowering prices,
but that dynamic could be changing, he said.
A host of mills have either
recently increased their energy tubular output or announced
plans to boost capacity (
amm.com, Feb. 1).
"With a lot of capacity
additions announced today, we are refragmenting to some extent
the producer side of the industry," Preckel said. "The next
cycle we go through after we add capacity, it will be
interesting to see what happens from a price perspective."
Managing inventory has never
been an easy task, as pipe suppliers struggle to keep
everything they need on hand while dealing with space and
credit limits, Peter Brebach, managing director of Colorado
Springs, Colo.-based Iron Angels of Colorado Inc., said.
While sales people might
complain about a lack of inventory or running out of one item
or another, inventory managers are inevitably criticized for
having too much inventory at the end of the year, he said.
"That, in a nutshell, is all you need to know about
Steel price volatility and the
sometimes different purchasing strategies of smaller and larger
firms further complicate inventory management, according to
Many large, publicly held
companies have "turned a lot of their decision-making process
to their computers," he said. But smaller, privately owned
firms, especially those with enough credit, "dont mind
stocking up when the price is right."
Customers have become more
conservative when it comes to inventory requirements for 2013,
but at the same time they have been asking for a greater
diversity of products as well as quick and smaller shipments,
according to Peter Schrumpf, president of Prime Metals Corp.
USA, Walden, N.Y., which primarily imports and distributes
steel pipe. "Were driven by our customers
requirements. ... So were working harder," he said.