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 inventory."
Steel price volatility and the sometimes different purchasing strategies of smaller and larger firms further complicate inventory management, according to Brebach.
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.