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Study shows service centers play critical role in economy

Keywords: Tags  Metals Service Center Institute, M. Robert Weidner III, metals distributors, steel shipments, John Dunham & Associates Inc.,

While service centers focus most of their attention on customer needs and company operations, they don’t mind spending a little time spreading the word that they play a significant role in the broader U.S. economy.

A recent study commissioned by the Rolling Meadows, Ill.-based Metals Service Center Institute (MSCI) shows that the metal production and distribution industry contributed more than $552 billion to the U.S. economy in 2012, or more than 3.5 percent of the nation’s gross domestic product.

MSCI president and chief executive officer M. Robert Weidner III pointed to the results as validation for the industry, which provides much-needed jobs. “Our industry and our members play an important role in our country’s economy,” he said. “We need both local and national elected leaders to pay attention to the issues and needs of the metals industry for it to remain viable and for industry executives to have the confidence to reinvest in and grow their companies. The future strength of our country depends on it.”

The study, conducted by John Dunham & Associates Inc., New York, found that metal producers and service centers directly or indirectly employ nearly 2.5 million Americans who will earn approximately $151.4 billion annually in wages and benefits. Members of the industry and their employees pay about $64.5 billion per year in federal, state and local taxes.

“One of the reasons we commissioned the study (was) to be able to see exactly what the metals industry means to the economy on both a local and national scale,” Weidner said. “The numbers don’t lie: These are desperately needed jobs and economic stimulation. It’s vital that our elected leadership listen to their constituents and act in the best interest of the country and its people.”

The study results are accessible online in an interactive format that allow users to analyze the data by congressional district. The MSCI hopes that its members will show their elected leaders exactly how the businesses impact their local communities, their states and the national economy.

Not long before the release of the study, President Obama delivered his fifth State of the Union address, outlining a platform to expand U.S. manufacturing. While Weidner said that the MSCI supports the majority of the policies, several proposals outlined by the President could have profoundly negative consequences for metal producers, distributors and processors.

“I was pleased that President Obama made the concept of restoring U.S. manufacturing the cornerstone of his remarks,” Weidner said. “Our industry is gaining strengthÑjobs are coming back and manufacturers are bringing operations back home to the United States. Several of the initiatives proposed by the President would increase hiring and promote reshoring.”

Specifically, Obama proposed creating more manufacturing innovation centers, investing in research and development and new training programs, and ensuring a robust domestic energy supply.

But Weidner said that Obama’s call for higher taxes and his plan to combat climate change through executive action may counterbalance his positive proposals.

“The President said it is lawmakers’ duty to restore the very American idea ‘that if you work hard and meet your responsibilities, you can get ahead.’ He is right,” Weidner said. “But lawmakers cannot restore that dream while taxing and regulating job creators more. More than half of MSCI members are small businesses that pay taxes at the individual income tax rate. Through hard work, they have achieved the American Dream and are trying to help others achieve it too. Making it more costly for them to do business, to hire more workers and to provide good benefits will not help us fulfill the generational obligation the President so eloquently spoke of; it will drive us further away from that goal.”

The MSCI represents more than 400 companies in the industrial metals industry, and Weidner said the institute’s policy agenda offers alternatives for lawmakers to consider.

The release of the jobs study and the reaction to the president’s speech came as steel distributors’ expectations for the first quarter remain tempered due to a sluggish economy and an anemic pricing recovery.

U.S. and Canadian distributors’ steel shipments fell about 5.6 percent in February compared with January and also were down 7.9 percent vs. February 2012, according to the MSCI.

“February for us was down 20 percent from last year. Also, on a per-day shipping basis we were down from January,” a source at a Midwest sheet distributor said.

And March isn’t looking any better, some steel market sources said.

“We’re not getting any pull-aheads (in orders). We’re not even getting requests for quotes for the second quarter yet, which is surprising since we’re almost there,” the Great Lakes distributor source said. “Our customers are not feeling the love that these steel mill increases will stick, regardless of what scrap is doing.”

“There is not a real strong pulse to the steel market,” a source at an upper Great Lakes flat-rolled distributor told AMM. “February was steady year over year but our shipments will be down in March. That tells me demand is tepid.”

New demand has been lacking, a source at a large-volume steel plate distributor and processor told AMM. “We don’t see anything happening soon where it will turn around,” she said. “Customers are not keeping inventory. They are shopping by the truckload when they need it.”

Service centers have reported orders coming in from the automotive, agricultural equipment and rail markets, but they noted that the construction market is still moving slowly, as are small and mid-sized manufacturers.

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