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Auto strength fails to bolster steel prices

Keywords: Tags  ASD, Association of Steel Distributors, steel, steel prices, Northshore Metals, Grand Steel Products, Voss Industries, Midwest Materials Heidtman Steel Products

PALM DESERT, Calif. — Steel distributors continue to see stagnant pricing despite mills’ persistent attempts to raise prices, although some key areas—such as automotive—are showing signs of strength.

"There’s just not a lot of upside (pricing) potential in the market," Jim Barnett, president and chief executive officer of Grand Steel Products Inc., Wixom, Mich., said on the sidelines of the Association of Steel Distributors’ 2013 annual convention in Palm Desert.

Nearly $200 in flat-rolled hikes have been announced over the past five months, Barnett noted. But while prices might rise briefly following an announcement, the market eventually "seeks its own level," making any improvement temporary, he said. "I don’t think the actual amount of the transaction price has increased more than $40 per ton (over this period)."

An unusually large amount of business seems to be between distributors, suggesting a reluctance to commit beyond the spot market, other sources said.

"It’s really an indecisive marketplace," Gregg Gross, president of Northshore Metals Inc., Deerfield, Ill., said, noting that the steel market’s "hesitation factor" is in line with most Americans’ cautious economic attitudes today.

With memories of the recession still fresh, Voss Industries, a Taylor, Mich.-based flat-rolled processor that does 80 percent of its business in automotive-related work, has continued to sit on some capital spending projects.

"All of us learned from 2008 and 2009," president Paul Michael Voss said, noting that his company is debt free. "We’re taking it day by day and running our place as efficiently and effectively as we can. We’re not going to pull the trigger on (projects) that take on debt."

Still, despite this caution, distributors aren’t willing to relinquish their roles.

"I don’t mind a slightly larger inventory," Brian D. Robbins, chief executive officer of MidWest Materials Inc., Perry, Ohio, said.

Robbins’ company is stocking about three months of material in its warehouses vs. a service center industry average that he estimates at two to two-and-a-half months. "At the end of the day, we’re a distributor of steel goods, and we want to have the goods to distribute," he said.

Moreover, some key markets are holding up.

Tim Berra, president of Toledo, Ohio-based flat-rolled distributor Heidtman Steel Products Inc., has a "very optimistic" outlook due to auto sector trends. Auto output is expected to build through the year, partly due to consumers’ needs to replace aging vehicles and greater demand for fuel efficiency.

Rail cars are another source of healthy demand, distributor, mill and securities analyst sources said. This has largely been driven by strong energy industry requirements for tank cars.

Capital equipment is currently stronger than consumer goods, James P. Bouchard, chairman and chief executive officer of Sewickley, Pa.-based Esmark Inc., said.

Plate fabrication, in particular, is up, with Dallas-based Trinity Industries Inc. and other rail car manufacturers "doing great," he said.

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