AMELIA ISLAND, Fla.
Consolidation in the copper service center industry is likely
to pick up over the next few years, ABC Metals Inc. president
Daniel Kendall told AMM.
There will be opportunities for
consolidation as baby boomers begin to retire without heirs
willing to take over their businesses, Kendall said April 12 on
the sidelines of the Copper and Brass Servicenter
Associations annual convention in Amelia Island. "If they
dont have a line of succession ... between now and 2025,
I see consolidation in copper metal fabrication growing."
Unlike previous eras of
consolidation, when service centers bought other service
centers, Kendall sees future consolidations differently, with
mills doing the buying. "Start thinking of consolidation in 3-D
rather than 2-D," he said.
Copper and brass mills might
choose to vertically integratesecuring their supply
chainsshould service centers be available for
acquisition, Kendall said. Its not the current strategy
at ABC Metals, but "it does affect how we plan things."
The Logansport, Ind.-based
copper fabricator enjoyed a record year in 2012. "We moved just
over 18 million pounds of copper, brass, steel and stainless
(products)," Kendall said. The company also has seen a
35-percent gain in productivity since it expanded its
Logansport facility last year, but volumes have been down
slightly in 2013.
"Were slightly off last
years pace in volume," Kendall said, although January was
the companys "best month ever," which he sees as a
cautious sign that volumes could catch up over the course of
But there also are signs of
weakness. "Im concerned about the stability of the U.S.
economy," he said. "Its a fragile growth curve were
He pointed to the steep rise in
copper inventories in London Metal Exchange-approved warehouses
in Europe and the United States as a sign that all is not
Copper inventories in Antwerp,
Belgium, soared to 123,600 tonnes on April 8 from 44,875 tonnes
at the beginning of the year, while stocks in New Orleans
jumped to 172,600 tonnes from 75,775 tonnes in the same
amm.com, April 10).
"Those are the markets of last
resort. When they grow, something has to be up," he said. Given
this, the company is concentrating on preserving
"I feel positive that we have a
secure value position," Kendall said. "Folks will continue to
return to ABC Metals (even if the economy dips). ... We
dont sell a product. We sell a service."
With mills lead times
remaining further out, ABC Metals remains competitive, Kendall
said. "We have taken some financial positions in the market,
which allows us to lay our hands on material when we need it. I
can take orders with confidence."
Kendall has implemented a rating
system on his customers and vendors in recent years, grading
them as partners, customers or vendors. "The folks I
concentrate on (are) the partners," he said. The system is
aimed at building relationships with certain companies with
which ABC Metals can come to reasonable agreements in both good
times and bad. The move is also strategic in light of possible
ABC Metals has a diversified
customer base, selling into the supply chains of the
Detroit-area Big Three automakers as well as the domestic
operations of such companies as Honda Motor Co. Ltd., Nissan
Motor Co. Ltd. and Toyota Motor Corp. Kendall sees the sector
as stable but expects a period of steady growth rather than the
heady pace of the past.
The housing market also is
improving, Kendall said, but he remained cautious. "A
20-percent increase on just a few starts does not a recovery
make," he said.
While lead times for copper
products have increased significantly in recent months,
Kendalls enthusiasm about the recovery is somewhat
tempered by the fact that the company has not seen the same
extension of lead times on its aluminum and steel products,
which largely are consumed by the same sectors.
While there are no further
expansions in line for ABC Metals in 2013, the company has
cleared some space at its site in Logansport for more
processing equipment, Kendall said.
ABC Metals also has facilities
in El Paso and Pharr, Texas.