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Consolidation to return to copper sector: ABC

Keywords: Tags  copper, service centers, Copper and Brass Servicenter Association, Daniel Kendall, ABC Metals, consolidation, housing, auto Barbara O'Donovan


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 Association’s annual convention in Amelia Island. "If they don’t 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 integrate—securing their supply chains—should service centers be available for acquisition, Kendall said. It’s 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.

"We’re slightly off last year’s pace in volume," Kendall said, although January was the company’s "best month ever," which he sees as a cautious sign that volumes could catch up over the course of the year.

But there also are signs of weakness. "I’m concerned about the stability of the U.S. economy," he said. "It’s a fragile growth curve we’re in."

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 rosy.

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 comparison (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 performance.

"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 don’t 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 consolidation.

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, Kendall’s 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.


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