CHICAGO Service center
operator Russel Metals Inc.s foray into the energy
business has intensified since the Mississauga, Ontario-based
companys acquisition of Apex Distribution Inc. in
November, giving its leaders a better view of whats
happening in the oil patch.
For example, president and chief
executive officer Brian R. Hedges said he is paying close
attention to the transportation of oilfield products and how
that affects Russels business.
The consensus in Canada is that
TransCanada Corp.s proposed Keystone XL pipeline will
eventually be approved, he said, but "the bigger discussion
point now is there are alternative ways of getting the oil
moved," Hedges said during the companys May 3 earnings
"It has become abundantly clear
that (the) XL pipeline doesnt (completely) solve the
problem anyway. There will have to be other pipelines or rail
sets that move oil," he said.
Hedges said Russel Metals
expects to benefit from growth in either pipeline construction
or the alternativerail activity. "Pipelines are a much
better piece of business for us, but obviously, youve got
to make more cars, and thats steel going into rail cars,"
Russel Metals has a service
center at Ontarios Thunder Bay Terminals Ltd. that could
both ship steel and transload energy-related products from rail
to boat, he said. "Theres a positive there, but it
doesnt even come close to offsetting what we lose if XL
doesnt get approved," Hedges said.
Russel Metals has won some
large-diameter pipe supply contracts recently, the
companys executives noted. Line pipe is picking up again,
chief financial officer Marion E. Britton said, but "the
problem area still really is (oil country tubular goods)."
Hedges said he wonders whether
new pipe production capacity announced in the United States
will displace imports, "because a lot of the (new plants) are
being built by importers," he said, citing Luxembourgs
Tenaris SA as one example.
On the other hand, "it hasnt happened yet, and the
larger issue is theres a lot of inventory out there and
the rig counts are down," he said.