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Extrusion demand shows signs of easing: SCM

Keywords: Tags  Service Center Metals, SCM, R. Scott Kelley, outlook, 2013, second half, soft alloy, extrusion demand

CHICAGO — Demand for soft alloy extrusions is showing signs of easing, a potentially worrying trend for the second half of 2013, according to Service Center Metals LLC’s top executive.

When the Institute for Supply Management’s Purchasing Managers’ Index (PMI) fell to 49 percent in May (, June 3), it brought back uncomfortable comparisons to June 2009, R. Scott Kelley, president and chief executive officer of the Prince George, Va.-based company, said in an interview with AMM.

At the same time, three of the last five months have seen soft alloy extrusion demand down year over year, he said.

“You don’t want to read too much into any one month, but May certainly was a disappointment,” Kelley said.

From 2006 to 2009, demand dropped every month year over year for three years in a row, he said. In 2010, that trend reversed, with demand improving every month year over year as businesses “crawled back out” of the recession, Kelley said.

But December 2012 shipments were worse than those in December 2011, and the same was true for February 2013 vs. February 2012 and March 2013 vs. March 2012, Kelley said.
“Things have flattened out, no question about it,” he said. “Business is still relatively good. It’s just that there are definitely some clouds on the horizon that we are very cognizant of.”

SCM has “heard a lot” from some customers and other industry players about a potential surge in business activity in the second half of 2013 that could see the last six months of this year stronger than the second half of the last two years, Kelley said.

“But based on what?” he asked. “Certainly, the trends don’t look like we’re moving that way, and I’m usually very optimistic.”

If 2013 is to experience the 5-percent to 10-percent growth seen over the last two years, the second half would have to see enough demand not only to offset a slower-than-expected first half but also to compensate for the traditionally slow months of July and December, Kelley reasoned.

So far this year, rod and bar shipments are down almost 4 percent, tube and pipe shipments are off 2.7 percent and extruded products in general are down 1.1 percent, he said. Distribution, which is heavily dependent on bar and rod shipments, is off by 12 percent, Kelley said.

“Certainly things aren’t deteriorating at an alarming level, but I don’t see things trending in the right direction,” he said. “Still, who knows? Maybe (trends will improve) next month.”

The building and construction sector accounted for the majority of soft alloy extrusion demand until 2011, when it was overtaken by a transportation sector primarily driven by automotive demand, he noted.

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