NEW YORK International trading house Steelcom S.A.M. is growing its steel trading business in the United States to take advantage of expanding pipe and tube demand amid the shale gas boom, the companys top executive told AMM.
"The plan in the U.S. is to focus in the niche area of the oil and pipe industry, which is coming along quite nicely. We concluded that it could be a nice business to be there," Victor Carballo, chief executive officer of both Monaco-based Steelcom and parent company Metalcorp Group, told AMM in an interview this week.
To capture a piece of that growing market, the company on June 3 formed a new subsidiary called Steelcom Pipe International LLC, which is headquartered in Houston and will concentrate on the burgeoning energy pipe industry, Carballo said.
While Steelcom already has a San Antonio, Texas, office focused on the trade of steelmaking raw materials, flats and long products in the North American Free Trade Agreement (Nafta) region, the new Houston subsidiary will focus specifically on tubular products for the shale gas industry.
Staffing the new company is a team of former Coutinho & Ferrostaal Inc. pipe and tube traders that exited the trading house in May (amm.com, May 7).
"The team we brought in is very experienced, one which everyone knows and recognizes, and they also came with a complete package of suppliers and customer relationships. We had the financial tools to help them," Carballo said of the hires.
The team will be led by industry veterans Wayne Pickle and Derek Meyer, who have enjoyed a "long lasting and successful career in this sector," he added.
Steelcoms push deeper into the U.S. market comes at a time when steel traders report challenging market conditions, particularly as softer U.S. prices coupled with shorter domestic lead times have buyers concerned over whether opting for imports is worth the risk. Additionally, in recent months, several large international trading houses, including Balli Group Plc (amm.com, April 2) and Stemcor Holdings Ltd. (amm.com, May 15), have faced financial difficulties as banks grow increasingly wary about lending levels.
Despite such issues, Carballo claimed that providing added services to customers and suppliers is allowing his company to keep its head above water.
"We dont speculate. We base our model on back-to-back (trading). We concentrate on finding sourcing for our products and finding an agreement with a supplier. Then, based on market conditions, we negotiate a discount, which makes our gross margin," he said.
As a result, Carballo said, his company has not lost money in any single year, even during the recent financial crisis.
"We prefer to have steady flows of money, even if the flows are not that big," he added.
As for future growth, Carballo said that Steelcom, which counts numerous global locations, continues to look for ways to expand, "Were not in a rush," he said. "We want to grow steadily and we want to consolidate what we have as we have it. For the U.S., if there is room for expansion, well be there for that."