NEW YORK Steel
traders are adding services to cope with a still-recovering
U.S. steel market in which the traditional back-to-back import
business model doesnt always work, members of the
American Institute for International Steel (AIIS) said at an
AMM-led roundtable at the Steel Success Strategies
XXVIII conference in New York.
"The trading industry
has had to reinvent itself," said AIIS chairman John Foster,
who is president of Burlingame, Calif.-based Kurt Orban
Partners LLC and Houston-based consultancy Partners in Steel
International LLC. "Trade services" such as financing
assistance, logistics and risk management are playing a larger
role in traders business, he noted.
AIIS president David
Phelps pointed out that with delivery lead times measured in
months, it can be difficult for imports to successfully compete
with much shorter domestic lead times, especially in a market
that still hasnt rebounded fully from a slump that began
"The customer is not
willing to be out five or six months," Leon Goldenberg, AIIS
vice president and president of New York-based trader Fremak
Industries Inc., said. "Risk management is much easier with a
two- to three-week lead time from a U.S. mill."
back slowly; theres a positive trend," Foster said. "But
buyers are still very wary of long lead times."
Some of the largest
U.S. service center chains, now being run under the tight
financial control of "bean counters," will only allow their
buyers to order imports if the steel is "inbound in 30 days,"
Services were involved
in "zero" percent of Fremaks oil country tubular goods
(OCTG) business three years ago, he said, but services such as
upsetting and threading gradually grew to 15 to 20 percent two
years ago and are now involved in about "60 percent of what we
do in OCTG."
Foster noted that
while virtually none of his pipe sales involved additional
services two years ago, its currently included in "maybe
20 percent" today. And while cutting services might be involved
in only 10 percent of bar business today, that nonetheless
represents "something that hasnt been done before."
Meanwhile, despite a
"slight" improvement during the past few years, a key leg of
the U.S. steel marketnonresidential
constructionremains weak, preventing a full recovery,
Phelps said. "The largest segment of steel demand is still in
the Great Recession."
Foster noted that
traders expanding role can go as far as taking positions
and actually laying down inventory. But he emphasized that this
practice, which moves risk from the customer to the trader, is
best applied "selectively" with a traders traditional
customer base. "To do it smart, you do it with people you
trust," he said.
The Steel Success
Strategies conference was sponsored by AMM and
Englewood Cliffs, N.J.-based World Steel Dynamics Inc.