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Rivals applaud Kloeckner’s West Coast exit

Keywords: Tags  Kloeckner, structural steel, steel beams, West Coast, distribution, Brown-Strauss Steel, Reliance Steel & Aluminum, Johannessen Trading Seaport Steel

NEW YORK — Kloeckner Metals Corp.’s exit from the West Coast structural steel market is being applauded by other distributors still pulling out of a post-2008 market slump.

"Maybe this will bring a semblance of order to this market," said a western distributor who, like many of his counterparts, believes there’s been too much service center capacity in the region’s wide-flange beam market, where nonresidential construction activity remains far below its 2006-07 heyday.

Kloeckner, based in Roswell, Ga., has pulled out of the West Coast market for beams and structural tubing, and after filling pre-existing orders it will close its Fontana and Stockton, Calif., facilities by late September (, July 9). It has agreed to sell the assets, including inventory, to Aurora, Colo.-based Brown-Strauss Steel, market sources said.

While distributors aren’t rejoicing over the possibility that people may lose their jobs—Kloeckner’s plans for employees at the two facilities aren’t known—they’re not unhappy that supply could ultimately tighten.

"We love the idea" of one less major competitor, a West Coast service center executive said.

With Kloeckner’s exit, Brown-Strauss Steel is seen as even more entrenched in its generally acknowledged role as the largest western beam and tubing distributor. Reliance Steel & Aluminum Co., which in the past has claimed to be the nation’s largest beam buyer, would appear to be a clear No. 2 in the West. Among Reliance’s West Coast outlets that stock beams are Stockton-based PDM Steel Service Centers Inc.; CCC Steel Inc., Rancho Dominguez, Calif.; Crest Steel Corp., Cypress, Calif.; and Portland, Ore.-based Lampros Steel Inc.

Estimates of Brown-Strauss’ western market share vary greatly, depending on the region, although they usually start at 30 percent and range upwards. Kloeckner’s share has been estimated at 20 to 25 percent.

Many observers saw the Kloeckner operations, with their traditional access to imports, as Brown-Strauss’ most direct and aggressive rival in the West. They were part of Macsteel Service Centers USA prior to Macsteel’s 2011 acquisition by Duisberg, Germany-based Klöckner & Co. SE. More recently, however, the Kloeckner facilities were seen as somewhat less dependent on foreign beams.

The largest regional market in the West includes California, southern Utah and Arizona, where structural demand was estimated at 15,000 to 18,000 tons per month before the 2008 recession and some 5,000 to 6,000 tons per month less after the downturn. The remainder, including the Pacific Northwest and Intermountain West, accounted for an estimated 12,000 tons per month prior to the slump, but could be off by a lesser portion, buoyed by the Mountain States’ comparatively stronger energy-related economy, according to observers.

Aside from Brown-Strauss and the various Reliance operations, the number of independent beam outlets is limited. Two of the most significant are distributors Johannessen Trading Co., Los Angeles, and Seaport Steel, Seattle.

In addition, Triple-S Steel Holdings Inc., Houston, a major privately held chain, operates Denver-based R&S Steel, which also has a Salt Lake City, Utah, facility. Triple-S has a reputation for ferreting out niche market opportunities, and R&S Steel’s management includes veterans of the western structural market, leading some observers to wonder if it might not seek to fill part of the void created by Kloeckner’s exit. A Triple-S executive couldn’t be reached for comment.

While most major domestic mills ship some beams directly to fabricators, there are no wide-flange beam mills west of the Rockies, and the preponderance of tonnage sold in the West goes through service centers.

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