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Staying power of steel price hikes said unclear

Keywords: Tags  Reliance Steel & Aluminum, earnings report, Greg Mollins, David Hannah, Severstal, AK Steel, steel prices, price hikes Thorsten Schier


NEW YORK — Supply constraints that lent support to previous flat-rolled steel price hikes have been resolved, but the market has seen little impact thus far, according to Reliance Steel & Aluminum Co. president and chief operating officer Gregg Mollins, noting that the sustainability of recent hikes is unclear.

"We have not necessarily seen an increase in metal out there today," Mollins said during a July 25 earnings conference call. "The last increase by both AK (Steel Corp.) and Severstal (North America Inc.)—that has a chance to stick (in the short term). How long that can stick with capacity (coming back), imports, I don’t know."

A return of capacity would need a while to filter into the market and could lead to a price fall when it does, he said. "There is that potential and we’re going to be very guarded about that," Mollins said, noting that the Los Angeles-based distributor will continue to run lean inventories in line with supply-demand fundamentals.

Second-half pricing should generally run ahead of the first half. "We certainly don’t expect the kind of decreases we’ve seen over the first half of the year," chairman and chief executive officer David H. Hannah said during the conference call.

Reliance has seen a surprising pickup in business in July, even after a June that was its best shipping month since May 2012, he said.

But the company expects only slight improvements in demand and generally flat pricing in the third quarter due to global economic uncertainty, it said in its second-quarter earnings report (amm.com, July 25).

One of Reliance’s top priorities during the quarter was to integrate recently acquired Metals USA Holdings Corp. "We’ve been concentrating on their inventory position; in our opinion it was high," Mollins said, adding that Reliance has been moving material from Metals USA sites to its other locations, reducing inventories to the tune of $66 million as a result.

"The integration process went a lot smoother than we’ve ever seen in any major acquisition," Mollins said.

Reliance remains hungry for acquisitions, with Hannah saying that the company is "ready, willing and able" and has proven that it can "grow profits ... not just volumes" with its recent buys.


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