Reliance Steel & Aluminum Co.s earnings dipped in the
third quarter due in part to seasonal demand and weaker metals
And although Reliance
executives see the metals pricing environment as challenging,
they believe business is steady and poised for improvement.
Metal prices are now
at or near bottom, and when demand grows so will prices,
chairman and chief executive officer David H. Hannah said
during a conference call Oct. 24. "Despite the persistently
soft pricing environment, which weighs heavily on our net sales
and profitability, the strong operational execution by our
managers in the field partially offset the pricing impact"
Reliance felt during the third quarter.
The Los Angeles-based
distributor posted net income of $95.1 million for the three
months ended Sept. 30, down 3.1 percent from $98.1 million in
the same period last year, on an 18.9-percent increase in sales
to more than $2.44 billion driven primarily by its acquisition
of Metals USA Holdings Corp. earlier this year.
soldexcluding the Metals USA acquisitionrose 3.1
percent in the third quarter compared with a year earlier,
although the average realized price fell 9.5 percent to $1,679
per ton from $1,856.
Although the market
has seen price increase announcements in the third quarter, it
will be a challenge to push those through, particularly on
aluminum, stainless and carbon alloy steel, Hannah said. "We
are not likely to see strength in pricing (for most products)
through year-end," due in large part to distributors and their
manufacturing customers buying less as they anticipate
maintenance and holiday outages at factories and job sites.
"Holiday closures among customers will reduce tons sold (during
the fourth quarter)."
Price increases on
flat-rolled carbon steel products were announced in June, July
and October, Reliance president and chief operating officer
Gregg J. Mollins said. "In the past four to six weeks, (such
increases) found some traction," which he attributed to
producer "outages and production issues, and low
Mollins cited a $30-
to $50-per-ton increase on plate after Chicago-based Evraz Inc.
North America announced it would shutter its Claymont, Del.,
amm.com, Oct. 14). Pricing on structural products
and merchant bar remains flat, he said, and imports are
arriving with a favorable spread. He expects both flat-rolled
and structural imports to rise this quarter.
On sheet products,
"lean inventory would support another increase. We are frankly
anticipating mills will throw out an increase before the end of
the year," Mollins said.
Reliance wont be
tempted to buy material beyond what it needs to fill existing
orders, however. Inventories are at the right level compared
with demand, Hannah said. "In order for Reliance to buy more,
we have to be convinced that demand is going up. If you want to
improve pricing, you need demand for (hikes) to stick."