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Reliance cautious on commodity tubulars

Keywords: Tags  metals, Reliance Steel & Aluminum, service enter, energy tubulars market, commodity tubulars, OCTG, oil country tubular goods, line pipe DAvid Hannah


CHICAGO — Reliance Steel & Aluminum Co. continues to seek opportunities for growth in the energy sector—but not in commodity oil country tubular goods (OCTG) and line pipe, company executives said.

"We have looked at some opportunities in the OCTG and line pipe end of things, but we have stayed away for a couple of years," Reliance chairman and chief executive officer David H. Hannah said in a conference call with analysts Feb. 20.

While the acquisitive Los Angeles-based service center will still consider opportunities in energy tubulars, it is concerned about "unknowns" in the sector, including pricing, import levels and domestic overcapacity, Hannah said.

That caution has only been reinforced by the U.S. Commerce Department’s International Trade Administration (ITA) preliminary decision not to impose anti-dumping duties against South Korean OCTG ( amm.com, Feb. 18), Hannah suggested.

"The preliminary ruling, it didn’t really help," he said. "And we still have a lot of capacity being built here in North America—and in the U.S. in particular—that is yet to be completed and absorbed by the market."

The company has largely stayed away from what it considers to be commodity energy tubulars, aside from a "small piece" of OCTG business in western Canada that came with Reliance’s acquisition of Spring, Texas-based Continental Alloys & Services Inc. ( amm.com, Aug. 3, 2011), Hannah said.

Reliance would prefer to focus on energy applications that require adding value but bring higher margins instead of high-volume, low-margin OCTG and line pipe, Hannah said. "We’re doing a lot of cutting, machining and boring. We’re making parts, and so it’s completely different from ... more commodity OCTG and line pipe," he said.

Outside of OCTG, Reliance’s energy business is "quite strong" and expected to make further gains in 2014, senior vice president of operations James D. Hoffman said. OCTG may get "a lot of press" but is perhaps less important for Reliance than more specialized energy products, such as alloy bar and bored tubing, he said.


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