Reliance Steel & Aluminum Co. expects prices and demand to
improve in 2014 and is already seeing better results, company
Such predictions may
feel like déjà vu, given that the Los
Angeles-based service center has predicted better times before
only to be proven wrong, said chairman and chief executive
officer David Hannah.
The difference this
year is that "were actually seeing rather than just
anticipating demand increases ... in our order books right
now," Hannah said during an earnings conference call with
analysts Feb. 20.
Prices are up an
average of 1.5 percent in January compared with December,
Hannah said. "We have probably not seen average pricing on a
sequential basis go up ... in the past 12 to 14 months, so
were encouraged. The demand looks better and it just
feels better this year than it did last year at this time."
On the steel side,
price increases announced for beams, mini-mill products and
plate have held to date, Reliance president and chief operating
officer Gregg Mollins said. Flat-rolled stainless steel also is
seeing "very strong" demand, with prices up in part because of
base price increases announced in the second half of 2013, he
discounting to CRU Group-indexed prices is largely out of the
market after fourth-quarter contract negotiations, with the
exception of two-year contracts negotiated in 2012, Mollins
said. "Some of the mills have taken a very, very firm position
on CRU discounts and refused to go below them," he said, adding
that he would like to see discounting to CRU prices "go by the
wayside and stay by the wayside for the rest of our lives."
Market sources told
AMM in October that U.S. steelmakers had remained firm
on their pledge to move away from index-based discounting (
amm.com, Oct. 23).
Not all products have
bright prospects, Reliance executives warned. Flat-rolled steel
is seeing "softness" as domestic mills come back from
maintenance outages in the third and fourth quarters and ramp
up production at the same time that imports are increasing,
announced price increases in the second half of 2013 as well as
in January, he said. "We have the highest-priced metal in the
world here in the United States." He suggested that increased
domestic prices were attracting imports, with carbon
flat-rolled steel arriving at U.S. ports at roughly a $60- to
$80-per-ton discount to domestic prices.
On the nonferrous
side, spot prices for aluminum ingotLondon Metal Exchange
prices plus Midwest premiumsare around 97 cents per pound
compared with 90 cents in the fourth quarter, Mollins said.
Common alloy sheet demand is "quite strong," with prices
trending with ingot tags.
And while high Midwest
premiums might benefit Reliance for now, company executives
argued that high levels were unlikely to hold, noting that
changes to LME warehousing policies could cause them drop.
Reliance sees current
Midwest premiums at "just south of 20 cents," senior vice
president of operations William K. Sales Jr. said. "We think we
will see that come back down to the 10- to 12-cent range
Midwest premiums shot
up to as high as 21 cents per pound in early 2014, double
levels seen just weeks earlier
(amm.com, Feb. 13).