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Reliance's aeropace plate outlook improves

Keywords: Tags  Reliance Steel & Aluminum, David H. Hannah, Gregg J. Mollins, William K. Sales, aerospace plate, inventory overhang, general engineering plate, 6061 imports

CHICAGO — Reliance Steel & Aluminum Co.’s second-quarter results were dinged by Midwest premium volatility and pressure on aluminum plate prices as a result of import competition and an aerospace supply chain glut.

But the aerospace inventory overhang, which had been predicted to run into 2015, is showing signs of abating especially as aircraft manufacturers push their suppliers to work more quickly through backlogs stretching out as far as eight years, company executives said.

“As you look at this year, we’ll continue to fight the fight,” Reliance senior vice president of operations William K. Sales Jr. said during the Los Angeles-based service center’s first-quarter earnings conference call April 24. “But as that inventory gets lower, it will put less pressure on pricing, and then I think the pricing outlook for next year will be more positive.”

While the outlook for aerospace plate is improving, prices for general engineering plate remains under pressure because of imports, Reliance president, chief operating officer and director Gregg J. Mollins said. “The U.S. remains a prime destination for plate due to the economic conditions in Europe and elsewhere,” he said, with other executives noting a big influx in imports of 6061 plate.

Mollins pegged aerospace sheet and plate lead times at eight to 10 weeks and lead times for general engineering plate at eight to
nine weeks.

Demand for common alloy sheet, meanwhile, remains “quite strong” with pricing following aluminum ingot tags, Mollins said. Spot Midwest ingot is currently trading at $1.02 per pound, up from 90 cents per pound in January, he said.

But volatility in the Midwest premium also scared away buyers, Reliance chairman and chief executive officer David H. Hannah said, pointing to a spike in the premium in January (, Jan. 23). The market then expected the high premium to fall, a forecast that was later thrown into doubt by a court ruling in the United Kingdom (, March 27), he said.

“No one wanted to buy,” Hannah said. “There was a lot of uncertainty and it looked like prices were coming down.”

Instead, the Midwest premium reversed course, inching up as it becomes clear the court ruling had effectively delayed the implementation of London Metal Exchange warehouse reforms that had been expected to take effect in April (, April 4).

Reliance’s aluminum sales totaled $386.6 million in the first quarter, up 13.8 percent from $339.6 million in the year-ago quarter as tons sold increased 22.7 percent to 76,700.

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