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Olympic sees specialty metals fueling growth

Keywords: Tags  specialty metals, steel fabrication, aluminum fabrication, Olympic Steel, Michael Siegal, automotive, Nat Rudarakanchana


NEW YORK — Olympic Steel Inc.’s specialty metals division has grown significantly, and the metals service center expects that to continue due to strength in automotive aluminum and stainless products, the company’s top executive said.

Bedford Heights, Ohio-based Olympic Steel’s specialty metals business has increased to more than 5 percent of the U.S. service center market from nothing six years ago and now comprises 13 percent of the company’s overall sales revenue, chairman and chief executive officer Michael D. Siegal said during Jefferies LLC’s 10th annual Global Industrials conference in New York.

In 2010, specialty metals had accounted for just 1 percent of Olympic Steel’s sales (amm.com, April 10, 2010).

"That is going to be a place in which you’ll see significant growth, in Olympic Steel, both in food service as well as into automotive aluminum," Siegal said, noting that food service industries, appliances, hospitals and transportation are key end markets for Olympic’s stainless products, while automotive aluminum represents a "significant opportunity for growth."

That is helped by Olympic’s dual expertise in both carbon steel and aluminum automotive parts, he said.

Automotive made up 8.9 percent of Olympic’s 2013 sales, significantly behind its industrial and fabrication end markets.

Siegal acknowledged that Olympic remains a "very minor player" in broad automotive markets, adding that good returns on capital are tough in the niche.

Olympic’s stainless business is outpacing aluminum in terms of growth, he told AMM on the sidelines of the conference, although Olympic’s aluminum work is expected to expand from its current niche of interior aluminum parts.

The distributor recently created new positions in its specialty metals division, including one in sales and one in a stainless metals subsidiary (amm.com, Aug. 12).

Still, the fabrication business might be where Olympic makes most of its profits, according to Siegal. "Ultimately, this is where we make a lot of the money, quite frankly," he said.

The division accounted for 22 percent of Olympic Steel’s 2013 sales of $1.3 billion, making it its second-largest revenue source. "And we don’t break this out," Siegal added.

"When we tell our customers how much money we’re making on them, they don’t like (it) when we make money on them," he told investors, citing Detroit-based General Motors Co. and Peoria, Ill.-based Caterpillar Inc. as fabrication customers. "So we don’t tell them."

Siegal declined to provide specific financial figures at the conference or to AMM on fabrication margins.

Olympic Steel’s fabrication business allows it to shift away from commodity steel. The company can, for example, charge high margins for machining time, and manufacturers continue to outsource assembly work, he said.

"We’re adding value and we want to charge for that," Siegal told AMM, referring to the company’s fabrication work.


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