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Distributors' 2015 success depends on key strategies


Steel prices have been falling of late, creating some uncertainty for distributors in the first quarter and threatening to make 2015 a wild ride. While 2014 mostly held good news for metal distributors, it was just that: Good, but not great.

First, the good: Steel and aluminum shipments posted year-on-year increases in each month through June. While not robust, the market at least seems to have stabilized for the long term. Witness some recent news:

• U.S. steel distributor shipments in 2014 were 4.2 percent higher than the previous year, according to Metals Service Center Institute (MSCI) data. Canadian results were similar.

• Aluminum shipments by U.S. distributors reached nearly 1.6 million tons last year, up 8.1 percent from 1.48 million tons in 2013, according to the MSCI.

• The stainless steel market should remain strong in 2015, returning to the robust conditions seen throughout 2014 despite logging some late-year drops, according to many market participants.

Now, the not great: Although 2014 was not a bad year, a return to the more significant growth rates seen in 2010 and 2011— emerging from the Great Recession—does not appear likely in the near term. While some monthly shipments increased strongly compared with a year earlier, in other months the increases were lowor nearly nonexistent. Inventories did not increase in every month.

This means that service centers are under considerable pressure as they attempt to balance the needs of customers against the realities of profit margins, and they should not expect to avoid some of the flat economic results that have affected other sectors of the steel and ferrous scrap industries.

However, distributors have some weapons to fight the vagaries of current market conditions. Many service centers are adding facilities, upgrading equipment, improving service capabilities, widening geographic scope and broadening product lines. So some form of forward movement on the part of distributors seems to be the best balm for the challenges that the overall economy—and, more specifically, the metals sector—present to the service center universe. It is in these choices that the make-or-break point of business is defined.

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