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Will
Prosperity Lead to a New Industry Model?
Editor’s
note: The following panel of mill and service center executives
discussed the changing shape of the global steel industry during
a joint session of the Metals Service Center Institute/American
Iron and Steel Institute annual meetings May 8 in Boca Raton,
Fla.:
- Dan
DiMicco, chairman, president and CEO, Nucor Steel, Charlotte,
N.C.
- Michael
Hoffman, president and CEO, Macsteel Service Centers USA, Newport
Beach, Calif.
- Bill
Jones, president and CEO, O’Neal Steel, Birmingham, Ala.
- Louis
Schorsch, president and CEO, Mittal Steel USA, Chicago
- Bud
Siegel, president and CEO, Russel Metals, Mississauga, Ont.
- John
Surma, chairman and CEO, U.S. Steel Corp., Pittsburgh
- David
Sutherland, president and CEO, IPSCO Inc., Lisle, Ill.
Global
metals industry consolidation still has a long way to go, agreed
leading mill and service center executives during last month’s
MSCI/AISI panel. Whether the market in North America will eventually
look more like the European model is a source of disagreement, however.
Industry
consolidation among both producers and distributors has only just
begun. “The trend has been around for a long time, it is just
accelerating,” said Bill Jones of O’Neal Steel. “At
the service center level, I doubt we’ve seen the bulk of consolidation.
It’s still a very fragmented industry.”
Mill
consolidation is ongoing around the world, noted John Surma of U.S.
Steel. “Regional consolidation has been very effective. I’m
not sure the economics on a global scale are quite as apparent.
That may take more time.”
Some
experts predict that the European model—where mills own captive
distribution—will become more common in North America over
time. But the panelists were split on the likelihood of that trend.
Bud
Siegel of Russel Metals said service centers are a likely target
of mill investors looking for another place to put their cash. Acquiring
a service center might be a more manageable and profitable transaction
than buying a mill. “It seems like a foreign mill coming here
might get more bang for its buck buying a distributor,” he
commented.
Mittal
Steel’s Louis Schorsch is skeptical about a shift toward the
European model. “If you try to run a service center to the
benefit of one mill, it would seem to make that service center less
competitive. I would never say never, but I still don’t see
why it would be better than the free-market approach we have.”
Jones
thinks co-ownership of mills and service centers would only take
place if it made economic sense both as a business and as an investment.
Meeting the just-in-time needs of lean-manufacturing customers is
a discipline more familiar to service centers. “I don’t
see that [captive distribution] becoming the dominant model here
in the U.S.,” he said.
Public
companies have a responsibility to maximize the return to their
shareholders, whether that can best be accomplished by acquiring
other mills or distributors, said Nucor’s Dan DiMicco. In either
case, he envisions greater cooperation between producers and distributors
of metals.
“One
thing for sure, there will be increased partnering, because we can’t
count on politicians to do the right thing,” DiMicco added.
“We must find ways to work together to maximize the efficiencies
and profits of the supply chain, whether that involves direct ownership
or not, so that we can maintain our manufacturing base and remain
competitive on a global basis.”
Indeed,
the metals industry is just beginning a new era of prosperity, DiMicco
asserted. He expressed strong long-term optimism for the economy,
equating current global conditions to post-war rebuilding.
“Right
now, with what is going on in the world, we are going to be in this
[up cycle] for 10 or 15 years. There certainly will be ups and downs,
but short of a catastrophic event, we are in a period where infrastructure
development will be going on for a long time. We have a brighter
view of things going forward than we’ve had since WWII.”
Other
panelists were a bit less bullish, noting that much of the North
American industry’s long-term competitiveness will depend on
its next generation of leadership, acknowledging that the steel
industry has a relatively poor record of attracting top achievers.
Surma
anticipates a talent gap as retirees leave the industry. “Human
capital is a top three issue at U.S. Steel,” he said.
Jones
and Michael Hoffman of Macsteel expressed hope that the industry’s
new-found success will help attract talent. “With the steel
industry back in the spotlight, we have more opportunity to sell
ourselves,” Hoffman said.
IPSCO’s
David Sutherland urged executives to engage colleges and universities
to persuade them to support metallurgical study programs. Hopefully,
the next generation of students will not consider “engineer”
a dirty word, DiMicco added.
“People
will migrate to a healthy industry,” concluded Siegel. “It’s
the difference between calling someone a ‘scrap dealer’
vs. a ‘materials trader’—it’s all in the packaging.”
Rinker
Takes Reins at
Michigan Seamless Tube
Russ Maier, who helped return Michigan Seamless Tube LLC to stability,
is turning over day-to-day operation of the company to Michael Rinker.
Maier became chairman of Michigan Seamless while Rinker became president
and CEO on May 1.
The
South Lyon, Mich.-based company was formed by Maier and Atlas Holdings
LLC in October 2002 to acquire the fixed assets and intellectual
property of the Michigan Specialty Tube Division of Vision Metals
Inc. (formerly Quanex). “It was an operation that got caught
in one of those 35 or 40 bankruptcies in 2000-01,” Maier says.
The
renewed company launched operations in October 2004. “Once
we got it up and running, I was looking for someone to come in who
was a little younger to become president and CEO,” says Maier,
who had already been retired for a few years before the company
formed.
That
choice was Rinker, who comes to Michigan Seamless with 28 years
in the stainless steel industry, most recently as president of the
North American Division of Outokumpu Stainless.
“His
proven leadership and experience in the metals industry will help
us continue to grow and develop organically, as well as through
potential acquisitions in the metals sector,” Maier says.
Rinker
says no immediate changes are the on the horizon, as Michigan Seamless
is running well. “I am excited to join MST, a premier and highly
specialized manufacturer of engineered seamless tube, and have the
opportunity to continue its profitable growth and expansion of its
product offerings and market reach,” says Rinker.
Michigan
Seamless Tube, founded in 1927, is a manufacturer of cold drawn
carbon and alloy seamless mechanical tubing, alloy pressure pipe
and tubing, carbon and alloy boiler tube, and carbon and alloy heat
exchanger tubing and condenser tube. It operates a 320,000-square
foot manufacturing facility in South Lyon.
Olympic
to Acquire Tinsley-PS&W
Olympic Steel, Inc., Cleveland, has entered an agreement to purchase
the Tinsley Group-PS&W Inc., a North Carolina-based fabricator
of heavy construction equipment components for original equipment
manufacturers. PS&W, a current customer of Olympic Steel, is
an indirect subsidiary of English company Eliza Tinsley Group PLC.
The acquisition will cost Olympic just over $10 million in cash,
and is expected to be completed this month.
“We
have indicated that our long-term strategy is to deliver additional
value-added services and supply solutions for our customers by migrating
into more downstream processing. The PS&W acquisition is an
integral part of our strategy because it complements our existing
tempering and plate processing expertise while expanding our fabricating
capabilities,” says Michael D. Siegal, chairman and CEO of
Olympic Steel.
PS&W
is a full-service fabricating company that utilizes burning, forming,
machining and painting equipment to produce a wide variety of fabrications
for manufacturers of heavy construction equipment. PS&W was
founded in 1990, and currently operates two facilities located in
Siler City and Seagrove, N.C.
“The
addition of PS&W to Olympic Steel also strengthens our geographic
presence and enhances our existing customer base in the Southeast,”
Siegal says.
Ranger
Expands Reach
with New Tulsa Facility
Ranger Steel Supply, Houston, has expanded its distribution network
with the opening of a new covered warehouse and sales office in
Tulsa, Okla. The facility, which is served by rail, will house a
large domestic steel plate inventory for faster customer service
to the Midwest.
“The
opening of our Tulsa facility moves our steel even closer to the
customer, which is a real plus with today’s high energy and
transportation costs,” says Ranger Steel Supply President Ron
Whitley. “As a historic transportation hub, Tulsa’s strategic
location provides direct access into the Midwest and points beyond.”
In
addition to Tulsa, Ranger operates a 23-acre distribution center
at the Houston Ship Channel and a covered warehouse in New Orleans,
serving Mexico, Central and South America, and other international
destinations in addition to the entire U.S.
Port
City Metal Services
Purchased by Metals USA
Metals USA Inc., Houston, has acquired the assets and business operations
of Port City Metal Services, Tulsa, Okla. Port City is a processor
of steel plate, offering laser cutting, plasma and oxyfuel burning,
braking, rolling, drilling, machining, welding and other services.
Port City will join Metals’ USA’s Plates and Shapes Group.
Metals
USA also made an addition to its Buildings Products Group with the
purchase of Dura-Loc Roofing Systems Ltd. The Toronto-based company
manufactures and distributes metal roofing products throughout the
eastern half of North America.
Marmon/Keystone
Opens Rochester Center
Marmon/Keystone, Butler, Pa., is opening a metals distribution center
in Rochester, N.Y. The location will serve as a satellite for the
service center company and offer daily product deliveries and enhanced
service to customers in central and western New York.
The
30,000-square-foot facility will carry an inventory of carbon, stainless
and aluminum pipe and tube, plus stainless and chrome-plated bar
products. Lou Grenci, district manager of the Butler service center,
will oversee the operation, expected to open in July.
Briefs
Layhill Processing LLC has installed a Red Bud Industries’
SCS Sheet Line at the Olympic Metals facility in Loudon, Tenn. Completed
in early February, Layhill is working in conjunction with Olympic
to produce a flat stabilized product before cleaning it. Layhill’s
new SCS Line is capable of processing blanks up to 75 inches wide
at lengths up to 20 feet and thicknesses up to one-half inch. Red
Bud Industries, Red Bud, Ill., offers both sheet and coil lines
featuring SCS technology.
To
commemorate its 10th year serving the metal industry, Maintenance
Metals & Alloys Inc. will hold an open house from 11 a.m. to
6 p.m. June 23 at its facility on 18 Killaloe Road, Concord, Ontario.
Customers and suppliers can visit and tour the new 10,000-square-foot
warehouse.
People
Dominic Vitucci Jr., president of Vitco Steel Supply Corp., Posen,
Ill., was elected president of the Association of Steel Distributors
at the 2006 Annual Convention. Vitucci replaces Doug Evernhart,
vice president of purchasing at Wyoming Steel, Camden, Ohio., in
the role as ASD president. Thomas N. Smith Sr. of B&D Steel
Co., Holland, Pa., is the new executive vice president. Robert Pellese,
president of Premium Metals, Cleveland, remains treasurer.
Reliance
Steel & Aluminum Co., Los Angeles, has appointed Mike Hubbart
president of the Bralco Group. Hubbart held the position of division
manager of Bralco Metals for 11 years and has spent 39 years in
the metals industry.
Mike Hattrup was named manager of sales and marketing for Wilco
Inc., Wichita, Kan. Hattrup is responsible for sales and customer
service among all Wilco product categories.
David
P. Yundt, was elected to serve as vice chair of the Association
of Home Appliance Manufacturers. Yundt is vice president and director
of stainless products at Main Steel Polishing Co., Tinton Falls,
N.J.
Glen
Henderson has been appointed branch manager at Marmon/Keystone’s
Salt Lake City service center. He replaces the retired Craig E.
Peterson.
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