The appliance market has all the fixin’s for another satisfying year. The recipe for success: a healthy economy, surprisingly strong new-home construction, nascent hurricane rebuilding, energy-efficient machine designs and consumers willing to pay for aesthetics as well as functionality.

By the Staff of Metal Center News

AK Steel
Reports Small Profit
Despite Labor Strife
AK Steel reported net income of $6.2 million for the first quarter of 2006 despite a lockout of union employees at its largest facility.

On March 1, AK Steel locked out approximately 2,700 hourly employees at its Middletown (Ohio) Works following the expiration of a collective bargaining agreement. AK Steel continued operations at the facility, using a combination of temporary and salaried workers to maintain production. (The lockout was still in place as of MCN’s press time, May 1.)

James Wainscott, president of AK Steel, said the company is committed to reaching an agreement with members of the Armco Employees Independent Feder-ation. “It will be settled. We have no higher priority than to reach an agreement with AEIF,” Wainscott told investors during the company’s first-quarter conference call last month.

The Middletown Works labor negotiation is just one of three facing the Middletown-based steel company. On May 3, AK reached an agreement with 200 hourly employees at its Zanesville (Ohio) Works. Its contract with 1,400 employees at the Butler (Pa.) Works expires Sept. 30. Workers at both of those facilities are represented by the United Auto Workers.

Wainscott said AK Steel’s existing labor contracts put it at a competitive disadvantage with the rest of the industry.

“Domestically, more than 50 steel companies in the U.S. went bankrupt since the last AEIF labor contract. Only two domestic steel companies [one of them AK] have avoided bankruptcy. AK Steel is competing against companies with lower cost structures,” Wainscott said.

The lockout at Middletown has cost the company approximately $13 million in training and overtime costs and an additional $14 million in charges related to reduced levels of operations. Wainscott anticipates the costs will be reduced in the second quarter, and may become a net gain.

AK Steel managed a net income of $6.2 million during the first quarter, down 90 percent from the same period in 2005. Its first quarter operating profit was $29.4 million, or $19 per ton, compared to $113.6 million, or $75 per ton, for first-quarter 2005. First-quarter 2006 net sales of $1.44 billion were up slightly year-over-year.

Rising raw material costs also contributed to decreased profits in the quarter, Wainscott said. Last month, AK announced price increases to offset those increased input charges. The price hikes range from 6 to 9 percent for all hot-rolled and cold-rolled stainless steel sheet, strip and continuous plate products, effective at the end of April.

Later last month, AK announced a $190 per ton surcharge on flat-rolled carbon steel and a $215 per ton surcharge on electrical steel products. At the end of the month, AK also announced it would increase spot market prices for its carbon steel products by $50 per ton for all new orders accepted for shipment on May 15 or later.

In March, published reports indicated that U.S. Steel was targeting AK Steel for acquisition. Wainscott was asked if the company was performing fiscal housekeeping to make it more attractive to a potential buyer.

“Our challenge has been very, very clear from the board of directors: Get our house in order. Improve our relationships with every constituency. Increase our revenues. Reduce our costs. We’ve done it for one reason—to make sure AK Steel is viable. Whether that’s as a standalone entity or with someone else is ultimately a call for our board,” he said.

“There have been a lot of rumors; we don’t comment on rumors. We wouldn’t want to fuel any speculation,” he added.

Alcoa
Enjoys Record Profits Amid Labor Concerns
Alcoa reported record sales and earnings during the first quarter of 2006. “It was a great quarter by any measure,” Chairman and CEO Alain Belda told investors during the quarterly conference call.

The company reported net income of $608 million, a 171 percent increase from the $260 million posted during the same period in 2005 and 134 percent ahead of the previous three months.

Alcoa also posted record net sales of $7.24 billion, an increase of 16 percent from the $6.22 billion recorded during the first quarter in 2005. Sales were up 8.6 percent from the last three months of 2005.

“We had excellent top and bottom line results, driven by strong demand, favorable metal prices and productivity programs,” Belda said.

Five of Alcoa’s six business segments performed better in the first quarter of 2006 than in the same three months of 2005. Additionally, three of those segments (Alumina, Primary Metals and Engineered Solutions) enjoyed record quarterly performances.

Hovering over Alcoa, however, are negotiations with union workers at 15 of its North American sites. The company is bracing itself for a possible strike, with management training on the floor to continue operations in the event of a work stoppage.

Current negotiations affect Alcoa facilities in North America, including all of its smelters except Mount Holly, S.C.; rolling mill plants in Iowa, Tennessee and Juarez, Mexico; an extrusion plant in Indiana; and a refinery in Texas.
“We’re never looking for confrontation, but we will be prepared if negotiations do not result in a contract,” Belda said.

In the meantime, Belda points to other positive trends in the months ahead. “Our aerospace and commercial transportation markets are particularly robust this year, and we expect overall market conditions to remain strong,” he said.

Alcoa is also looking to capitalize on the increased margin between aluminum and copper prices. Rolling mills, rod and tubing plants are all stepping up production, while a rod machine is being installed in Iceland. The CEO said all efforts are being undertaken swiftly.

“This is an industry that was built on the basis of substitution. When stainless steel hit high prices last year, we immediately started replacing white-line consumer goods with aluminum products that looked like stainless,” Belda said. “We’re moving as fast as we can to replace copper in every place we can. At a $1.50 difference, we have a significant advantage as a competitive material.”

Alcoa also continued its growth strategy to meet the projected doubling of consumption by 2020. Two capital projects—the 657,000 metric ton per year efficiency upgrade to an alumina refinery in Australia and a 63,000 metric ton per year expansion of the Alumar smelter in Sao Luis, Brazil—were completed in the quarter.

Carpenter Technology
Quarterly Net Income Grows by 72 Percent
Carpenter Technology Corp., Wyomissing, Pa., reported record quarterly sales and net income last month. Results were led by strong demand for aerospace materials and by the company’s continued focus on cost reduction through lean production.

Net sales for the company’s third quarter ended March 31 were $426.0 million, compared with $342.1 million for the same quarter a year ago. Net income in the third quarter was $60.8 million, up over 70 percent vs. the net income of $35.3 million in the year-ago quarter.

“Record quarterly results were achieved primarily due to robust demand from the aerospace market for our specialty alloy and titanium materials, and our ongoing focus on operational excellence,” said Robert J. Torcolini, chairman, president and CEO.

“Our growth in the aerospace and other key markets reflects our strategy to develop and produce materials that are valued for their performance characteristics.

“For the quarter, aerospace sales reached a record level and accounted for 43 percent of total sales. Sales of our higher-value materials also benefited from favorable market conditions in the medical and power generation markets.”

IPSCO INC.
Pleased with Market Strength,
Though Income Backslides
IPSCO set a sales record during first-quarter 2006, though its net income was down year-over-year and from fourth-quarter 2005.

The Lisle, Ill.-based company generated sales of $902.9 million, an increase of 17.8 percent from first-quarter 2005. The figure was also up 5.9 percent from the previous quarter.

However, IPSCO’s net income of $150.7 million was down 2.6 percent from the previous year and 11.4 percent from the final quarter of 2005. Company officials said the decline in margins was driven by lower average steel mill product selling prices, higher steel mill input costs and higher tubular product costs.

The steel company’s composite first-quarter product price of $898 per ton was also a new quarterly record, up $2 per ton from a year ago and $4 per ton from the prior quarter.

Both steel mill product and tubular shipments set new quarterly records. Steel mill product shipments of 658,000 tons represented an increase of 6.5 percent over the previous year and 7.1 percent over the prior quarter, while tubular shipments of 347,000 tons represented an increase of 46.0 percent over the prior year, primarily due to greater large-diameter shipments. Tubular shipments were 2.4 percent greater than the prior quarter.

“We are pleased with the strength and sustained demand for IPSCO’s products. The record sales levels experienced this quarter can be attributed not only to the ongoing strength of the plate, energy tubular and large-diameter pipe markets, but also to the execution of our strategy,” said David Sutherland, president and CEO during the company’s first-quarter conference call.

Tubular sales volumes are expected to dip in the second quarter as a result of spring thaw and road restrictions in Western Canada. Nevertheless, the overall outlook for tubular goods is outstanding, IPSCO officials said.

First-quarter 2006 rig counts were 35 percent higher in Canada and 18 percent higher in the United States compared to the same period in 2005. North American energy tubular demand is expected to be at the highest levels that weather conditions and rig availability allow.

Still, the increases in 2006 are only the beginning for large-diameter pipe products. Executive Vice President John Tulloch said the market is just in the entry stage of a strong cycle, and projects the peak period will come between 2008 and 2010.

The market’s upturn is based on several large energy projects planned for the coming years coupled with above normal replacement and refurbishment of existing lines, Sutherland said.

Maverick Tube Corp.
Net Income Jumps On Drilling Activity
Maverick Tube Corp., St. Louis, Mo., reported record net income for the first quarter of $70.9 million, more than double the net income for the same quarter last year of $31.2 million, and up substantially from the net income of $63.2 million for fourth-quarter 2005.

Net revenues totaled a record $543.1 million for first-quarter 2006, up from net revenues of $410.8 million for first-quarter 2005, and $484.7 million for fourth-quarter 2005.

First-quarter 2006 net revenues from energy products increased 39.6 percent to $465.6 million vs. first-quarter 2005, and 13.6 percent vs. fourth-quarter 2005, due largely to increased drilling activity. The active rig count, as measured by Baker Hughes Inc., increased in the first quarter by 2.8 percent in the United States and 16.3 percent in Canada, while drilling activity declined 3.5 percent in the rest of the world.

Maverick’s 13.6 percent increase in net revenues from energy products over last quarter is attributable to a 13.6 percent increase in tons shipped. Average selling prices remained constant during both periods, company officials reported.

First-quarter 2006 net revenues from electrical products totaled $77.4 million vs. $77.2 million in first-quarter 2005 and $75.0 million in fourth-quarter 2005. The 3.2 percent increase in net revenues over the fourth quarter is attributable to an 11.8 percent increase in volume, to about 62,800 tons, partially offset by lower selling prices.

“We are very pleased with the contributions of all of our business units to this quarter’s record results,” said C. Robert Bunch, Maverick chairman, president and CEO. “In particular, we had especially strong performances by Maverick Tubular Products, our U.S. OCTG and line pipe business, as well as TuboCaribe, our Latin American OCTG business, and Precision Tube, our coiled tubing business.

“In addition, Prudential, our Canadian OCTG and line pipe business, had another outstanding quarter,” Bunch continued. “Canadian energy activity was the driver for about 37 percent of our consolidated net revenues this quarter. Our electrical products segment performed in line with expectations. And our efforts over the past several quarters to reduce expenses and create a more nimble, responsive and focused organization are beginning to bear fruit.”

Nucor Corp.
Sets Another First-Quarter Earnings Record
Nucor Corp., Charlotte, N.C., reported record earnings for the first quarter of 2006 and expressed optimism that the second quarter would be as strong, or even a bit better, as long as scrap pricing and import shipments remain in line.

During last month’s conference call with analysts and investors, Dan DiMicco, vice chairman, president and CEO, observed that Nucor’s first quarter 2006 net earnings of $379.2 million represent the third consecutive year that the minimill has established a new record for first-quarter profitability. Profits for the quarter were 6.9 percent over those for the first quarter of last year and 4.5 times greater than the level reached in the last peak of the economic and steel cycles in 2000.

Likewise, Nucor reported that its first-quarter sales of $3.55 billion were up 6.7 percent from $3.32 billion in the first quarter of 2005. Total steel shipments for the quarter increased 13 percent to 5.7 million tons vs. 5.0 million tons a year earlier.

“During the second quarter of 2006, we should see continued very strong business conditions and an increasing pricing environment across all products,” DiMicco said, noting that scrap pricing and import shipment levels could impact that prediction. “At this time they both appear to be more positive than negative.”

While imports are currently strong, he said, it appears offshore deliveries are starting to slow. “Right now all indications are that imports are manageable, but things could turn on a dime, so we will have to see how the year goes.”

DiMicco also was cautious in predicting the impact that scrap prices could have on the marketplace in the second quarter, as Nucor had not yet bought its scrap for June. “We have seen scrap in the past move $50, $60 or $70 [per ton] for the month, which gives us a reason to be conservative. Right now, we don’t see these kinds of pressures in front of us at all. But I’m not willing to say it can’t happen.”

Though Nucor is encouraged by the results it has achieved in the past nine quarters, the mill remains focused on growth and continual improvement. As part of this strategy, Nucor announced an agreement March 21 to purchase the assets of Wallingford, Conn.-based Connecticut Steel Corp. for approximately $43 million. The deal closed at the start of May.

According to DiMicco, this transaction will enhance Nucor’s leadership position in the bar business by allowing the steelmaker to expand the depth of its construction product offerings to include structural mesh and wire mesh, as well as expanding Nucor’s production of coil rebar.

DiMicco said that Nucor also has made excellent progress in implementing its raw materials strategy to produce in-house between 6 million and 7 million tons a year of high-quality scrap substitutes—about 30 percent of its current iron unit consumption. By the end of next year, the company should be about half way to its goal. The next step is to expand two of the three projects it is currently working on—the Ferro Gusa Carajas “green pig” joint venture with CVRD in Brazil to produce pig iron using eucalyptus trees as the charcoal source, and the HIsmelt joint venture with Rio Tinto to produce hot liquid pig iron from coal and iron ore fines.

“We also have a few other things that we are looking at, but we haven’t talked publicly about them and are not prepared to do so yet,” DiMicco said.
Nucor is continuing to refine the production process for its Castrip technology to directly cast sheet steel into final shape and thickness at its Crawfordsville, Ind., facility. It is moving ahead with a project to build a second Castrip operation at Nucor-Yamato Steel’s facility in Blytheville, Ark., as well as establishing its first overseas joint venture partnership utilizing the Castrip process later this year.

Looking forward for the next three to five years, DiMicco sees Nucor continuing to grow profitably. “We have no designs on being a 100 million tons a year steel producer, but if that were to happen it would be because of our ability to grow profitably to that level,” he says.

“We are doing things in a minimill environment that people thought could never be done,” added John Ferriola, executive vice president of Nucor’s sheet mill group. He said the company is participating in the automotive market in levels that surprise its integrated competition, is making advancements in its electrical steel products, and continues to grow in appliance and HVAC applications thanks to the production of higher quality, lighter gauge product. In fact, he said, in the past two years Nucor has grown its higher-value-added product business by 10 to 15 percent.

Steel Dynamics Inc.
Increases Capacity with
Acquisitions, Upgrades
Capacity increases at its facilities in Columbia City and Butler, Ind., and the acquisition of Roanoke Electric Steel Corp., will increase Steel Dynamics’ steel production potential to nearly 6.0 million tons by the end of 2007, SDI President and CEO Keith Busse told investors and analysts last month. “We’re continuing our very aggressive pattern of growth into the future,” he said.

The company has a lengthy outage planned at Butler during the second quarter to modify its casters. The caster upgrade will increase capacity by 200,000 tons at the Butler facility, which currently can produce up to 2.8 million tons annually. Busse said shipments are likely to remain flat during the coming three-month period due to the caster project.

SDI is coming off a good quarter, however. First-quarter shipments were 24 percent higher than in the same period last year, and 15 percent higher than fourth-quarter 2005, Busse said.

In the second quarter, SDI officials expect to begin seeing the effects of the Roanoke Electric acquisition, which was completed in April. The company will call its new facility the Roanoke Bar Division. Similarly, it renamed its SBQ mill in Pittsboro, Ind., the Engineered Bar Products Division.

Busse said the company does not expect the integration of Roanoke to have a big earnings impact in the short-term, but it will be felt in the quarters to come. “It will have a rather neutral effect in the second quarter, and a rather positive effect in the third and fourth quarters,” he said. “The synergies to be enjoyed will continue to grow over time.”

For the first quarter, Fort Wayne, Ind.-based SDI reported earnings of $76 million, an increase from both first-quarter 2005 and the previous three months. Earnings were up 17 percent from the comparable period last year and 11 percent from fourth-quarter 2005. Net sales for the quarter of $666 million represented an increase of 17 percent from both periods.

“Revenue and net income exceeded our preliminary views principally due to a record volume of steel shipments,” Busse said. “Our mills were able to take advantage of the continuing strong market demand for flat-rolled steel and wide-flange beams, increasing production rates and enjoying record shipping volumes.”

SDI’s average consolidated selling price per ton shipped increased from $619 in the fourth quarter to $631 in the first quarter.

Also during the quarter, the company’s Structural and Rail Division completed multiple rail rolling trials using blooms produced on new casting equipment. At Pittsboro, substantial progress was made in the construction of the new SBQ finishing facility with the start-up of some finishing operations, the company reported.

The Timken Co.
Steel Business Offsets
Automotive Weakness
The Timken Co. reported record first-quarter sales of $1.35 billion, up 3 percent from the same period a year ago. First-quarter net income increased 13 percent to $65.9 million from $58.2 million in the first quarter a year ago.

“Our strong first-quarter results reflect the ongoing strength of industrial markets and the performance of our steel business,” said James W. Griffith, president and CEO. “We are focused on accelerating profitable growth in industrial markets while repositioning our automotive portfolio to improve its earnings power.”

During the first quarter, the company set production and shipment records in the Steel Group, continued major capacity expansions for industrial products at several plant locations around the world, and made further progress relating to Automotive Group restructuring actions and manufacturing performance improvement. The company, which recently increased 2006 earnings estimates, expects continued strength in industrial markets, particularly in aerospace, energy, mining and rail.

Steel Group sales of $468.2 million were up slightly from record sales in the first quarter a year ago. Increased pricing and higher demand in aerospace, service center and energy markets were mostly offset by lower automotive sales. The company expects Steel Group profitability for the year to approach last year’s record performance.

U.S. Steel Corp.
Exceeds Expectations,
Expects Robust Year
Bolstered by a positive global economic environment and robust steel demand across virtually all end-use markets, U.S. Steel Corp., Pittsburgh, significantly exceeded the average of analyst expectations for first-quarter 2006 and expects to continue seeing strong earnings at least through midyear, said John P. Surma, chairman and CEO, during last month’s conference call with analysts and investors.

U.S. Steel posted a first-quarter net income of $256 million, which was more than double its earnings of $109 million in fourth-quarter 2005, although down about 44 percent from a year earlier when it posted net income of $459 million. Its first-quarter net sales of $3.73 billion were up 7.4 percent from the fourth quarter, but down 1.6 percent compared with first-quarter 2005.

“All of our three main operating segments (flat roll, tubular products and European operations) are firing on all cylinders,” said Surma, with segment income reaching $429 million, a 36 percent improvement from the fourth quarter. However, operating income remained 35 percent below the $660 million level a year earlier.

The flat-roll segment, which experienced a threefold increase in operating income in the first quarter vs. the fourth quarter, was partly aided by the long-awaited restart of U.S. Steel’s No. 14 blast furnace at its Gary (Ind.) Works. The furnace was ramped up in late January and by mid-March produced in excess of 9,000 tons of steel on most days. With this furnace up and running, Surma is optimistic that U.S. Steel has the capacity to ship at least as much steel as it shipped in 2004.

“Recently reported service center inventory and shipment data indicates that flat-rolled inventories are still low in terms of tons on hand, which supports our view of the strength in the steel market,” Surma said. Because of this, and recent strength in flat-rolled steel pricing, U.S. Steel intends to operate its furnaces at near capacity levels at least through the second quarter.

Surma noted that there has been some upward movement in steel spot prices of late—a trend that may continue—though he declined to speculate how much, how fast or how far. He added that he is encouraged by anecdotal reports that U.S. Steel’s customers are optimistic about their respective businesses. At this point, most end-use markets are doing well, he said, including appliances, nonresidential construction, tube and sheet converters, and even automotive.

Surma admitted that some industry observers are concerned about the recent uptick in steel imports. But recently landed imports are the result of orders placed months ago, he noted. “At that time, the market experienced low service center inventory levels, lower domestic production due to maintenance outages, and a significant price differential between North America and other global markets. But with service center inventories moving toward more historical levels, improved domestic production and the reported price increases around the world, some of the economic motivation of ordering steel from offshore would seem to be diminishing.”

U.S. Steel Europe had higher shipments in the first quarter due to its No. 2 blast furnace in Slovakia, which operated for the entire quarter. “Slightly lower selling prices [in Europe] were offset by lower raw material costs, and a strong Central European economy continues to generate increased demand for steel,” Surma said. He added that U.S. Steel’s ability to serve this market will be greatly enhanced upon completion of its 350,000 metric ton per year automotive quality galvanizing line early next year.

U.S. Steel also continues to see outstanding results in its tubular segment, particularly for its high-end products, with strong demand and good prices.

While demand and price levels in this segment are expected to remain firm, Surma said, U.S. Steel’s shipments will likely decline due to planned two-week maintenance outages at its Fairfield and Lorain Works seamless mills.

Several months ago, U.S. Steel stated that it was contemplating selling or spinning off part or all of its tubular business. Surma noted that the company has taken no action in that direction.

“We have observed how significant the integration value of the tubular segment is for the company as a whole and, as a result, we are pretty happy with where we are right now.”

Service Center First-Quarter Results

Olympic Steel
Ups Investment Despite
Sluggish First Quarter
Difficult conditions for the Detroit automotive market led to a first-quarter sales and profit decrease for Cleveland-based Olympic Steel.

Olympic reported first-quarter net sales of $238.9 million, a 16 percent decrease from the same period in 2005. Net income totaled $7.98 million, also down 16 percent from the previous year’s first quarter.

“For us, automotive is a very challenging market. It has affected both our tonnage and our profitability. We expect to still be somewhat challenged but hopefully improved,” Olympic Chairman and CEO Michael D. Siegal told investors at the company’s first quarter conference call.

Olympic reported a 6 percent decrease in tons sold during the quarter, from 360,000 to 338,000.

To counter the narrowing margins in the automotive market, Siegal says, Olympic will become more involved in downstream processing and narrow its participation in automotive.

“We are focusing our investment attention on additional tempering and lasering equipment and downstream capabilities such as machining, welding, shot blasting, fabricating and painting. These investments will provide growth and sustained imbedded margins,” Siegal said.

The first of those investments was implemented in the first quarter, when Olympic completed a 150,000-square-foot facility in Chambersburg, Pa., to fabricate steel plate.

Additionally, in the first quarter, two new laser-processing lines went online in Winder, Ga., while two more in Minneapolis and a third in Cleveland will become operational during the second quarter.

Overall, the company spent $6.2 million on expenditures during the quarter, a substantial increase over previous record levels. Moreover, Olympic is looking at additional acquisitions, new construction and, possibly, a new IT system through capital expenditure investments.

“Last quarter we discussed our disciplined approach to reviewing acquisitions and greenfields in targeted geographies where we have significant sales presence without a physical presence,” said David Wolfort, president and chief operating officer. “We feel we can grow our company by better servicing our existing and targeted customers with processing and servicing capabilities located within 150 miles of these facilities.”

Despite the sluggish first quarter, Olympic officials expected better conditions in the second. Olympic upped its inventory by nearly $3 million during the quarter, though the company maintains its turn of six times per year.

“The second quarter market outlook appears to be favorable for continued strong demand from our customer base, the industrial machinery and equipment manufacturers and the fabricators,” Siegal said. “Supply is tightening and prices are rising for carbon flat-rolled steel.”

Reliance
Sets New Income, Sales
Records in First Quarter
Reliance Steel & Aluminum Co. CEO David Hannah credited strong customer demand for quarterly records in net income and net sales during the first quarter of 2006.

The Los Angeles-based company reported net income of $71.9 million during the period, a 55 percent increase from the same period in 2005. First-quarter sales totaled $988.0 million, a 22 percent improvement from the $811.9 million posted during the first three months of 2005.

Another factor driving the record earnings during the first quarter was the company’s performance on margins. Reliance reported profit margins of 27.5 percent on sales. Margins began to improve during the fourth quarter of 2005 when steel prices increased.

The company’s figures were above first-quarter 2005 totals even after removing the 2005 acquisitions, including Chapel Steel, from the equation. Reliance posted same-store sales of $903 million during the period, 11 percent ahead of first-quarter 2005.

“Overall, volume was up 27 percent compared to the 2005 first quarter, and up 12 percent from the 2005 fourth quarter,” Hannah told investors during the first-quarter conference call. “The various end-market industries where we sell our products are still doing quite well, with strength in the aerospace and non-residential construction markets leading the way.”

Sales and profit totals should set more records in the months to come, as Reliance completed its acquisition of Earle M. Jorgensen Co. during the quarter. The combined companies have more than 150 locations in 36 states and Belgium, Canada, China and South Korea with total assets of approximately $3 billion and annual revenues of more than $5 billion. EMJ now operates as a wholly owned subsidiary of Reliance.

Reliance has also begun shipping from new facilities outside Green Bay and Cincinnati, while another new facility in Philadelphia was set to begin shipping in May. The company also completed the relocation of its Phoenix Metals subsidiary into a new facility in Birmingham, Ala.

Though no mega-deals are currently in the works, Hannah says the market remains strong for additional merger activity. “It’s still very active out there. There’s a lot of opportunity. Not like EMJ, but still many opportunities out there.”

One area of concern for Reliance executives is the uncertainty surrounding the labor situation at Alcoa, the company’s primary supplier of heat-treat plate.

“If Alcoa goes out, and our feeling is they more than likely will, that will cause a problem on the supply side. There’s no question about it. They are the largest supplier of heat-treat plate in the world, and for Davenport to shut down, there’s going to be an impact,” said Gregg Mollins, Reliance president and chief operating officer.

“We’ll sell our product very wisely. We would expect fairly significant margin improvement on the product we sell.”

Though conditions are favorable for imports of steel, Mollins says he has yet to see a substantial influx of imports in the market. Noting a rather narrow spread between domestic and import pricing, Mollins said. “We’re not anticipating a great deal of impact from imports coming in the second half of the year.”