In the interest of fairness, here are a few comments from one writer who nicely expressed service center sentiments:

“It seems there’s been a lot of service center bashing going on lately over the subject of inventories being too high, including critical comments about distributors’ lack of discipline, greed, etc. While there’s no doubt that service centers contribute to the problem of excess inventories, which lead to lower prices, the cause of the problem isn’t so simple,” he wrote, requesting anonymity.

“Service centers are responsible for making sure their customers never run out of steel. The customer doesn’t care one little bit if the distributor has too much inventory, but he’ll [bash] the distributor who lets him run out.”

Service centers obviously feel their middleman role most intensely when prices shift, as they dwell between a rock and a hard place—suppliers and customers. “When spot market prices begin to head down, end-users are out in force beating up their suppliers for lower prices,” he continued. “When spot market prices go up, they become hard of hearing, disconnect their phones, stall and drag their feet kicking and screaming before accepting any increases.

“When prices decline, mills generally won’t lower their price on existing orders, telling their service center customers the new price will be in effect with new orders. Yet when prices increase, mills often insist on the higher price on any order that hasn’t shipped yet, not just newly placed orders.”

Mills often criticize service centers for buying from overseas producers, yet they buy raw materials, and even slabs and hot-bands, from foreign sources when the cost is favorable, the writer observed. “At the point when spot market prices go up to a level higher than other major world markets, import offers generally become more abundant and at lower than domestic prices. Service centers have the opportunity to improve their profit margin. And if they don’t bring the lower priced steel in and control its sale to their customer, a broker, trader or another service center will, and likely at a lower price.”

Service centers do not create demand for steel; they cater to it and react to it. Demand is not fixed, constant or even reliably forecastable, he noted. “Few if any service centers buy simply because prices are low, but when prices are at X and are headed to X-plus, that’s a different situation. That’s called buy low and sell high, right? Stock market, real estate market, steel market—what’s so different?

“So, who or what’s the villain here?” the writer concludes. “It’s human nature for everyone in the supply chain to want to spend less and keep more. Let’s stop bashing one sector; it’s not productive and it distracts from the solution, which is happening while we speak. Consolidation.”

Well said, pard’.