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Metal Center News ranks the largest, most successful service centers in North America. Once again, Ryerson remains No. 1, but Reliance has closed the gap.
By Tim Triplett
Editor-in-Chief
Sidebars
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Combined revenues among the industry’s Top 50 service centers grew by about 9 percent in 2006, topping the $50 billion mark for the first time. Though still growing, the pace appears to be slowing from the 20 percent rate reported in 2005, reflecting moderating market conditions compared to the boom of the previous few years.
MCN polled the industry’s largest players in July and August and ranked them based on total revenues from their last full fiscal year, calendar year 2006. Chicago-based Ryerson Inc. remains on top of the Top 50 with $5.9 billion in 2006 revenues, up from $5.80 billion the previous year. Not far behind is Reliance Steel & Aluminum Co. at $5.74 billion, up from $5.54 billion in 2005. No. 3 ThyssenKrupp Materials NA has seen strong growth—to $3.18 billion in 2006 from $2.35 billion in 2005—but remains well back of the two market leaders. Thirteen companies in this year’s ranking have topped the $1 billion mark.
Reliance, as the market’s most prolific acquirer, has been steadily gaining ground on Ryerson in the past few years. In July, Ryerson officials agreed to a purchase offer estimated at $2 billion from Platinum Equity, a California-based investment firm. Platinum Equity already owns the PNA Group, ranked No. 12 in this year’s survey, which includes Feralloy, Delta Steel, Infra-Steel and Metal Supply Co. Last month, stockholders gave Ryerson’s board and management a vote of confidence and cleared the way for the sale to proceed. If the deal is finalized, Platinum Equity will have control of both Ryerson and the PNA Group, with combined sales of nearly $7.5 billion, putting some distance between it and Reliance.
In total, the Top 50 generated combined revenues of approximately $50.5 billion last year, nearly half of all sales by metals distributors in North America, according to rough industry estimates. This compares to $46.3 billion generated by the Top 50 in last year’s MCN survey. Service centers remain the largest single customer group for North American mills, buying, processing and reselling one-quarter or more of all the steel, aluminum, copper and brass produced each year.
Because respondents are polled in late summer each year, they are not only asked to report their last full fiscal year’s results, but also to forecast their expectations for the remainder of the current year. For the past few years, the market’s actual results have exceeded executives’ combined expectations, but not this time. Halfway through 2006, respondents forecast growth averaging nearly 12 percent for the year, a bit higher than the eventual 9 percent gain.
Based on mid-year 2007 predictions by the leading service centers, MCN forecasts that aggregate revenues for the Top 50 will increase by a further 4 to 6 percent this year. Clearly, many service center executives expect business activity to ease further in light of uncertain economic conditions and slowdowns in such key markets as residential construction and automotive.
Service centers achieved solid growth in 2006 despite declining metals prices. Various sources report that both the price of steel and aluminum peaked in summer 2006—hot-rolled steel to around $650 per ton and aluminum to around $1.30 per pound. By year’s end, however, steel had declined by nearly $100 per ton, though aluminum had recovered to near mid-year levels after dipping precipitously in early fall.
2007 has seen similar price volatility, which no doubt tempered executive’s forecasts for this year’s growth. As of midsummer, the price of hot-band, at less than $515 per ton, was near the past year’s low, while aluminum remained flat with an LME price around $1.25 per pound.
In the aggregate, this year’s Top 50 operate about 1,175 stocking locations totaling more than 107 million square feet of warehouse and processing space, while employing about 59,000 workers. This is down from 1,330 locations, 116 million square feet and 60,000 workers reported in last year’s survey. The difference may reflect the weakening market conditions and the rationalization of facilities among consolidating companies.
Several major mergers were finalized in the past year or so, continuing the consolidation trend that is reshaping metals distribution. More than 20 deals were announced in 2006, and about 15 through the first eight months of 2007. Notable among them:
- Platinum Equity’s bid for Ryerson Inc. (see Service Center News for more detail).
- Reliance Steel & Aluminum’s acquisitions of Earle M. Jorgensen Co. and Yarde Metals last year, followed by a string of smaller purchases including Crest Steel Corp., the Encore Group, Industrial Metals and Surplus Inc., Athens Steel Inc. and Clayton Metals.
- O’Neal Steel’s 2006 acquisitions of Timberline Steel and Ferguson Metals, following on the heels of its 2005 purchase of TW Metals.
- Edgen’s purchase of Murray International Metals last year, and PetroSteel International earlier this year. The company now goes to market as Edgen Murray.
- A.M. Castle’s acquisition of Transtar Metals last fall, which has strengthened the company’s position in the specialty metals and aerospace markets.
Absent a major upswing in metals pricing or end-use demand—which seems unlikely given the current economic situation—2007 is shaping up as a decent, though weaker, year than 2006 for the service center industry.
Editor’s Note: Changes in the Ranking
New to the Top 50 this year are Novamerican Steel Inc. at No. 18, Eastern Metal Supply at No. 31, MISA Metals at No. 33, Mill Steel at No. 42, Standard Tinsmith Supply Corp. at No. 47, McNichols Co. at No. 48 and Atlas Steel Products Co. at No. 50. Dropped from the ranking was Gibraltar Steel, No. 14 last year, whose business is no longer a good fit for a service center ranking.
Notable non-respondents to this year’s survey include Maksteel, McJunkin Corp., Robinson Steel and Sandmeyer Steel Co., whose inclusion most likely would have altered the rankings.
Also new to this year’s Top 50 coverage is information on the end-use markets served by each company.
Top 10 Profiles
No. 1 Ryerson Inc., Chicago—Ryerson remains in the top spot on MCN’s ranking with $5.9 billion in annual revenues, up from $5.8 billion in 2005 and $3.3 billion in 2004. Ryerson is likely to remain in the top spot, though as a private entity, under the pending ownership of Platinum Equity (see main story). Under fire from some shareholders over relatively weak financial reports in the past year, Ryerson management has been focused on improving internal profitability rather than expansions or acquisitions.
No. 2 Reliance Steel & Aluminum Co., Los Angeles—A continuing series of acquisitions has secured Reliance’s spot as the second biggest metals distributor in North America, with $5.743 billion in 2006 sales, up from $3.367 billion in 2005 and $2.943 billion in 2004. Reliance’s profitability is second to none, reporting a 2006 net income of a record $354.5 million, up 73 percent from 2005. The company can be expected to continue its growth-through-acquisition strategy, especially in light of the ongoing mergers among its service-center peers.
No. 3 ThyssenKrupp Materials NA, Southfield, Mich.—The North American distribution arm of the German steel giant, ranked No. 4 last year, reported 2006 revenues of $3.18 billion, up from $2.35 billion in 2005 and $2.2 billion in 2004. It followed up last year’s acquisitions of VPK Metal Inc.’s operations in Canada and C-S Metals Service Inc. of Baltimore with this year’s purchase of Alcoa’s Aerospace Service business in North America and Europe. Its parent company has announced plans to construct a major new carbon and stainless mill in Alabama within two years, which some speculate could give its service centers a leg up in the South.
No. 4 Russel Metals Inc., Mississauga, Ontario—Ranked No. 5 last year, Russel Metals reported $2.821 billion in 2006 sales, up from $2.3 billion in 2005. Russel has been quiet on the acquisition front in the past year, focusing instead on internal profitability. The company achieved the second best earnings result in its history in 2006.
No. 5 Samuel, Son & Co., Mississauga, Ontario—Samuel, ranked No. 3 last year, falls at No. 5 this year with $2.702 billion in sales. This compares to $2.675 billion in 2005 and $1.83 billion in 2004. The family-owned company, which dominates the Canadian market along with Russel, followed up last year’s purchase of Michigan-based Form-Tech with the acquisition earlier this year of Esco Corp.’s Engineered Metals Group.
No. 6 O’Neal Steel Inc., Birmingham, Ala.—O’Neal, which claims to be the largest family owned service center in the United States, jumped from No. 10 last year to the No. 6 position with $2.3 billion in 2006 revenues, up from $1.6 billion in 2005 and $1.3 billion in 2004. Much of that gain is attributable to its late-2005 acquisition of TW Metals, followed by the spring 2006 purchase of Colorado’s Timberline Steel and the fall purchase of Ferguson Metals in Ohio. O’Neal formed a High Performance Metals Group earlier this year—including its TW Metals, Aerodyne Alloys, Ferguson Metals, AIM International and Supply Dynamics operations—to expand business in this high-margin piece of the market.
No. 7 Worthington Steel Co., Columbus, Ohio—Falling once again at No. 7 in MCN’s ranking with $2.0 billion in 2006 sales is Worthington Steel, the steel processing and distribution division of Worthington Industries. Worthington Steel reported $1.7 billion in revenues in 2005 and $1.3 billion in 2004. In mid-2006, Worthington acquired Precision Specialty Metals of Los Angeles, expanding into the processing of stainless flat-roll, and establishing a base from which to grow its carbon steel processing business on the West Coast.
No. 8 Carpenter Technology Corp., Wyomissing, Pa.—Both a producer and distributor of specialty alloys, including stainless steel and titanium, Carpenter moves up to the No. 8 spot on this year’s ranking with $1.9 billion in distributor sales, up from $1.3 billion in both 2004 and 2005. Carpenter broke ground in June on a new, $115 million mill in Reading, Pa., that will expand the company’s premium melt capacity by 40 percent beginning in 2009, and should give a major boost to its distribution business as well.
No. 9 Metals USA, Houston—Holding steady at No. 9 with $1.802 billion in 2006 sales is Metals USA. The company reported sales of $1.639 billion in 2005 and $1.51 billion in 2004. Created through an aggressive series of rollups in the mid-1990s, Metals USA struggled during the recession, but has since successfully completed a bankruptcy reorganization and is now owned by the investment group of Apollo Management LP. In July, Metals USA acquired Lynch Metals, a deal that strengthened its aluminum and stainless steel product mix, as well as its geographic presence in both the eastern and western U.S.
No. 10 Macsteel Service Centers USA, Newport Beach, Calif.—Macsteel USA, a division of South Africa’s Macsteel Holdings, drops from the No. 7 spot last year, but stays in the Top 10 with $1.802 billion in 2006 sales. This compares to $1.7 billion in 2005 and $1.5 billion in 2004. Its most recent acquisitions include Alpha Steel and Alpha Processing of Chicago in late 2005.
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