Combined revenues among the industry’s Top 50 service centers grew by nearly 14 percent in 2007, to approximately $57.5 billion, as the big continued to get bigger. Los Angeles-based Reliance Steel & Aluminum Co. surpassed long-time market leader Ryerson Inc. of Chicago to take the top spot on this year’s list with nearly $7.3 billion in 2007 sales. Ryerson came in at No. 2 with about $6 billion.

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 2007. Rounding out the top 10, in order, were: McJunkin Red Man Corp., $3.80 billion; ThyssenKrupp Materials NA, $3.20 billion; Samuel, Son & Co. Ltd., $3.15 billion; Russel Metals, $2.56 billion; O’Neal Steel, $2.40 billion; Carpenter Technology Corp., $1.95 billion (for its fiscal year ended June 30, 2008); Macsteel Service Centers USA, $1.90 billion; and Metals USA, $1.85 billion.

The current Top 50 range from $7.3 billion down to $180 million in annual sales. This compares to a high of $5.9 billion and a low of  $110 million in last year’s survey. Such a bump in revenues would suggest that the market was on the upswing. In fact, shipments of steel and aluminum by distributors in the United States and Canada totaled about 57.2 million tons in 2007, down 6 percent from the previous year.

Service center revenues obviously are a function of metals prices. Much of the increase service centers saw in 2007 can be attributed to rising prices, especially for nonferrous and specialty metals, rather than improvements in demand. Revenues from acquisitions also contributed to the expanding market share of the Top 50.

Purchasing magazine estimates that U.S. and Canadian metals distributors generated total revenues of $143 billion in 2007. If that’s the case, then MCN’s Top 50 commanded a 40 percent share of the market. Service centers remain the largest single customer group for North American mills.

In 2007, 18 companies claimed membership in the billion-dollar club, compared to 2006 when just the top 13 surpassed $1 billion in sales.

While the service center industry continues to consolidate (see “Recapping a Decade of Service Center Consolidation” on page 42), the Top 50 continue to expand in terms of facilities and labor. In the aggregate, this year’s Top 50 operate about 1,500 stocking locations totaling nearly 134 million square feet of warehouse and processing space, while employing about 65,000 workers. This is up from 1,175 locations comprising 107 million square feet and 59,000 workers reported in last year’s survey. The difference may reflect recent acquisitions by the industry’s market leaders and reinvestment of gains in new plants and manpower.

Reliance continues to be the industry’s most aggressive acquirer, buying up more than 10 competitors since 2006. Surpassing the scope of its $934 million acquisition of Earle M. Jorgensen Co. in 2006 was its $1.1 billion purchase this summer of the PNA Group companies from the investment firm Platinum Equity. PNA operates 23 steel service centers throughout the United States, as well as five joint ventures with seven additional service centers in the United States and Mexico. With $1.63 billion in 2007 sales, the PNA Group ranks 12th on this year’s Top 50 list and will put considerable distance between Reliance and the rest of the field when their combined results are reported next year.

Platinum Equity opted to cash in its investment in the PNA Group but retains ownership of No. 2 Ryerson, which is in the midst of a restructuring designed to improve its operational performance and profitability.

Because MCN polls companies each summer, respondents are also asked to forecast their expectations for the remainder of the current year. Based on mid-year 2008 predictions by leading service centers, MCN forecasts that aggregate revenues for the Top 50 will increase by a further 9 percent or more this year, the result of both rising metals prices and demand in key markets such as energy and heavy equipment, which continue to defy the otherwise gloomy U.S. economic outlook.

Top 10 Profiles

No. 1 Reliance Steel & Aluminum Co., Los Angeles—To no one’s surprise, Reliance’s decade of aggressive growth finally landed the company in the top spot on the service center ranking, surpassing long-time market leader Ryerson. Reliance completed five acquisitions in 2007, which along with its purchases of EMJ and Yarde Metals in 2006, contributed to its record sales and earnings last year. Reliance reported $7.256 billion in 2007 sales, up from $5.743 billion in 2006 and $3.367 billion in 2005. With its $1.1 billion purchase of the PNA Group earlier this year and no end in sight to its future acquisitions, Reliance is almost assured of a similar growth report for 2008.

No. 2 Ryerson Inc., Chicago—Ryerson reported $6 billion in 2007 revenues, up from $5.9 billion in 2006 and $5.8 billion in 2005. As a private entity under the ownership of Platinum Equity, which purchased the company last year, Ryerson has been in a restructuring and cost-cutting mode. Platinum Equity opted to cash in part of its steel industry investment earlier this year when it spun off Ryerson’s sister company, the PNA Group, to Reliance. Ryerson remains a market leader with over 100 locations across the U.S., Canada, Mexico, India and China.

No. 3 McJunkin Red Man Corp., Charleston, W. Va./Tulsa, Okla.—The merger of McJunkin and Red Man Pipe and Supply last November created a $3.8 billion distributor of industrial and oilfield pipe, valves and fittings. The combined company operates more than 250 stocking locations with 3,000 employees. Goldman Sachs Capital partners, a major investor in McJunkin, reportedly pushed the merger, which may lead to a public offering. McJunkin was ranked No. 11 in MCN’s 2006 Top 50, but did not respond to last year’s survey due to the merger talks.

No. 4 ThyssenKrupp Materials NA, Southfield, Mich.—The North American distribution arm of the German steel giant, ranked No. 3 last year, reported 2007 sales of $3.2 billion, up modestly from $3.18 billion in 2006 and $2.35 billion in 2005. The company is focused on value-added processing and distribution of aluminum, copper, brass, specialty metals, steel and plastics products. Divisions include Copper and Brass Sales, AIN Plastics, OnlineMetals, Ken-Mac Metals, ThyssenKrupp Steel Services Distribution, ThyssenKrupp Steel Services Trading, TKX Aerospace, TMX Aerospace, ThyssenKrupp Hearn and TKX Logistics. Its parent company continues to work on a new, $4 billion carbon and stainless mill in Mount Vernon, Ala., which is expected to begin production in 2010 and could give TKMNA a leg up in the South.

No. 5 Samuel, Son & Co. Ltd., Mississauga, Ont.—Occupying the fifth spot once again is Canada’s Samuel, with $3.15 billion in 2007 sales, up from $2.7 billion in 2006 and $2.675 billion in 2005. The family-owned company, which dominates the Canadian metals distribution market along with its chief competitor Russel Metals, has worked to expand its geographic reach and now sells more on the U.S. side of the border than in its home country. In its most recent acquisition earlier this year, Samuel acquired Namasco Ltd. of Canada, a leading supplier of carbon and specialty flat-rolled products in Ontario and Quebec.

No. 6 Russel Metals, Mississauga, Ont.—Ranked No. 4 last year, Russel finished 2007 with about $2.56 billion in sales, down from $2.69 billion in 2006. Russel management cited margin pressures resulting from high steel prices and weakness in some key end-use sectors as reasons for the flat results. Like Samuel, Russel sees growth opportunity in the United States. Its most recent acquisition, in October 2007, was JMS Metal Services, which operates eight facilities in Alabama, Arkansas, Georgia, Kentucky and Tennessee.

No. 7 O’Neal Steel, Birmingham, Ala.—O’Neal, the largest family-owned service center in the United States (not counting Samuel, which is based in Canada) reported $2.4 billion in 2007 sales, up from $2.3 billion in 2006 and $1.6 billion in 2005. O’Neal, ranked sixth last year, has made its greatest gains of late by focusing on aerospace and other high-margin specialty markets. Last year it formed a High Performance Metals Group to coordinate the efforts of its TW Metals, Aerodyne Alloys, Ferguson Metals, AIM International and Supply Dynamics operations. In March, O’Neal further diversified in terms of product and geography by acquiring TAD Metals’ Northeastern, Southwestern and Canadian regional operations, including six service centers and one sales office specializing in the processing and distribution of stainless steel and aluminum.

No. 8 Carpenter Technology Corp., Wyomissing, Pa.—Both a producer and a distributor of specialty alloys, including stainless steel and titanium, Carpenter remains in the eighth spot with 1.95 billion in 2007 revenues, up from $1.9 billion in 2006 and $1.3 billion in 2005. Work continues on Carpenter’s new mill in Reading, Pa., which will expand its premium melt capacity by 40 percent when completed sometime next year. The mill is part of a four-year, $200 million capital investment program announced in September 2006. 

No. 9 Macsteel Service Centers USA, Newport Beach, Calif.—Macsteel USA, a division of South Africa’s Macsteel Holdings, moves up to the ninth spot with $1.9 billion in 2007 revenues, up from $1.8 billion in 2006 and $1.7 billion in 2005. Most recently, Macsteel opened a new $10 million processing and distribution hub in Tucson, strengthening its presence in the Southwest and Mexican markets.

No. 10 Metals USA, Houston—With $1.845 billion in 2007 sales, Metals USA stays in 10th place where it was ranked last year with $1.802 billion in 2006 revenues, up from $1.639 billion in 2005. While other service centers were reducing stock levels, Metals USA management began building its inventory position last year ahead of the recent steel price increases, leading to a particularly strong 2008 first quarter. Metals USA, which is owned by the investment group of Apollo Management, filed a registration statement with the SEC in May for a possible public stock offering.