http://www.metalcenternews.com RSS feeds for Metal Center News 60 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5573/Mill-Fourth-Quarter-Year-End-Reports.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5776&ModuleID=13765&ArticleID=5573 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=5573&PortalID=51&TabID=5776 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5573/Mill-Fourth-Quarter-Year-End-Reports.aspx In their fourth-quarter reports to analysts and investors, executives from the major publicly held mills reported strong 2011 results, despite some weakness in the fourth quarter. AK Steel Pension Charge Turns Operating Profit into Loss AK Steel reported a net loss of $193.9 million during the company’s fourth quarter, leading to a loss for the full year. The West Chester, Ohio, steelmaker posted a net loss of $155.6 million for 2011, following a net loss of $133.9 million in 2010. The loss was entirely attributable to a noncash, pretax pension corridor charge of $268.1 million, however, said company officials. Excluding this amount, the company’s adjusted net income for 2011 was $10.3 million. AK Steel’s sales for 2011 totaled $6.5 billion, an increase of 8 percent compared to $6.0 billion for 2010. Shipments for 2011 totaled 5.7 million tons, a slight increase from 2010. “The combined effects of lower production and lower selling prices nearly eroded profitability from the prior three quarters,” said James L. Wainscott, chairman, president and CEO of AK Steel during the company’s conference call with investors and analysts. “But for the first time since 2008, we generated adjusted net income, before taking into account the pension corridor charge.” Net sales for fourth-quarter 2011 totaled $1.5 billion on shipments of 1,409,900 tons, compared to sales of nearly $1.4 billion on shipments of 1,359,900 tons for the previous year’s fourth quarter. The company’s average steel selling price in the fourth quarter was $1,070 per ton, 5 percent higher than last year’s fourth quarter, but an 8 percent decrease from the $1,158 per ton in third-quarter 2011. “The economic recovery we’ve been anticipating for several years simply did not fully materialize in 2011, and we endured another round of raw material price increases,” said Wainscott. “However, we made significant strides towards becoming more self-sufficient in raw materials—moves that will greatly improve our cost structure in the future.” In October, AK formed a joint venture with an existing company to produce iron ore concentrate, and, in a separate transaction, acquired stock in a company with significant reserves of met coal. Alcoa Curtailments, Lower Prices Lead to Quarterly Loss for Alcoa Alcoa reported a loss from continuing operations of $193 million in the fourth quarter, the byproduct of charges related to the closure and curtailment of high-cost production capacity, lower aluminum prices and continued market weakness. The fourth quarter loss compares to income from continuing operations of $172 million in third quarter-2011, and income of $258 million in the fourth quarter of 2010. Still, for the full year, Alcoa reported income from continuing operations of $614 million, more than double 2010 results. Revenue in the fourth quarter of 2011 was $6 billion, down 7 percent from the $6.4 billion reported in the third quarter, but up 6 percent over fourth-quarter 2010 revenue of $5.7 billion. Income in the Flat-Rolled Products segment was down 57 percent to $26 million during the quarter, compared to the previous quarter. The declining performance was driven by seasonal volume declines in North America and Russia and continued weakness in the European market. Performance was also unfavorably impacted by credit losses for several customers. “We stayed focused on growth and took aggressive action to cut costs, improve our competitiveness, and strengthen our balance sheet,” said Alcoa Chairman and CEO Klaus Kleinfeld during the company’s year-end conference call with investors and analysts. “For 2012, we expect global aluminum demand to grow 7 percent and are forecasting a global deficit in primary aluminum supply.” Alcoa’s growth projection is ahead of the 6.5 percent rate required to meet the company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth in 2010. In 2012, Alcoa projects global growth of 10-11 percent in aerospace, 3-8 percent growth in automotive, 2-5 percent in commercial transportation, 2-3 percent in packaging and 4-5 percent in construction. Alcoa also projects that growing demand for aluminum, combined with market-related production cutbacks, will result in a global aluminum industry deficit of 600,000 metric tons in 2012. Those factors, among others, lead Alcoa officials to believe pricing for primary aluminum will be stronger this year. Carpenter Technology Carpenter Improves Sales on Lower Volumes Carpenter Technology Corp. reported net income of $23.6 million during its second quarter ended Dec. 31, more than double the $9.3 million during the same period in 2010. Costs in the quarter related to the Latrobe Specialty Metals transaction were $2.4 million. “Our solid second-quarter results reflect continued execution of our strategy to optimize the core business by growing premium product volume and improving our overall profit per pound through pricing and mix management actions,” said William A. Wulfsohn, president and CEO of the Wyomissing, Pa.-based specialty metals company. Net sales for the second quarter were $431.1 million, up 15 percent from the prior year. Total pounds sold were 7 percent lower than in last year’s second quarter based on deliberate actions to grow premium products and strengthen overall mix. Titanium products increased 17 percent, powder metal products were up 15 percent and special alloy products increased 1 percent, while stainless steel and other alloys decreased 12 percent. Revenues increased 12 percent on 4 percent higher volume for the company’s premium products, including special alloys, titanium and powder metals. Revenues for its stainless products increased 31 percent on 12 percent lower volume. “Our success in driving more premium volume through our limited capacity, and actions to improve our product mix, enabled us to more than double our profit per pound from a year ago,” Wulfsohn said. “With end-market demand remaining strong, and our sizable backlog, including in Europe, we remain on track to achieve our fiscal year financial target of a 50 percent increase in operating income.” The Latrobe acquisition is on track to close by the end of the fiscal third quarter, added company officials. Nucor Nucor’s Sales, Income Up Significantly in 2011 Nucor Corp., Charlotte, N.C., reported full-year 2011 earnings of $778.2 million, a big leap from the $134.1 million income posted the previous year. Net sales for the year jumped 26.2 percent to $20.02 billion. The steelmaker’s fourth-quarter performance was consistent with the increase. Nucor reported net earnings of $137.1 million in the quarter, compared to a loss of $11.4 million during the same period the previous year. Net sales during the quarter grew 25 percent to $4.83 billion. That was still 8 percent below the company’s sales during the third quarter. The quarter’s average selling price per ton decreased 6 percent vs. the third quarter, but was up 18 percent compared to fourth-quarter 2010. Tons shipped to outside customers totaled 5.7 million in the fourth quarter, down 2 percent from the third quarter but up 7 percent over 2010. For the full year, the average sales price per ton increased 21 percent vs. 2010. Tons shipped to outside customers totaled 23,044,000 tons, an increase of 5 percent over 2010 levels. Overall operating rates at the company’s steel mills hit 74 percent for the full year, increasing from 70 percent in 2010 and 54 percent in 2009. Construction continues on the company’s 2.5-million-ton direct reduced iron facility in Louisiana. The majority of the equipment will begin arriving in 2012. The project is on schedule for start-up in mid-2013, said Nucor officials. Steel Dynamics SDI’s Full-Year Income Up Almost 100 Percent Steel Dynamics’ full-year income in 2011 increased nearly 100 percent from the preceding year. The Fort Wayne, Ind.-based steelmaker reported net income of $278 million, compared to $141 million in 2010. SDI’s net sales also were up in 2011, though not as dramatically. Net sales jumped $1.7 billion to $8.0 billion for the year. For the fourth quarter, SDI’s net income totaled $30 million, well ahead of the $8 million recorded during the same quarter in 2010. Net sales of $1.9 billion were up 26.7 percent from the previous year’s fourth quarter. “We are pleased with the strong revenue and bottom-line performance in both the quarter and for the year in comparison to prior-year results,” said President and CEO Mark Millett during the company’s conference call with investors and analysts. “We achieved both quarterly and annual organic sales growth of over 20 percent and nearly doubled our annual pretax earnings in a challenging environment.” Fourth-quarter volumes increased in each of the company’s operating segments when compared to the prior-year fourth quarter, but decreased when compared to the third quarter of 2011. While the company’s operating income increased 76 percent over prior-year performance, it decreased 24 percent in comparison to the third quarter of 2011. The decrease in quarterly operating income was primarily the result of compressed flat-rolled margins and Iron Dynamics’ planned three-week maintenance shutdown, which reduced operating income by $10 million due to associated costs and reduced volume. Despite increased volumes, earnings from flat-rolled operations declined 26 percent, as lower selling prices in the first half of the quarter were not matched with corresponding declines in the cost of raw materials, resulting in margin compression. However, beginning mid-quarter, increases in both order entry and pricing should benefit the first quarter of 2012, officials said. Fourth-quarter margins for the combined steel operations expanded in comparison to prior-year fourth-quarter results, as the average selling price per ton shipped increased $100 per ton to $853, and the average ferrous scrap cost per ton melted increased $68. In contrast, steel margins compressed in comparison to the third quarter of 2011, as the average selling price per ton shipped decreased $44 per ton across the steel group, and the average ferrous scrap cost per ton melted decreased only $12. SDI reported a number of milestones in 2011. Its Flat-Roll and Engineered Bar Products segments reported record annual production and shipping volume figures, as well as steel operations in total. Engineered Bar Products and Steel of West Virginia divisions reported record annual operating income. Looking to the year ahead, Millett said the company is optimistic for further growth in most steel end markets. “We believe there is the possibility for more stability to develop in 2012 as improvements continue in certain market sectors, such as energy, agriculture, automotive, transportation and construction equipment,” Millett said. “If the U.S. economy continues a pattern of slow and steady growth during the year, steel demand should logically follow, given the relatively low levels of inventory across the supply chain.” Timken Record Sales in Fourth Quarter The Timken Company, Canton, Ohio, reported record sales of $5.2 billion for 2011, up 28 percent from the prior year on strong demand from diverse industrial markets. The increase primarily reflects growth from the energy, heavy truck, mining, rail and industrial distribution sectors, as well as favorable pricing, material surcharges and acquisitions. In 2011, the company generated $454.3 million in income from continuing operations, up 65 percent from $274.8 million a year ago. Higher volume, favorable mix, surcharges and pricing drove the improvement, more than offsetting increased raw material and administrative costs. "Our financial results tell the story of a transformed Timken Company," said James W. Griffith, Timken president and CEO. "We've successfully repositioned the company, focusing our efforts on those industries and applications where we bring significant value and can make a difference in our customers' performance. As a result of this and our improved operating model, we have increased our earning power, serving Timken customers across a multitude of high-performance applications in industrial markets." For the fourth quarter, Timken reported sales of $1.3 billion, an increase of 18 percent from the same period in 2010. Income during the quarter totaled $108.3 million, up 19.5 percent from the same quarter in the prior year. Sales for steel, including inter-segment sales, totaled $2 billion in 2011, an increase of 44 percent from $1.4 billion in 2010. Demand from the energy and industrial sectors drove the improvement, as well as favorable pricing and an increase in raw-material surcharges of approximately $210 million. U.S. Steel Flat-Rolled, European Segments Lead to Fourth-Quarter Loss United States Steel Corp., Pittsburgh, reported a fourth-quarter 2011 net loss of $226 million, a slight improvement compared to the fourth quarter of 2010 but a reversal from the $22 million net income in the prior quarter. The fourth-quarter performance led to a loss for the full year of $68 million. That was a major improvement from the $482 million net loss posted in 2010. Net sales for the quarter totaled $4.8 billion, down slightly from the third quarter, but up 12.1 percent from the same quarter in 2010. Net sales for the year totaled $19.9 billion, a 14.4 percent improvement from the previous year. The company’s flat-rolled segment reported a loss from operations of $24 per ton, compared to $53 per ton income in the third quarter. The decrease was driven largely by lower average realized prices and shipments created by the uncertain economic outlook and increased domestic supply, which perpetuated cautious purchasing patterns early in the quarter, officials said. Fourth-quarter prices decreased by $32 to $741 per ton, reflecting lower average realized prices on spot market business and index-based contracts. Additionally, the company performed maintenance outages at several facilities, which resulted in increased costs of approximately $50 million compared to the third quarter. Tubular fourth-quarter 2011 results were in line with the third quarter as average realized prices increased to $1,711 per ton and shipments of 482,000 tons were comparable to the third quarter. Fourth-quarter results reflect the continued strong demand for energy-related tubular products. "Our operating results for the fourth quarter included another solid performance by our Tubular segment, reflecting the continued strength of oil-directed drilling. Our Flat-rolled segment incurred a loss from operations due to soft steel market conditions during most of the quarter, increased costs related to planned maintenance outages and accounting losses on transactions to sell excess iron ore pellets,” said John Surma, chairman and CEO. “U.S. Steel Europe results continue to reflect the difficult economic situation in the region." At the end of January, U.S. Steel sold U.S. Steel Serbia to the Republic of Serbia for a nominal purchase price. U.S. Steel Kosice will receive payment of certain intercompany balances owed by U.S. Steel Serbia for raw materials and support services, subject to adjustment. "Our efforts to improve the operation's cost structure and shift our commercial focus towards more value-added products have been unable to offset the particularly difficult economic conditions in Southern Europe. As mentioned last quarter, in response to sustained operating losses at our Serbian operations, we have been pursuing all options to improve our situation there. The option that proved to be in the best interest of our shareholders is this sale to the Republic of Serbia," said Surma. The sale will allow U.S. Steel to exit the operations quickly and avoid further losses in Serbia, he said. The company’s losses there were in excess of $200 million in 2011. "We expect to report a significant improvement in our operating results in the first quarter as compared to the fourth quarter, mainly driven by improved average realized prices and shipments for our Flat-Rolled segment. Our Tubular operations are expected to have another strong performance as operating results are expected to be in line with the fourth quarter,” Surma said. “We expect our European segment results to reflect the effects of the continued difficult economic environment across Europe." Pam Tue, 13 Mar 2012 18:35:00 GMT f1397696-738c-4295-afcd-943feb885714:5573 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5572/Producer-Profile-Leavitt-Tube.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5776&ModuleID=13765&ArticleID=5572 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=5572&PortalID=51&TabID=5776 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5572/Producer-Profile-Leavitt-Tube.aspx With the support of its parent company, and upgraded equipment, this Chicago-based tubing manufacturer has a new lease on life. By Tim Triplett, Editor-in-Chief At a Glance Leavitt Tube Co. LLC 1717 W. 115th St. Chicago, IL 60643 1-800-LEAVITT Fax: 773-239-1023 www.leavitt-tube.com tubeman@leavitt-tube.com Key Personnel: Takabumi Konishi, chairman and CEO; Dave Klima, vice president of finance; Shunsaku Honda, vice president of operations and quality director; Joe Fattori, vice president of human resources; Pat Knutson, director of sales; Joe Davy, director of business development Total Employees: 120 Facilities: Two manufacturing plants totaling 740,000 square feet on a 46-acre campus in Chicago; 256,000-square-foot manufacturing plant in Jackson, Miss. (currently idled) Products: Broad line of structural and mechanical steel tubing Equipment: W80, W50 structural mills, #8, #7 and #5 mechanical mills in Chicago; #21, 22, 23, 24 mechanical mills in Jackson, Miss. Even though Leavitt Tube is about half its former size, its aspirations have never been bigger. With new equipment coming on line at its Chicago headquarters, and a market that is finally beginning to turn around, this long-time maker of structural and mechanical steel tubing sees 2012 as “a new beginning.” As Leavitt executives say, it’s not how big you are, but how profitable, that really matters. The company was founded by the Leavitt family in 1956, but it has changed ownership several times in the past 40 years (see History of Leavitt sidebar). In 2001, it was acquired by private investors in the Pinkert Industrial Group. Pinkert cashed in some of its investment in 2005, selling a 40 percent stake to Sumitomo Corp. of America. Then in 2008, Pinkert sold the remaining 60 percent to Maruichi Steel Tube Ltd., the largest steel tube producer in Japan. Today, the two large Japanese industrial companies jointly own Leavitt, with Maruichi holding the controlling interest. Takabumi Konishi, chairman and CEO of Leavitt, admits that the timing of the latest acquisition could have been better. Six months after the deal, the bubble burst and the U.S. economy plummeted. His early days at Leavitt’s helm were difficult ones as orders waned and the company was forced to lay off nearly half its workforce. It also closed a second manufacturing plant in Jackson, Miss., which remains idle today. Leavitt currently has about 120 total employees, a 50 percent reduction from its peak. “The timing was unfortunate, but the economy in the U.S. will recover at some point,” Konishi says. “We [Maruichi] have been in business since 1926, and we have seen the business go up and down with the economy many times. This is just part of history. Meanwhile, we continue to invest strategically.” “2009 was a very difficult year as we right-sized the company to our business,” adds Pat Knutson, Leavitt’s director of sales. “Fortunately, our parent company in Japan has solid confidence in Leavitt’s potential and its market. We knew they were in it for the long haul.” Maruichi is not new to the U.S. market. It opened Maruichi American Corp. in Santa Fe Springs, Calif., in 1978. The West Coast tube-making operation is jointly owned by Maruichi and Metal One, another Japanese steel company. “Maruichi wanted to expand its reach across the U.S. Their goal from the beginning was to focus on producing the highest quality tubing in the industry. To that end, they set forth a strategic plan to upgrade and modernize Leavitt’s aging equipment with a long-term focus on quality,” Knutson explains. Maruichi invested millions to acquire the best tube-making equipment available, and spent the past two years replacing and upgrading Leavitt’s three main manufacturing lines in Chicago. Effective this month, Leavitt will be producing a majority of its product line on the following new equipment, which gives it greater size range capabilities, faster turnaround times and tighter tolerances: W80 Structural Mill—Leavitt’s largest mill, the W80 structural mill, can produce tubing from 4-by-4 through 10-by-10 inches, from 0.188- to 0.500-inch wall thickness, in rectangles and HI-Y 50 pipe sizes from 5 Sch. 40 through 8 Sch. 80. The line also includes a new automated quick-change cartridge tooling system, which slides one set of tooling out of the way and replaces it with tooling for the next job, cutting changeover time from eight hours to less than three hours. Later this year the company will add 10.75- and 12.75-inch rounds to its size range. W50 Structural Mill—Replacing one older mill and eventually another is a new W50 structural mill, also with quick-change tooling. It produces 1.5- to 4.0-inch squares in gauges from 0.083 to 0.313 inch, as well as HI-Y 50 pipe size tubes from 1.25 Sch. 10 through 4 Sch. 40. The new mill is also equipped for flash removal of the weld bead to produce a smooth interior surface for applications where tubing must telescope. No. 8 Mechanical Mill—Leavitt’s new #8 mechanical tube mill, relocated from a Maruichi plant in Japan, produces A513 tubing in rounds from 0.625 to 2.75 inches, in one-half-inch to 2-inch squares, in gauges from 0.049 to 0.120 inch. It replaces a mill that had been in service for 40 years. Leavitt also operates two other existing mechanical ERW mills (#5 and #7) and one structural mill (W40) at the Chicago location. “Starting this month, nearly our entire size range can be produced on the brand new or upgraded state-of-the-art equipment,” Knutson says. Leavitt saw over 20 percent growth in 2011 vs. 2010, in terms of tonnage, and forecasts a similar gain this year. Historically, Leavitt has distributed over 90 percent of its volume through service centers—and that approach will not change, emphasized the company’s management team. “We will continue to support the metal service centers in North America, but our new equipment opens up opportunities for different customers we have not been able to service before,” Knutson says. Leavitt’s new equipment allows it to offer a higher quality product, suitable for applications with tighter tolerances. That will help the company expand its customer base in three ways, he explains: through greater penetration of existing service center customers; through new service centers that were not formerly customers because of the demanding markets they serve; and through end-users currently buying mill-direct from Leavitt’s competitors. “This new equipment will help us crack new markets that require especially tight tolerances, such as automotive and ag equipment,” Knutson says. “Many service centers have bought tube lasers, which require a consistent tube so the laser only has to be set up once. Now that Leavitt can make more sophisticated tubing, service centers can sell to more sophisticated users,” Konishi notes. He also sees an opportunity for Leavitt to sell to Japanese carmakers with plants in the United States that continue to buy tubing from suppliers in Japan. As part of its long-term relationship with service centers, Leavitt will continue to offer product knowledge programs for service center personnel. “We want to be able to educate their sales reps so they know how to sell our product,” says Knutson. “Ninety percent of our business goes through distribution. We count on our service center partners and their salespeople to be our sales force.” The new equipment does not add to Leavitt’s total capacity, which remains around 250,000 tons a year, but it enables the company to offer a better product at a lower production cost. “Our target is not to become the largest in terms of tonnage, but to become the highest quality tubing supplier,” Konishi says. Pam Tue, 13 Mar 2012 18:27:00 GMT f1397696-738c-4295-afcd-943feb885714:5572 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5571/Tollers-on-Auto-pilot.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5776&ModuleID=13765&ArticleID=5571 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=5571&PortalID=51&TabID=5776 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5571/Tollers-on-Auto-pilot.aspx A healthier auto industry is piloting toll processors toward prosperity. By Dan Markham, Senior Editor The health of the toll processing segment of the metals supply chain is tied inextricably to the condition of the automotive industry. Thus, for most of North America's processors, the prognosis is outstanding. Most toll processors—companies that provide processing services for mills and end-users for a fee—are gaining strength right along with their automotive customers. Since needing life support in 2009, carmakers have boosted production of cars and light trucks dramatically. In 2011, light vehicle production in North America was just short of 13.0 million units, a figure that is projected to increase to more than 14.0 million units in 2012. The number is far short of the 16-million unit peak at mid-decade, but it's up more than 50 percent from the 8.6 million vehicles produced three years ago. “Being a toll processor in the Detroit and Louisville areas, we're heavily dependent on the automotive market. 2010 and 2011 have been very good for us, and we expect more of the same in 2012," says Dave Detzel, sales manager for Voss Industries, Taylor, Mich. Unlike the trend before the recession, the automotive rebound is taking place with all automakers and in all parts of the country. The domestic automakers, which lost ground to their transplant counterparts for almost two decades, have regained market share since the Big Three's well-documented troubles of 2008-09. Now, their streamlined supply chains and improved products have made for a healthy steel processing environment in the Midwest, where many of the nation's toll processors are located. "I think the marketplace finally understands that Ford, GM and Chrysler are pretty good car builders," says Eduardo Gonzalez, president and CEO of Ferrous Metal Processing, Cleveland. "They've gotten a lot smarter with consolidation of production. I love what's happening." Steel Technologies, Louisville, Ky., serves both the traditional Big Three and the foreign-owned New Domestics. Brian Habermel, sales manager of outside processing, says conditions are good for both sets of automakers. "It's good to see what the domestics have been able to do. The only issue over the last year was the natural disaster [tsunami in Japan], which caused a hiccup with Toyota and Honda, though not so much with Nissan," says Habermel. "That caused a bit of a backlog of inventory, but it has worked itself through." Beyond automotive, however, the outlook is not as robust. “All of the other markets, primarily construction and converters, are showing little evidence of rebounding," says Peter Adamski, general sales manager for Taylor Coil Processing, Lordstown, Ohio. That sentiment was shared by a couple of Southern processors less heavily tied to automotive. "Nothing would indicate a strong increase from our current customers, with the exception of our automotive accounts," says Ed Panek, senior executive vice president for All Metals Service and Warehousing, Spartanburg, S.C. Further west, the outlook is similar. "We're off to a better start this quarter than we were from the second quarter on last year. I'd like to think it's going to hold, but I really don't expect it," says Ben Kalb, director of operations for Ameristar Coil Processing, Tulsa, Okla. The company, which is owned by Ameristar Fence Products, does a lot of processing for the fencing market, plus some for automotive and appliance. "There are too many things going on that are going to impact the markets we serve," Kalb says, noting the election year uncertainty, oil prices, and political and economic turmoil overseas among them. "I'm just not that optimistic, and normally I am." That kind of pessimism is tough to shake, particularly when memories of the brutal recession are still fresh in the minds of so many in the supply chain. Even as conditions improve in a lot of markets, both mills and end-users continue to make decisions with one eye on the past. Though dedicated toll processors don't directly buy and sell steel, they feel the effects of those who do. "You will find people who don't want to play the market anymore," says Steel Technologies' Habermel. "It's almost to the point where people are saying, 'I don't care what the price of steel may be next month, I don't want to keep it on my floor this month.'' The end result of that inventory-is-evil attitude is a supply chain with very little cushion, which puts pressure on processors to get material in and out as quickly as possible. "The biggest pressure it puts on us is to make sure we can minimize the unscheduled downtime," says Detzel. "You have to make sure your maintenance program will keep your units in operation and reduce the number of unplanned outages." Calls from customers' for quick turnarounds can be seen as an opportunity for processors equipped to meet the new demands, Adamski says. "If you have the ability to coordinate your internal production to meet those needs consistently, you start to build a level of confidence. Suppliers learn they can count on you to get material turned around and off to their customers in a timely manner." Fortunately for processors, more exacting demands from their customers have also been accompanied by a trend toward more information sharing. Having ready access to current and expected demand levels from their customers is crucial to reducing the time material spends in transit. When the economy stalled, in an attempt to expand their business, some toll processors began buying steel for inventory. Similarly, some service centers began marketing themselves as toll processors. Consequently, more players are directly affected by the volatility of steel prices today. FMP is a toll processing purist, selling only its services, not steel. "The only thing we worry about is the overall economic activity in the United States, and in particular the metalworking community. The only thing that affects us is volume. Our prices are based on costs, rather than the vicissitude of the price of steel," Gonzalez says. Gonzalez questions the wisdom of service centers that have decided to expand their processing capacity. "There are very few service centers that can justify employing a new piece of equipment. You need to have a lot of processing at $25 per ton to pay the bills," he says. Once a dedicated toll processor, Main Steel Polishing Co. entered the service center business in 2011. The Tinton Falls, N.J.-based company, which specializes in polishing coils in addition to other services, now generates most of its revenue through its metal sales, though it has maintained its toll processing offerings. "Our philosophy, which we were very open about, was to turn Main Steel into a service center. We told our customers [some of them service centers] they could stay with us if they chose. We weren't kicking anybody out," says Keith Medick, CEO of Main Steel. Habermel, whose company has both service center and toll processing operations, says the trend of distributors adding processing equipment has slowed in recent years. "Right now, the market is still dealing with a hangover from 2008, where a lot of companies are not sure they want to put in equipment and add people," he says. Other trends are just now emerging, most notably demand for flat memory-free steel. "It started 10 or 15 years ago, and now everyone is demanding it," says Gonzalez. "Not everyone needs it, but everyone is demanding it." To satisfy that demand, some companies are investing in new stretch leveling or temper pass equipment. For example, FMP is installing a mammoth stretcher leveler at its FerrouSouth facility in Iuka, Miss. Olympic Steel, a service center that does extensive toll processing, has just completed installation of a temper mill at Gary, Ind., and plans to build another. Detzel at Voss Industries says the growing demand for flawless material prompted his company to install a Parsytec electronic surface inspection machine. "Every year, the level of detail that customers want to identify on flat-rolled coil increases. They are continuing to press on what they expect, to stop imperfections from going to their customers," Detzel says. Another trend that will intensify over the coming years is the use of advanced high-strength steels, especially by the auto industry. Processors will need more high-powered equipment to level, slit, cut and coil this stronger steel, Adamski says. Extensive communication between the mills, the processors and the equipment manufacturers will be imperative. "As we've gone through the last year, the mills are learning more and more about how the product is performing and the requirements of the auto industry," he says. "With the composition of that material, it's really going to drive change in the way some of the equipment is laid out and operated." Pam Tue, 13 Mar 2012 18:23:00 GMT f1397696-738c-4295-afcd-943feb885714:5571 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5570/The-Spin-on-Spiral-Weld.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5776&ModuleID=13765&ArticleID=5570 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=5570&PortalID=51&TabID=5776 http://www.metalcenternews.com/Editorial/CurrentIssue/February2012/tabid/5776/articleType/ArticleView/articleId/5570/The-Spin-on-Spiral-Weld.aspx Weak demand and overcapacity have hurt producers of spiral welded pipe, who are pinning their hopes on new pipeline projects like the controversial Keystone XL. By Myra Pinkham, Contributing Editor North American spiral welded pipe producers saw a challenging year in 2011, and expect another one in 2012, unless the U.S. economy—and therefore industrial natural gas consumption—snaps back faster than anticipated. Contributing to the challenging business conditions is a large oversupply of API-grade large-diameter double submerged arc welded (DSAW) line pipe used for the transmission of oil, natural gas and natural gas liquids from the drilling sites to consumers. Production capacity nearly doubled in 2009 when five new spiral weld DSAW pipe mills came on line, adding over 1.25 million tons of capacity to the market, just as new pipeline projects began to dry up. “The companies decided to build these mills based on the fact that from 2006 to 2008, the existing DSAW mills were going like gangbusters,” says Paul Vivian, a partner with Preston Pipe Report, Ballwin, Mo. Prior to 2009, the entire North American large-diameter API-grade pipe capacity was only about 2 million tons, largely using longitudinal or straight seam welding, at a time when many new energy transmission projects were in the works. During the peak of this demand, a large percentage of DSAW pipe was imported because of the long lead times at the domestic mills. “At that time, it made sense to expand the market’s production capacity and to do so by building spiral welded pipe mills,” says Kimberley Leppold, senior steel analyst for London-based Metal Bulletin Research. “That way the mills could come on line quicker than with a traditional longitudinal DSAW pipe mill, and the companies could produce large-diameter pipe at a cheaper price.” Spiral welded pipe starts with a coil that is formed into a helically shaped tube, similar to the cardboard tube found inside rolls of paper. Using a cage rolling process, the mill places a weld on the inside seam, followed by one on the outside seam. This continuous process creates pipe with a barber pole effect, as opposed to the straight seam of electric resistance welded (ERW) or longitudinal welded DSAW pipe. Spiral welded pipe-making technology dates back to 1927, says Rob Simon, executive vice president of Evraz North America’s Tubular Products Group. The Evraz mill in Regina, Saskatchewan, (then run by Ipsco Inc.) was the first mill in North America to produce API-grade large-diameter spiral pipe for the transmission of oil and natural gas in 1969. Today, Evraz operates four spiral weld mills in Regina and two in Portland, Ore. API-grade spiral welded pipe is also produced by Berg Steel Pipe Co. in Mobile, Ala.; Stupp Corp. in Baton Rouge, La.; PSL North America LLC in Bay St. Louis, Miss.; United Spiral Pipe (a joint venture of U.S. Steel Corp. and South Korea’s Posco) in Pittsburg, Calif.; and Welspun Tubular LLC, Little Rock, Ark. All of these companies entered the market in the 2008-09 timeframe, contributing to the oversupply situation that is weighing on the market today, says Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa. Other North American mills produce spiral welded pipe for structural and water transmission applications, but these are relatively small niches. Scott Montross, chief operating officer for Vancouver, Wash.-based Northwest Pipe Co., estimates that spiral welded water transmission line pipe is only a $400 million to $500 million per year market. As opposed to the energy sector, demand for water transmission pipe was relatively healthy in 2011, as a number of municipalities let orders for pipelines, Montross says. He expects fewer quotes this year as government agencies struggle to fund such projects, despite the huge need to replace aging municipal infrastructure. Nevertheless, Northwest Pipe plans to expand the production capabilities at its Saginaw, Texas, manufacturing facility, including two new buildings, upgraded hydrostatic testing equipment, extended cement mortar lining capabilities and new paint equipment. The project will increase the diameter and thickness ranges of the spiral welded pipe produced there to a maximum of 126 inches by 1 inch. Montross says this expansion will position the company to land certain water transmission contracts expected in the next three to five years. They include the Tarrant Region Water District’s planned 147-mile Integrated Pipeline project in north Texas, which will bring additional water supplies to the Dallas/Fort Worth area by 2018. While structural applications for spiral welded pipe are slowly improving, including some new activity in offshore loading, port activities and other infrastructure improvements, demand for structural tubing is highly dependent on the nation’s jobs recovery. “There isn’t much of a need to build new buildings, roads and bridges when unemployment is so high,” says Vivian at Preston Pipe Report. “Any pickup relies on economic recovery, and that won’t happen overnight.” When it comes to energy-related applications, electric resistance welded pipe can be manufactured more cheaply than DSAW, notes Simon at Evraz. However, the outer diameter of ERW pipe is limited by the maximum width of the coil available, generally to 24 inches. Longitudinal or straight seam DSAW pipe is limited by the plate width, keeping it to a maximum of a 42-inch OD. In contrast, spiral welding can produce pipe up to 60 inches in diameter and in 80-foot lengths, as opposed to the 40-foot sections of most longitudinal DSAW mills. Ty Serrill, product manager for PSL North America, says the 80-foot lengths offer major advantages. They maximize the space on each railcar, keeping transportation costs down. They minimize the number of welds that must be done in the field, saving time and expense, and allowing contractors to lay the pipe more quickly. Plus they require fewer welds that must be inspected. Few pipeline companies make much of a distinction between spiral welded and long seam DSAW, however, says David Delie, president of Welspun Tubular. “They just look to use large-diameter line pipe.” With many pipeline projects winding down or completed, demand for large-diameter pipe has been fairly weak for the last year, says Delie, who expects that weakness to persist this year. Not that there isn’t a lot of drilling activity. Booming exploration in the shale plays in the United States and Canada has boosted demand for oil country tubular goods, and for small-diameter line pipe as well. But not many new large-diameter pipeline projects have been announced, and those that are going forward tend to be shorter in distance, say suppliers. “This is why everyone is chomping at the bit to get the Keystone XL pipeline going,” says Leppold, referring to the $7 billion, 1,700-mile pipeline proposed by TransCanada Corp. to transport crude oil from the Alberta, Canada, oil sands to refineries on the Texas Gulf Coast. Those hopes were dashed last month, at least for the time being, when President Obama opted to deny a permit TransCanada needed to proceed with the pipeline, which was to pass over environmentally sensitive aquifers in Nebraska. Had the project been approved, it would have consumed an estimated 1 million tons of line pipe, much of which was already produced in anticipation of the project, which was to have commenced in September 2010. Canada has said that if the U.S. blocks the pipeline, it will transport the oil from its tar sands via its West Coast ports to China. The Obama administration’s decision not only creates problems between the United States and Canada, but it could taint the whole pipeline permitting process, says Delie. “Everyone will now take a second look before building pipelines.” He believes it isn’t so much a threat to Nebraska’s Ogallala Aquifer that is behind environmentalists’ protests, but the fact that this project would expand America’s use of carbon-based energy, at least for a time. “There are already a number of pipelines running through that aquifer. I would think there would be more concern about the older pipelines already located there than a new one,” he adds. About 100 manufacturing, oil and metals industry groups had asked the Obama administration to approve the pipeline, given its potential to create new jobs and reduce the country’s dependence on foreign oil. TransCanada estimates the pipeline would create 13,000 construction and 7,000 manufacturing jobs. “I’m eventually expecting to see a push from the shale plays, especially the Marcellus,” says Leppold at Metal Bulletin Research. While some of the shale plays, especially the oil plays, are close to existing pipelines, others will eventually need more transmission lines. Shifts in U.S. population centers will someday require new pipelines to transport natural gas and oil to new places, but that won’t occur until the housing market recovers, adds Vivian. Serrill at PSL says there is also hope the recently enacted Pipeline Safety, Regulatory Certainty and Job Creation Act will help the large-diameter line pipe market stay afloat despite the current overcapacity. “As more inspections are done, more pipelines could be replaced,” he says. Some of the nation’s existing pipelines are 40 to 50 years old, says Vivian, even though they were only designed to last for 20 years. Yet without a healthier economy and more financially solvent municipal governments, they are unlikely to be replaced any time soon. Currently the spiral welded pipe sector is operating at only about 50 percent capacity utilization, he adds. “That should improve as the economy gets back on track, probably by 2013 to 2015.” Pam Tue, 13 Mar 2012 18:19:00 GMT f1397696-738c-4295-afcd-943feb885714:5570