http://www.metalcenternews.com RSS feeds for Metal Center News 60 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9758/Business-Topic.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5977&ModuleID=14422&ArticleID=9758 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=9758&PortalID=51&TabID=5977 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9758/Business-Topic.aspx MCN Outlook 2013 Survey Post-Election Pessimism Colors Forecast By Tim Triplett, Editor-in-Chief Results from the latest Metal Center News Outlook Survey show that recent events on the economic and political fronts have taken a toll on industry attitudes. Fully 70 percent of respondents said the results of the election made them feel more pessimistic about the economy, while only 4 percent felt more optimistic. Twenty-six percent felt about the same regarding the economy’s prospects post-election. That attitude obviously affected MCN’s 2013 Optimism Index, which dipped to a reading of 4.0 from last year’s 4.5. Since hitting a low of 3.5 in 2009, the index had been on the upswing, registering 4.1 in 2010, 4.3 in 2011 and 4.5 in 2012. To calculate the index, MCN asks respondents to rate their prospects for the coming year on a 1-to-6 scale, with 1, 2 and 3 on the pessimistic half and 4, 5 and 6 on the optimistic half. In the latest survey, only 66 percent of respondents place themselves on the optimistic half of the scale, down from the 89 percent who characterized themselves as optimists last year. Changes in optimism levels among industry decision-makers tend to correlate to their forecasts for growth, purchasing, compensation and capital spending. The more pessimistic they feel, the less ambitious their plans. The lingering economic uncertainty appears to have dampened service centers’ forecasts for sales in 2013. Only about 65 percent predict an increase. Twenty-five percent expect sales levels to remain about the same, while 10 percent forecast declines. Averaging all the responses yields a forecast for about a 4 percent gain in service center sales this year. That’s down from last year’s 6.5 percent prediction. Asked to predict the direction of steel prices in 2013, about 50 percent of respondents expect prices to increase, while 10 percent expect prices to decline and 40 percent expect them to remain about the same. Averaging all the responses yields a forecast for about a 3 percent gain in steel prices this year. For comparison, in last year’s survey, service center executives forecast a 5.8 percent increase in the price of steel in 2012. In actuality, the price of hot-band began the year around $750 a ton and finished the year below $650 a ton. A few basic conclusions can be drawn from these figures: This year’s more modest forecast probably reflects the higher degree of pessimism in the marketplace. Metals prices are highly volatile and highly unpredictable, and service center executives are in no position to predict them. As middlemen, they have no pricing power and are at the mercy of larger forces both upstream and downstream. In the aluminum market, 56 percent of respondents expect an increase in prices and 6 percent a decrease, while 38 percent see them staying about the same. In the copper market, 50 percent forecast an increase in prices, while just 10 percent expect a decrease. Forty percent see little change. (Note, the sample size was too small to calculate the degree of change.) To buffer themselves from the volatility of metals pricing, service centers continue to increase their value-added service offerings. Revenues from such processing services as sawing, slitting, laser cutting, and even welding and parts fabrication, are more manageable and predictable. How much do service centers add value? About 30 percent of respondents consider themselves strictly distributors; another 30 percent offer basic value-added services such as sawing and shearing. But nearly one-third offer extensive processing, from first-step part production to full-on fabrication. The typical/median service center/processor responding to this survey derives 20 percent of his revenues from the value-added side of the business. The trend toward more value-added processing by distributors has spurred capital spending in the past two decades, but concerns about the economy may limit spending next year. Only 28 percent plan to spend more in 2013 than they did in 2012, while 34 percent plan to spend about the same. About 38 percent of respondents plan to spend less on new equipment this year. The typical/median capital budget is in the $100,000-$250,000 range. Hopefully, the pessimistic sentiment that is coloring attitudes toward 2013 will improve once Congress has safely steered the economy away from the fiscal cliff. Wed, 20 Feb 2013 21:22:00 GMT f1397696-738c-4295-afcd-943feb885714:9758 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9757/Prepaint-Outlook.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5977&ModuleID=14422&ArticleID=9757 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=9757&PortalID=51&TabID=5977 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9757/Prepaint-Outlook.aspx Prepaint Awaits a Construction Rebound Coil coaters hope to expand prepainted metals into other markets, but the still-wobbly construction market remains the primary end use for the material. By Dan Markham, Senior Editor Demand for prepainted metal, including steel and aluminum, has lagged in recent years as a result of the slowdown in building and construction, the destination for two-thirds of the material. The outlook for 2013 is mildly better, say the experts, though a return to the boom times of the past remains somewhere in the future. “We’ll probably have a year that’s similar to this past one. Not a whole lot of positive change,” says Jim Dockey, director of sales and marketing for Centria, Moon Township, Pa. “We have some cautious optimism that it will get better by the end of the year, but we said that last year and it didn’t happen.” Through the first six months of 2012, where the data is available, the market for prepainted coil was fairly flat, reports Jeff Widenor, vice president of the National Coil Coating Association, Cleveland. The industry made mild gains in the construction market this year, but they were offset by weaker results in the consumer markets. His prognosis for this year is for modest improvement. “For 2013, it’s kind of a mixed bag, depending on what sector you’re talking about,” says Widenor, who also serves as vice president of marketing and planning for Precoat Metals, St. Louis. The commercial construction market has been way down in recent years, off as much as 55 percent from its peak, says Don Switzer, prepainted product manager for Steel Dynamics Inc., Fort Wayne, Ind. It has climbed from its trough, and will continue to make progress in 2013, though not to high levels, he predicts. Prepainted aluminum composite panels have grabbed substantial market share in the nonresidential building market, says Jeff Alexander, president of the NCCA. Unfortunately, public sector building construction, including schools and hospitals, remains sluggish as municipalities having little money for major projects. One construction sector that has propped up demand for prepainted materials is the post-frame market. Post-frame construction uses engineered framing systems with widely spaced supporting columns to produce versatile, inexpensive low-rise commercial buildings. Such structures are particularly popular in agricultural settings. But even that market is losing traction, Widenor says, and is forecast to dip 5 percent this year. “There were some very attractive tax incentives in 2011, which were reduced in 2012 and will be reduced further in 2013. There’s been a pretty clear impact on farm spending as a result of that.” Prepaint suppliers point to some favorable signs for their business, including a recent run of positive reports from the American Institute of Architects’ Billings Index. The index recently hit 52.8, with all regions of the country reporting growth for the first time since the recession. A 50-plus reading generally indicates growth in the nonresidential construction sector, though typically there’s a 9-12 month lag between when the index increases and the industry sees improved demand. Moreover, the recent past has left Widenor somewhat cautious. “We’ve seen false positives before, where it’s bounced above 50 and below 50. I’d like to see something stable, like a six-month trend that we can really sink our teeth into.” Despite the concerns, he projects nonresidential construction spending to increase 4-5 percent in 2013. The residential side is also blooming, with promising housing start figures reported in the fourth quarter. Unfortunately for metal suppliers, new housing construction is not a major source of demand for prepainted metal. The prepaint industry, led by the Metal Roofing Alliance, Belfair, Wash., targets more of its efforts at the reroofing market, a relatively stable business involving 500,000-700,000 homes annually. That’s where metal roofing suppliers have seen their most success, winning converts from conventional asphalt shingles. Metal roofing’s market share topped 10 percent before slipping a bit in the last two years. To Bill Hippard, president of the MRA, the market share dip is attributable to a declining budget for advertising and PR work. The industry had been investing upwards of $3 million annually to sell homeowners on the benefits of metal roofs, though that spending was cut in half in the past few years. That assessment was supported by a recent targeted marketing campaign conducted by the MRA. The association decided to spend four times its typical marketing budget in four cities: Fort Smith, Ark., and Eau Claire, Wis., one year, followed by Birmingham, Ala., and Harrisburg, Pa., the following year. The campaigns had the desired effect, with metal roof purchases growing to the targeted 20 percent market share in those areas. “People just had to be educated about the benefits of metal roofing,” says Hippard, who also serves as vice president of sales at Precoat Metals. “This was our proof of concept, that if we had the right program, pointed at the right people, we could make it happen.” And the metals industry has taken notice. “Metal roofing continues to be the shining star as it relates to prepainted steel,” says SDI’s Switzer. Metal roofing has had less success infiltrating the new-home market, capturing only a 5 percent share. Installing a metal roof can cost up to twice as much as conventional asphalt shingles. The homebuilder’s primary goal is to keep his costs down. While a metal roof will more than pay for itself in the long run, it’s easier to sell the life-cycle benefits the homeowner who will live there for many years. Still, MRA believes that if it can continue to grow its share of the reroofing market, that home buyers will start to push for the product at the time of the home’s construction. Boosting that cause are recent technical and cosmetic developments that make metal roofing materials easier to install and more attractive. Metal roofs are now available to resemble any and all traditional roofing materials. “Not too many years ago, everything was a vertical seam roof like you’d see in mountain and snow load areas. It was very attractive and very colorful, but maybe it didn’t fit into the neighborhood in suburbia,” Hippard says. “Now, for every type of roofing product there is, there are a number of manufacturers who make a metal substitute that looks just like it. In some cases, you have to use a magnet to make sure it’s not slate or cedar shake.” One wildcard for building and construction demand in 2013 will be reconstruction in the Northeast as the coastal areas work to recover from Hurricane Sandy. Groups like the Metal Roofing Alliance and the Glenview, Ill.-based Metal Construction Association will promote the virtues of metal buildings, which could stand up better to the next storm. “We want to be very sensitive and discreet, but when it’s time for rebuilding we have a number of different documents that talk about metal roofing from a wind-resistant standpoint and durability standpoint,” Hippard says. The trade groups can make a similar case for prepainted metal materials used in other types of building construction. Along those lines, one of Centria’s bigger markets is signage. Dockey expects to see substantial growth in his company’s Northeast business to replace signs lost during the storm. Beyond construction, other markets for prepaint include HVAC and appliance, which were down 1.4 percent in 2012 but are expected to grow by 4 percent in 2013 along with the residential construction market. Transportation is also a destination for painted coils, though not in the numbers the industry would like. “The big market for prepaint continues to be automotive,” says Switzer. “That’s been a challenging sell for our industry.” Making greater headway in segments such as transportation, or grabbing a piece of previously untapped markets, is one of the primary objectives of NCCA. The organization has also shifted some of its efforts from the prepainting vs. postpainting debate to positioning prepaint as an attractive alternative to materials such as wood, concrete and plastic, says Widenor. To help achieve those goals, the organization has hired its first technical director, Al Dunlap, a retired executive from Chicago paint supplier Valspar. Dunlap will work as a liaison between the NCCA and other trade groups, and also examine what new markets may be exploited. One area that coil coating executives point to as a prime selling point is the material’s environmental attributes, from the natural recyclability of its steel and aluminum to the cleaner painting process that releases fewer contaminants into the air. But, Dunlap says, the industry needs to do a better job of putting that on paper. “Most people in our industry believe it, but we haven’t really done the documentation. That’s part of what I’m going to gather. I believe the European Coil Coating Association is a little ahead of us in that regard, and we can learn from them and move quicker.” Europe also has led in the development of chrome- and lead-free coatings, which eventually may be mandated in the U.S. Metal Coaters, one of the largest toll processing coil coaters in the U.S., already has begun offering pretreatments compliant with Restriction of Hazardous Substances standards that were developed abroad, says Megan Haun, marketing manager for the Houston-based company, emphasizing prepaint’s environmental attributes. Like other links in the supply chain, the industry has experienced a fair amount of consolidation in recent years. The most noteworthy was Precoat Metals’ 2011 acquisition of Indianapolis-based Roll Coater. Widenor says the integration of the two large companies, which had more than a dozen locations between them, has taken place quicker than anticipated. Earlier last year, Centria signed an alliance with Toronto-based Metal Koting to represent some of their technology, particularly for printing and laminating in the United States. “Instead of investing in our own lines, we wanted to work with them and capitalize on what they’ve already worked hard to do,” Dockey says. Also in 2012, Metal Coaters opened a new facility in Middletown, Ohio, to reduce freight costs. The company now operates four locations. Additionally, the industry anticipates three new coil coating lines becoming operational in 2013. “However, the current economic environment does not support this kind of capacity, so there are sure to be more changes (to the supply base),” says Alexander at NCCA. On top of that, Dockey says, the U.S. has seen a sizable uptick in the amount of painted product being imported. The phenomenon is not new, though it usually takes place in markets that are more robust. “The equivalent of two or three high-speed coating lines worth of capacity is being imported into the U.S. That’s 600,000-700,000 tons of prepaint coming in from offshore, at market prices that raise questions about whether it’s being fairly traded,” he says. “There’s a lot of sentiment to do what we can to understand these imports and figure out how as an industry we should react.” Wed, 20 Feb 2013 21:03:00 GMT f1397696-738c-4295-afcd-943feb885714:9757 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9756/Nickel-Market-Report.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5977&ModuleID=14422&ArticleID=9756 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=9756&PortalID=51&TabID=5977 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9756/Nickel-Market-Report.aspx Superior Outlook for Superalloys Prospects are good for nickel-based superalloys, with demand on the upswing in power generation, aerospace, and oil and gas markets. By Myra Pinkham, Contributing Editor Nickel suppliers are cautiously optimistic that the market for superalloys will strengthen at least modestly in 2013, following the correction that occurred in the second half of 2012. While demand for nickel-based superalloys was significantly higher across all the major end-use markets in the first half of 2012, activity slowed to 2011 levels during the last three months of the year, says Blain Tiffany, president of Castle Metals Industrial, Oak Brook, Ill. “Our customers are concerned with the possibility of an economic decline if the government doesn’t resolve its budgetary issues,” Tiffany says. Buyers are also concerned about factors affecting the global economy, including the European debt crisis and the slowing of growth in China. The majority, perhaps 60 percent, of nickel-based superalloys are sold directly by the mills, but distributors’ role will grow, Tiffany predicts. “Going forward, traditional mill customers will be looking for distribution partners that could provide added value through processing services and other supply chain solutions.” Given the headwinds created by the macroeconomic and political unknowns, demand for nickel-based superalloys should remain soft and inventories tight among both distributors and OEMs, at least for the short term, says Richard Harshman, chairman, president and chief executive officer of Pittsburgh-based Allegheny Technologies Inc. “But I’m confident that as these issues are addressed and resolved, growth in demand for our products will strengthen,” he adds. The superalloy market reached “a steep inflection point” in 2011 as lead times extended, causing a buying frenzy as customers rushed to build up inventories, recalls Stephen Peskosky, vice president of forged bar and billet for Carpenter Technology Corp., Wyomissing, Pa. The current supply of nickel-based superalloys is plentiful, with relatively short lead times and additional production capacity being added in the United States, Europe and Asia. That lingering oversupply scenario is the reason for the slight inventory correction in late 2012, Peskosky says. Carpenter and ATI are among the producers adding superalloy production capacity in the next year or two. Carpenter is building a new facility in Athens, Ala., that will give it the capability to produce an additional 27,000 tons of premium products annually once it comes online in 2014. That is about the same time ATI’s new advanced hot-rolling and processing facility in Brackenridge, Pa., is scheduled to start up. It will produce up to 48-inch-wide nickel alloy, titanium and zirconium coils, as well as 60-inch-wide stainless sheet and plate. Current lead times for high performance metals, though varying by alloy and product form, are very short from a historical perspective, ranging from 4-12 weeks, Harshman estimates. Most buyers remain cautious. “Given the uncertainty of the economic climate, most distributors are being very conservative in inventory management and are not willing to go out on a limb when it comes to replenishing stocks,” Tiffany says. “Rather they are working closely with their mill partners to manage inventories appropriately.” This was especially true at year's end, which is traditionally the time service centers try to increase their cash flow by cutting back their inventories. “With the decline of nickel prices, there has been no urgency to buy more metal, especially if they expect nickel prices, and therefore nickel-based superalloy prices, to continue softening,” says Larry Paul, technical marketing manager for ThyssenKrupp VDM USA, Florham Park, N.J. The London Metal Exchange’s three-month bid price for nickel in December averaged about $17,527 per metric ton. That’s up from the 2012 low of $15,722 per ton in August, but down from the year’s high of $20,547 per ton in February. Nickel has ranged from as high as $31,442 per metric ton in March 2008 to as low as $9,777 in March 2009 during the recession. Though they inched up a bit in the last quarter, nickel prices are floundering at levels many consider only marginally profitable. “Customers buy nickel-based alloys for a specific need,” typically corrosion or high-temperature resistance, Tiffany says. “These alloys are used in extremely demanding applications, such as components for the aerospace, power generation, oil and natural gas, and chemical process industries.” In the first half of 2012, demand in those industries was surprisingly strong. “In general, the U.S. manufacturing sector was stronger than many people gave it credit,” he adds. Despite some slowing in the second half, U.S. industrial production remains fairly strong, with November production 2.5 percent ahead of November 2011 and manufacturing production up 2.7 percent year on year, according to the latest data from the Federal Reserve Board. “The aerospace market continues in an accelerated growth cycle driven by the large commercial airplane segment,” says James Callan, president of Castle Metals Aerospace, with aircraft backlogs at both Boeing and Airbus at record levels. “This continues to drive increased demand for superalloys and other metals that are part of this dynamic supply chain.” Dan Greenfield, ATI’s vice president of investor relations and corporate communications, says the industry is in the midst of a once-in-40-year event. The future generation aircraft now under development will be equipped with more efficient jet engines, which burn hotter and require more parts made of heat-resistant superalloys. In fact, aerospace R&D is leading to the development of new, complex superalloys by metals producers, including ATI’s 718 Plus and General Electric’s proprietary Rene 65 alloy. ATI reports that sales of its patented 718 Plus alloy increased 20 percent from a year ago. “That is impressive considering this alloy is in the early stage of adoption by engine OEMs,” Harshman notes. According to the Airline Monitor, commercial jet engine production is expected to rise 36 percent from 2,750 engine builds in 2012 to 3,740 in 2019. Those figures include an 8.5 percent increase in 2013, followed by another 5.4 percent increase in 2014. Nickel-based superalloys are not just making gains in jet engines, but also in aerostructures such as engine mounts and wheel and braking systems, says Carpenter’s Peskosky. The ambitious aircraft build schedules pose double-digit growth opportunities for nickel superalloys in the next five to seven years, even with near-term economic conditions weakening demand in the jet engine MRO segment. In the energy sector, demand for nickel superalloys used in equipment for oil and gas exploration also has been solid, even with the number of U.S. drill rigs declining in recent months, says Peskosky. Superalloys provide strength and corrosion resistance for parts used to drill in harsh environments, such as deep wells and those with sour gas. “There will be more of a need for superalloys as offshore drilling increases,” he adds, noting that offshore drilling has been on the increase around the world, even in the U.S. where it slowed considerably in the aftermath of the BP Deepwater Horizon oil spill. According to Baker Hughes Inc., Houston, 1,799 drill rigs were operating in the U.S. as of mid-December, down 10.9 percent from a year earlier. Due to overproduction of natural gas, a larger percentage of those rigs are being used to find oil and natural gas liquids, and many are being capped. Taking wells out of production requires an increase in completion equipment, which also contains a lot of superalloys, Peskosky says. Oil and gas exploration could rebound in 2013. Harshman notes that some fairly large oil and natural gas projects that were put on hold in 2012 could be back on the books in the coming year. The outlook for the industrial gas turbine business is positive for the next three to four years, says Castle’s Tiffany, due to a combination of new builds and repair and refurbishment business. “Not only is natural gas plentiful at a low price, but also in the United States there are a lot of environmental concerns about coal.” Although burning coal continues to be the most cost effective way to produce power, it also results in high greenhouse gas emissions. “Natural gas is a very clean, cost effective answer,” he notes. Coal concerns have spurred demand for both renewable energy and for gas turbines, says Bill Day, president of Longview Energy Associates, Kensington, Calif. “While there is increased use of renewables to produce power, they are a highly variable power source. They are only available when they are available, and that availability isn’t totally predictable. Utilities need to be able to ramp up quickly to fill the gap, and gas turbines can be ramped up and down quicker and more efficiently than a coal-fired plant.” As the economy and industrial production continue to rebound from the recession, demand for industrial gas turbines will only increase, he adds. In the United States, natural gas is expected to generate almost as much electricity as coal by 2017, says Steve Bolze, president and chief executive officer of GE Power & Water, Fairfield, Conn., one of the largest producers of industrial gas turbines. Whether orders for gas turbines return to the levels of the late 1990s remains to be seen, says Greenfield at ATI. “While demand is picking up, you would think it would already be stronger than it is, with the price of natural gas being this low.” Production of gas turbines this year will likely be “modestly” better than 2012, say the experts, depending on what happens with the domestic and global economies, as well as natural gas prices. With increased use of natural gas, not just for power generation but by the plastics and fertilizer industries, prices have risen to about $3.50 per MMBtu from under $3 early in 2012. “However, I don’t see it getting back up to $10 to $12 per MMBtu like it was prior to the downturn for a while,” Greenfield adds. Bill Schmalzer, senior analyst for power systems at Forecast International Inc., Newtown, Conn., forecasts that 1,341 gas turbines will be produced for electrical power generation in 2013, up about 4 percent from 2012. For the next several years, the rate of growth will continue at 3-5 percent, he says. Peskosky predicts demand could grow more rapidly than that, especially in the 2013 to 2015 timeframe. Major producers of large gas turbines are expanding or building new plants in the U.S. in anticipation of renewed demand. For example, Siemens AG is in the midst of an expansion project in Charlotte, N.C.; Mitsubishi Heavy Industries has built a plant in Savannah, Ga., and has agreed to acquire Pratt & Whitney Power Systems from United Technologies Corp.; Alstom SA has opened a facility in Chattanooga, Tenn.; and General Electric continues to expand its gas turbine product line. Day notes that demand also has been strong for small turbines used for co-generation, combining a gas turbine with a steam turbine to take advantage of heat generated by another process. “Big process industries, such as oil refineries, could use them for self-power generation and, in some cases, sell unused electricity back to the power grid.” Klaus Kleinfeld, chairman and chief executive officer of Alcoa Inc., told analysts earlier this year that the next generation of gas turbines are about 15 percent more fuel efficient, but need 3D airfoil cooling schemes to get air to critical areas. These turbines run much hotter, above the melting point of many materials, and need heat-resistant superalloys in order to function. Another emerging use for superalloys is the more fuel efficient automotive engine. Years ago, there were no superalloy parts in car engines, Peskosky says. Today, almost every engine design includes some, especially those with turbochargers. Most suppliers are bullish about demand for superalloys in 2013, especially with applications continuing to broaden and market drivers generally moving in a positive direction. “There will continue to be business out there as long as we don’t go over the fiscal cliff,” Tiffany says. Wed, 20 Feb 2013 20:46:00 GMT f1397696-738c-4295-afcd-943feb885714:9756 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9729/Year-in-Review-2012.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5977&ModuleID=14422&ArticleID=9729 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=9729&PortalID=51&TabID=5977 http://www.metalcenternews.com/Editorial/CurrentIssue/January2013/tabid/5977/articleType/ArticleView/articleId/9729/Year-in-Review-2012.aspx Promising Year Hits Some Potholes 2012 started out strong, but suffered in the second half from lingering economic uncertainty. By Tim Triplett, Editor-in-Chief Perhaps it’s because the year started out with so much promise that its finish with so little progress seems so disappointing. For most metals producers and distributors, 2012 will go down in the books as “just OK,” rather than the “just great” normally expected following a recession. Through October, U.S. service center shipments of steel were running only 3.4 percent ahead, and aluminum was running just 1.2 percent ahead, of 2011, according to the Metals Service Center Institute. World crude steel production was tracking less than 1 percent ahead of the prior year, reported the World Steel Association. If November and December data follows the downtrend of the second half, 2012 may essentially be a repeat of 2011. For metals suppliers, 2012 fell far short of its early potential for a number of reasons, many of them macroeconomic. U.S. GDP growth sputtered along at around 2.5 percent, well short of the 3.5 percent rate forecast by many economists last year. Thus unemployment remained too high and consumer spending too low to really kick start growth and demand for capital goods. Slowing growth in Asia, recession in Europe and election-year politicking contributed to the insecurity and lack of investment last year. Global economic uncertainty only added to the volatility of metals pricing. Scrap prices reportedly declined from nearly $470 a ton in January to less than $330 a ton by October, taking the price of steel down with them. Industry sentiment tracked along with metals prices. Hot-rolled sheet began the year at nearly $750 a ton, a decent level for mills and service centers alike, setting the stage for what looked like a strong recovery. For most of the year, however, suppliers’ hopes deflated along with the steel price, which dipped below $600 a ton by October. It has since recovered a bit, but leaves the market to ponder the likely trend for 2013. Aluminum followed a similar path, starting the year strong, steadily losing ground until fall, before recovering modestly in the fourth quarter. In February 2012, the spot price for high-grade aluminum on the London Metal Exchange was $2,203 per metric ton, or right around $1 a pound. By August, it had declined to a low for the year of $1,837 per ton or about 83 cents a pound—a 17 percent erosion. By year’s end, it had recovered modestly. Copper saw a 12 percent swing from its March high around $3.84 a pound to its June low of $3.36, but it improved in the second half to over $3.60, according to LME figures. Copper prices have seen years with worse volatility. Unfortunately, as 2013 arrives, many of the global and domestic economic questions remain unanswered, making forecasts for metals pricing and demand just as tenuous as in 2012. Some metals producers struggled with the challenging market conditions last year. Most notably, RG Steel filed for Chapter 11 bankruptcy protection. “Despite aggressive cost-reduction efforts...the company has been unable to overcome the impact of the continued deterioration of the market and the inability of the industry to sustain a meaningful recovery,” said CEO John Goodwin. Loss of a key supplier sent some service centers scurrying to find other sources of supply. Germany’s ThyssenKrupp acknowledged it was seeking a buyer for its new carbon steel plants in the United States and Brazil. After investing billions in two new state-of-the-art mills, company officials reported they are “examining strategic options” for their Steel Americas plants in Rio de Janeiro and Calvert, Ala. On the aluminum side, market leader Alcoa announced plans to curtail 12 percent of its global smelting capacity to lower the company’s costs and improve its competitiveness. But Alcoa also made a major investment in China to produce aluminum parts for the aerospace, automotive, transportation and electronics markets. Along similar lines, aluminum maker Novelis announced plans to build the company’s first automotive sheet manufacturing facility in China. Many other producers of steel and aluminum sheet, bar and tubular products announced new investments in plant and equipment last year in anticipation of improving market conditions moving forward. Industry consolidation continued among both producers and distributors of steel and aluminum, but at a modest pace, with no megamergers announced in North America. Raising the most eyebrows was the Platinum Equity investment group, owner of Ryerson Inc., which acquired a 6 percent stake in A.M. Castle & Co., causing speculation that the purchase could be the initial step in a merger between the two service center giants. A.M. Castle’s board subsequently instituted a shareholder rights plan to rebuff any takeover attempt. Among service centers, the big continued to get bigger, though not necessarily in the same manner. There’s a noticeable trend among distributors to diversify by acquiring downstream businesses. For example, market leader Reliance Steel & Aluminum added McKey Perforating and steel fabricator GH Metal Solutions to its portfolio of companies. It also acquired distributors specializing in promising niche markets, such as National Specialty Alloys, a distributor of premium stainless steel and nickel alloy bars and shapes, and Sunbelt Steel Texas, a distributor of special alloy steel bar and heavy-wall tubing products for the oil and gas industry. To cite a few other examples, O'Neal Industries expanded its manufacturing division with the acquisition of Iowa Laser Technology, which offers laser cutting, welding and forming of various parts. Canada’s Samuel, Son & Co. acquired Stanrail Corp., a maker and distributor of railcar components. Metals USA bought Gregor Technologies, a fabricator of custom parts and assemblies for OEMs. Strong showings by the aerospace, energy and automotive markets are likely to continue in 2013. The wild card, experts say, is how quickly the construction sector recovers. Following is a roundup of notable news events reported by Metal Center News in 2012: January • Chicago-based Ryerson Inc., North America’s second-largest service center company, acquired Turret Steel Industries and Sunbelt-Turret Steel, service centers headquartered in Pittsburgh. The acquisition also included Turret-affiliated companies Wilcox Steel and Imperial Logistics. • Optima Specialty Steel Inc., Miami, acquired Niagara LaSalle Corp., Hammond, Ind. Niagara LaSalle is a specialty steel processor and manufacturer of engineered cold-finished steel bars. • Ron Chase, president of Action Steel Corp., Edison, N.J., was named Steel Man of the Year by the Association of Steel Distributors, Chicago. The annual ASD award honors an individual who embodies leadership, dedication, service and excellence in the steel industry. • Marmon/Keystone LLC promoted J.T. “Tim” Spatafore to president of the Butler, Pa., tubular products distributor. Norman E. Gottschalk continues as president of Marmon Distribution Services LLC. • ArcelorMittal installed a super heavy duty coiler at its Indiana Harbor mill in East Chicago, Ind. The massive, three-story-tall device can coil 1-inch steel up to 76 inches wide for API X80 line pipe. • Gerdau Special Steel North America launched the second phase of its $67 million investment in Monroe, Mich., adding a new walking beam reheat furnace and four additional rolling mill stands. • The Commercial Metals Co. board recommended that its stockholders reject the unsolicited tender offer of Carl Icahn to acquire the company for $15 per share. Icahn, a minority shareholder, had made a bid for the company in November 2011. • Almost 90 percent of respondents to Metal Center News’ Outlook Survey considered themselves optimistic about 2012, a higher figure than in the pre-recession boom year of 2007. • Dr. Chris Kuehl, economic analyst for the Fabricators and Manufacturers Association, predicted the U.S. could expect growth of around 3 percent in 2012 if the U.S. government addressed four key issues: employment, consumer behavior, global economic strain and the role of politicians. February • Heidtman Steel announced plans to build a new $18.5 million processing facility in Calvert, Ala., on the campus of ThyssenKrupp Steel. • O'Neal Industries, Birmingham, Ala., expanded its manufacturing division with the acquisition of Iowa Laser Technology Inc., Cedar Falls, Iowa. Iowa Laser employs more than 20 laser cutting machines, plus various welding machines and forming equipment, to process sheet, tube, stamped and spun metal parts. • New York-based Alcoa announced plans to close or curtail 531,000 metric tons, or 12 percent of its global smelting capacity, to lower the company’s costs and improve its competitiveness. • Nucor Corp., Charlotte, N.C., approved $290 million to upgrade its SBQ facilities in Memphis, Tenn., Norfolk, Neb., and Darlington, S.C. The projects will expand the steelmaker’s SBQ and wire rod capacities by a combined one million tons. • Severstal North America commissioned a new 500,000-ton hot dip galvanized line at its Dearborn, Mich., facility. • U.S. service centers shipped 40.7 million tons of steel in 2011, an increase of 14.2 percent over 2010, the Metals Service Center Institute reported. • World crude steel production reached a record 1.53 billion tons in 2011, an increase of 6.8 percent compared to 2010, according to the World Steel Association. March • Speaking at MSCI’s Carbon Conference, Kloeckner Vice Chairman Michael Hoffman said he believes mills looking to expand their holdings will target North America’s most successful service centers. “We have broken the taboo against the European model. We’ll see service centers acquired by mills, though right now they have other priorities in mind.” • Reliance Steel & Aluminum expanded its downstream holdings with the acquisition of McKey Perforating Co., New Berlin, Wis., and its subsidiary McKey Perforated Products Co., Manchester, Tenn. • Marmon/Keystone opened a new warehouse in Tulsa, Okla. • Finnish specialty steelmaker Outokumpu merged operations with Inoxum, the stainless steel unit of Germany’s ThyssenKrupp. The combined company operates under the Outokumpu name. ThyssenKrupp now holds a 29.9 percent interest in Outokumpu. • Steel Dynamics Inc. announced a $76 million investment to expand its Engineered Bar Products division in Pittsboro, Ind., to 950,000 tons of annual capacity. • The Timken Company moved forward on a new $225 million investment at its Faircrest Steel Plant in Stark County, Ohio, to expand its specialty alloy steel bar capacity. • New York-based Alcoa agreed to join with China Power Investment Corp. to produce high-end fabricated aluminum products for the aerospace, automotive, commercial transportation, consumer electronics and packaging markets in China. April • Ratner Steel Supply Co., Roseville, Minn., began construction of a new $14 million steel processing and distribution facility at the Port of Indiana, to be operational in early 2013. • Samuel, Son & Co., Mississauga, Ont., acquired Stanrail Corp., Gary, Ind., a maker and distributor of railcar components. • Metals USA Holdings Corp., Fort Lauderdale, Fla., acquired Gregor Technologies, a fabricator of custom parts and assemblies for OEM customers in Torrington, Conn. • ArcelorMittal USA President and CEO Mike Rippey called on the federal government to turn its attention to the nation’s crumbling infrastructure. Rippey was one of the North American steel executives who spoke to the Congressional Steel Caucus. May • Chicago-based Ryerson opened a new bar processing depot and full-line service center in DeKalb, Ill., following its opening of a new plate processing facility in Eldridge, Iowa. • Reliance Steel & Aluminum Co. purchased National Specialty Alloys, a Houston processor and distributor of premium stainless steel and nickel alloy bars and shapes. • Marmon/Keystone added a stainless steel bar depot at the company's Spring Valley, Ill., location. • TSA Processing expanded its nonferrous operations with the opening of a facility in the Chicago market, the company’s first outside Texas. • Steel Technologies secured land in Celaya, Mexico, to construct a 125,000-square-foot flat-rolled steel processing operation. • JMC Steel Group Inc., Chicago, completed the acquisition of Ontario’s Lakeside Steel. The new North American division created in the process is called Energex Tube. • Atlanta-based Novelis Inc. announced plans to build the company’s first automotive sheet manufacturing facility in China. The company will construct a wholly owned $100 million plant with a capacity of 120,000 metric tons per year in the Jiangsu Province. June • RG Steel announced plans to idle all three of its North American steel mills in Sparrows Point, Md.; Warren, Ohio; and Wheeling, W.Va., as a result of a liquidity crisis. • Germany’s ThyssenKrupp acknowledged it was seeking a buyer for its new carbon steel plants in the United States and Brazil. Company officials reported they are “examining strategic options” for their Steel Americas plants in Rio de Janeiro and Mobile, Ala. • Nucor Corp., Charlotte, N.C., purchased Skyline Steel and its subsidiaries from ArcelorMittal. Skyline Steel, Parsippany, N.J., is a steel foundation distributor. • The Specialty Steel Industry of North America, Washington, D.C., expressed concern about surging imports of grain-oriented electrical steel. SSINA claimed that annualizing March data for full-year 2012 would result in a 38 percent increase in imports over 2011. July • 2012 was developing into a difficult year for steel mills, with macroeconomic developments around the world weighing heavily on steel demand, reported Peter Marcus and Karlis Kirsis, managing partners of World Steel Dynamics, in their remarks at the Steel Success Strategies conference in New York. Marcus and Kirsis forecast diminishing demand, especially in China, low steel mill orders and lower steel prices for the second half of the year. “Folks, we are on the steel price roller coaster. The magnitude of the price decline will be a function of how much of a fall there is in iron ore, coking coal and steel scrap, all of which we think will come down,” Marcus told the crowd of steel industry executives. • Nucor-Yamato Steel Co., a joint venture between Nucor and Yamato Kogyo Co. Ltd., approved a $115 million plan to expand the production of hot-rolled sheet piling. The project at Nucor's steel mill in Blytheville, Ark., is expected to be finished in early 2014. • Luxembourg-based Tenaris S.A. announced a $1.5 billion investment in a new seamless pipe mill to serve the energy industry in the Gulf of Mexico. The mill, expected to begin operations in 2016, would have an annual production capacity of 650,000 tons. • SBQ-producer Republic Steel began construction of a new electric arc furnace and related equipment at its Lorain, Ohio, facility. The company expected the first heat of steel from the new mill to be tapped during the second quarter of 2013. • RG Steel, the country’s fourth-largest steelmaker, filed for Chapter 11 bankruptcy protection. “Despite the company’s aggressive cost-reduction efforts…the company has been unable to overcome the impact of the continued deterioration of the market and the inability of the industry to sustain a meaningful recovery,” said CEO John Goodwin. • Kloeckner Metals, North America’s fourth-largest service center company, announced plans to build a new 100,000-square-foot light-gauge flat-rolled processing facility in the Southeast on the campus of ThyssenKrupp’s flat-rolled mill in Calvert, Ala. August • The Leavitt Tube Co. was renamed Maruichi Leavitt Pipe & Tube, LLC, to better reflect the ownership of the company, which is 60 percent owned by Maruichi Steel Tube Ltd. and 40 percent by Sumitomo Corp. of America. • At mid-year, most service center operators looked back on the first half with a feeling of accomplishment, but their outlook for the rest of the year was considerably less bullish. Interviews with service center executives revealed a general sense that the best of 2012 was behind them (which generally proved to be the case). • Heidtman Steel planned to close its Sparrows Point, Md., facility by Oct. 31 in response to declining demand for steel in the Northeast and the Chapter 11 filing of one of its biggest suppliers, RG Steel. • Steel Technologies ramped up its Mexican operations with five new production lines at two different sites, Pesqueria, NL, and Celya, GTO. September • The Obama administration released its final ruling on fuel efficiency standards for American automobiles and light trucks, requiring automobiles to get up to 54.5 mpg by 2025, almost double the miles per gallon required under the current standards. The new regulations turned up the heat on the competition for market share between the makers of steel and aluminum. The move toward vehicle lightweighting has allowed aluminum to grow its share of automobile production annually. Steel has responded with the development of lighter high-strength steels to protect its position as the dominant automotive material. • Carpenter Technology Corp., a major producer and distributor of specialty metals, planned to pare down its distribution holdings with the sale of its Latrobe Specialty Steel Distribution division and its Mexican network, Aceros Fortuna. Carpenter plans to focus on growing its high-value specialty alloy manufacturing, titanium processing and precision engineered businesses. • California Steel Industries planned to build a new $100 million pipe mill at the company’s site near Fontana, Calif., to produce high-strength electrical resistance welded pipe. • Brazilian steelmaker Gerdau announced plans to resume construction of a $542 million EAF steel mill in Sagun, Mexico, to produce structural shapes. The new mill will have an annual capacity of 1 million tons of steel and 700,000 tons of rolled product. Plans for the mill were initially announced in 2008, but were idled with the economic downturn. The mill is expected to be operational by the second half of 2014. • Nucor Corp., Charlotte, N.C., sold its Nucor Wire Products Pennsylvania facility to an affiliate of Wire Mesh Corp., Jacksonville, Fla. • Welded Tube of Canada planned to shut down its ERW tube mill in Huger, S.C., to relocate production to its Concord, Ont., operations north of Toronto. • The Platinum Equity investment group, which owns Ryerson Inc., acquired a 6 percent stake in A.M. Castle & Co., raising speculation that the purchase could be the initial step in a merger between the two service center giants. A.M. Castle’s board subsequently instituted a shareholder rights plan to rebuff any takeover attempt. • Main Steel planned to move into a new flagship location in the Chicago market. The 240,000-square-foot facility in Elk Grove, Ill., will serve the entire Midwest, combining the company’s two Chicago operations, located in Bartlett and Wheeling, under one roof. • Even with lackluster nonresidential construction, demand for structural tubing grew by nearly 10 percent in 2012 on the strength of orders from the manufacturing sector. Experts predicted further “choppy” improvement in 2013, though the HSS market remains 25 percent below its peaks in 2006-07. October • Following a strong first half, producers and distributors of aluminum reported waning momentum in the second half as the market faced several strong headwinds, including the disappointing economic recovery in the United States, the fiscal crisis in Europe, a slowdown in China and uncertainty over the upcoming presidential election. • Joint venture partners Hilco SP LLC and Environmental Liability Transfer Inc. completed the purchase of the former RG Steel Sparrows Point mill in Baltimore County, Md., and planned to sell the mill and its assets. • ThyssenKrupp Materials North America announced plans to invest $13 million to build a new processing and distribution center southeast of Birmingham, Ala. Part of the Coil Processing Group, the facility will support the operations of the company’s Ken-Mac Metals and ThyssenKrupp Steel Services divisions. • Reliance Steel & Aluminum Co., through its subsidiary Feralloy Corp., acquired the stock of GH Metal Solutions Inc., Fort Payne, Ala. GH, formerly known as Gas House Inc., is a processor and fabricator of carbon steel products. • Leeco Steel, Lisle, Ill., announced plans to build a 73,000-square-foot facility near Fort Worth, Texas. • Bushwick Metals, Bridgeport, Conn., acquired service center Tarco Steel Inc. and fabrication shop Metal Fab LLC, both located in Binghamton, N.Y. The companies go to market as Tarco Steel, a division of Bushwick Metals LLC, which is owned by Marmon/Keystone . • Russel Metals Inc. agreed to purchase Apex Distribution, a Canadian oilfield supply company based in Edmonton, Alberta, with $500 million in annual revenues. • MidWest Materials chairman and co-founder Joseph Koppelman passed away at age 94. An industry leader and one of the earliest members of the Association of Steel Distributors, Koppelman founded the business as a one-room operation in Cleveland in 1952. Located in Perry, Ohio, the company is now one of the 100 largest service centers in the United States. • Experts say the outlook for air travel, and production of new aircraft, promises a robust market for suppliers of aerospace materials for at least the next decade. Orders for new aircraft reportedly are backlogged for seven to eight years. November • Gerdau completed construction of a new continuous caster at its Monroe, Mich. facility. The new caster is part of a multi-year, $155 million capital investment project to increase production capacity and quality at the mill, to be completed by the end of 2013. • Evraz North America planned to restart its Portland, Ore., spiral mill, which has been idled since July 2009. New equipment is to be installed in the first half of 2013, to serve the fast-growing Bakken and Western Canada oil and natural gas regions, as well as oil fields in the U.S. Rockies. • RTI International Metals Inc. produced the first certified commercial aerospace titanium at its new $135 million forging, grinding and hot-rolling facility in Martinsville, Va. • Despite the fact that flat-rolled steel prices were on a downward trajectory all year, major mills pushed through a new round of price increases in anticipation, or perhaps hope, that the market would soon turn around. Concerns about overcapacity and imports weighed heavily on prices, even as demand in some sectors showed new promise. • Esmark Steel Group planned to acquire RG Steel's Yorkville, Ohio, cold-rolled finishing mill and RG Steel's 50 percent interest in Ohio Coatings Co.'s tin plate production facility. The purchases once again returned interest in the properties to Esmark, which said the two acquisitions would accomplish its goal of returning the company to $1 billion in revenue in 2013. • Olympic Steel planned to expand its steel processing facility in Chambersburg, Pa., an $11 million capital investment to better serve the company's East Coast customers. • A.M. Castle & Co. named Scott Dolan president, CEO and board member, succeeding interim CEO Scott Stephens, who continues as chief financial officer. Stephens filled in for former President and CEO Michael Goldberg, who resigned in May. Dolan is former senior vice president of airport operations and cargo at the combined United and Continental Airlines. • Reliance Steel & Aluminum Co. acquired the assets of Sunbelt Steel Texas, Houston. Sunbelt is a value-add distributor of special alloy steel bar and heavy-wall tubing products to the oil and gas industry. December • According to the 2013 Capital Spending Forecast, published by the Fabricators & Manufacturers Association, International, Rockford, Ill., U.S. metal fabricators expected to spend about 4 percent more on new metal processing equipment in 2013. • Optima Specialty Steel Inc., Miami, Fla., planned to acquire Kentucky Electric Steel, Ashland, Ky., a value-added minimill manufacturing special bar quality and merchant bar quality flat steel products. • Welded Tube USA, the subsidiary of Welded Tube of Canada, planned to invest $50 million to construct a new steel pipe mill on the former Bethlehem Steel property in Lackawanna, N.Y., to serve the energy industry. • Dan DiMicco stepped down as CEO of Nucor Corp., handing the reins to current President and COO John Ferriola. DiMicco will remain as executive chairman of the Charlotte, N.C., minimill. • Service center company Dennen Steel opened a steel stamping facility in Iuka, Miss., the Michigan-based company’s first plant in the South. The $7 million operation is located near the Severstal mill in Columbus. • Demand for SBQ products cooled considerably in the second half. Rising imports and increasing domestic production capacity could boost supply ahead of demand and delay any recovery, experts said. • Steel and aluminum shipments by U.S. service centers were running just 1-3 percent ahead of 2011, according to MSCI, as the market coasted toward the end of 2012. Likewise, the Copper and Brass Servicenter Association reported red metals shipments for the year to date that were about the same as 2011. • Bill Hickey, president of Lapham-Hickey Steel in Chicago, was named the 2012 Service Center Executive of the Year by Metal Center News. Tue, 19 Feb 2013 18:54:00 GMT f1397696-738c-4295-afcd-943feb885714:9729