Signs of Life in the Metals World
After two years of clawing out from under the recession and its aftermath, the metals industry began to show signs of its old self, with service centers resuming M&A and other growth initiatives.
By Dan Markham, Senior Editor
For the metals supply chain, the calendar year wrapping up will not be confused with the industry’s halcyon days in the pre-bubble period of the past decade. But for most of the players who survived the Great Recession, 2011 saw a return to more healthy business conditions.
Those conditions could be seen in the performances of North America’s largest publicly traded companies. Since 2008, mills and service centers alike battled through sluggish sales, declining earnings and more than the occasional unprofitable quarter. That changed this year. While earnings were not as high as past peaks, profitable quarters were the rule throughout the industry.
It was even more evident in the merger and acquisition activity. For the past few years, mills and service centers alike have stayed largely on the sidelines, with cash and credit in tight supply and both buyers and sellers uncertain about valuations in the depressed business environment. But from the outset of 2011, it was obvious that all members of the supply chain were ready to resume aggressive growth initiatives.
In the service center sector, six of the industry’s biggest names combined operations in three major deals. In the first, Top 10 service center companies Macsteel Service Centers USA and Namasco combined to create the third-largest general line service center company in North America.
The following month, two Ohio-based companies, Worthington and MISA Metals, formed a joint venture, with MISA acquiring a 75 percent interest in the metal building business and Worthington obtaining three MISA processing facilities.
Finally, Cleveland’s Olympic Steel acquired Chicago Tube & Iron, which brought together two longstanding midwestern service center companies with disparate product lines.
While those deals were the headliners, the industry’s most frequent acquirers were also active this year. Reliance Steel & Aluminum Co. picked up Lampros Steel and Continental Alloys and Services, Metals USA acquired Richardson Trident Co., Ryerson bought Singer Steel, and O’Neal’s United Performance Metals acquired Plus Ten Stainless. Smaller players also made less publicized moves on the local level throughout 2011.
While service center consolidation continued, activity at the steel producer level remained mostly quiet. One major deal was completed by newly formed RG Steel, which acquired mills in Wheeling, W.Va., Sparrows Point, Md., and Warren, Ohio, from Severstal North America.
That acquisition, coupled with the ramp-up in production at ThyssenKrupp’s Alabama facility and a new line at Severstal Columbus, left many industry watchers concerned about oversupply issues.
Some domestic producers focused their attention upstream. ArcelorMittal, AK Steel, Nucor and Steel Dynamics all made various deals throughout the year to shore up their raw material positions.
On the nonferrous side, Alcoa, Kaiser, Novelis and Sapa all reported plans to expand capacity at their facilities, driven by anticipated demand in the aerospace and automotive markets.
Yet growth projects weren’t limited to expansion through acquisition. Companies throughout the supply chain were ambitious in purchasing new buildings, expanding old ones and adding new lines. Mills and service centers alike boosted capital spending considerably during the year.
From a demand perspective, most of the major end markets for service center products enjoyed improved conditions in 2011, with the exception of residential and commercial construction. Inventories remained at low levels, however, as price fluctuations and concerns over macroeconomic factors kept both service centers and their customers wary of putting material on the floor.
Service centers had to deal with volatile prices throughout 2011. On the steel side, carbon flat-rolled peaked in the second quarter around $900 per ton, then fell precipitously to below $700 per ton by October.
Aluminum followed a similar path. The price of high-grade spot-market aluminum peaked at $2,743 per metric ton on the LME at the end of April, declining steadily to just under $2,100 per ton in November.
On the copper side, the red metal price has been on a downward trajectory from its all-time high of $4.62 per pound on Comex in mid-February. The price has fallen to the low $3.00 range since hitting that historic peak.
Declining prices would seem to be at odds with increasing demand, suggesting that the economy, and the metals market, are not yet out of the woods.
n Alro Steel Corp., Jackson Mich., acquired certain assets of Anderson Metals’ three service centers. Anderson, a general-line distributor, operates facilities in York and Huntingdon Valley, Pa., and Greensboro, N.C.
n Reliance Steel & Aluminum Co., Los Angeles, acquired the capital stock of Lampros Steel Inc. and a related interest in Lampros Steel Plate Distribution LLC. Lampros Steel is a service center company specializing in structural steel shapes with a facility in Portland, Ore.
n Namasco Corp., Atlanta, acquired Texas distributor Lake Steel Ltd. Lake Steel has two Texas locations, Amarillo and Mansfield, from which it supplies customers in the surrounding states of New Mexico, Oklahoma, Colorado, Arkansas, Kansas and Louisiana.
n Pennsylvania Steel Co. Inc., a full-line service center headquartered in Bensalem, Pa., purchased a 71,000-square-foot building in Bethlehem, Pa. The crane-served facility is the new home for the Bethlehem Aluminum Division, which the company acquired in 2007.
n Max Aicher restarted its reheat furnaces and completed test runs at its Hamilton, Ont., bar and bloom mills. The German company acquired the idled facilities from U.S. Steel in November.
n AK Steel, West Chester, Ohio, announced plans to permanently close its Ashland, Ky., coke plant by the second quarter. The company said the decision to close the facility was made because the coke plant was no longer cost competitive due to increased maintenance and increasingly stringent environmental regulations.
n Century Aluminum of Kentucky restarted its idled potline at its Hawesville, Ky., aluminum smelter. The Hawesville smelter has a rated capacity of approximately 250,000 tons of primary aluminum annually from five potlines.
n Reflecting its focus on identifying growth opportunities for housing in China, Worthington Industries Inc., Columbus, Ohio, entered a joint venture to manufacture light-gauge steel framing products and to design, engineer and supply light-gauge steel-framed mid-rise residential buildings in five Central Chinese provinces.
n Turret Steel Industries Inc., Imperial, Pa., acquired the assets of Wilcox Steel, Green Bay, Wis. The facility consists of a modern 63,000-square-foot manufacturing plant with the capability to service a niche market that requires custom-
engineered cold-finished bar products.
n Namasco, the U.S. subsidiary of Germany’s Klöckner & Co. SE, and Macsteel Service Centers USA, the U.S. subsidiary of Amsterdam’s Macsteel Global B.V., announced plans to merge operations. The combination of the companies, both of which had $1.2 billion in annual sales in 2009, created the third-largest general line service center in North America.
n Metals trading firm Primrose Alloys Inc. purchased the assets of aluminum master distributor The Channel Corp., Stamford, Conn., changing the company’s name to Channel Alloys. Channel has six locations across the United States.
n Publicly traded mills and service centers reported improved fourth-quarter and 2010 earnings in their year-end conference calls. All expected continuing gains for the metals market in 2011
n Titanium Industries, Rockaway, N.J., made an entry into the rapidly expanding Chinese market for aerospace, medical products and industrial business opportunities with the opening of a new sales office in Shanghai.
n Brush Engineered Materials Inc., Mayfield Heights, Ohio, changed its name to Materion Corp.
n Dominic Vitucci, Jr., president of Vitco Steel Supply Corp., 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.”
n U.S. service center steel shipments for 2010 rose 20.6 percent above 2009 to nearly 35.7 million tons. In Canada, steel shipments rose 15.3 percent to about 5.67 million tons, according to final year-end figures from the Metals Service Center Institute, Rolling Meadows, Ill. U.S. aluminum shipments finished 2010 some 25.8 percent higher at 1.3 million tons and rose 7.7 percent in Canada, to 135,200 tons.
n Marubeni-Itochu Steel America Inc. and Worthington Industries Inc. reached an agreement to combine ClarkWestern Building Systems and Dietrich Metal Framing in a newly formed joint venture. As part of the exchange, Worthington also acquired the assets of the non-automotive service center business of MISA Metals Inc., consisting of three steel processing facilities in Ohio and Tennessee.
n A new ownership group purchased the assets of Canada’s Precision Metal Processing 2005 Inc. The facility in Cambridge, Ontario, is now operating under its new name, Superior Metal Processing.
n Northwest Pipe Co. announced plans for major capital projects at mills in Atchison, Kan., and Houston. The Atchison location will increase production capacity by 50 percent and enable the company to produce pipe with up to 0.375-inch walls. At Houston, Northwest will add production of 2 3/8- and 2 7/8-inch tubing with properties suitable for heat-treating.
n Republic Engineered Products’ Blasdell, N.Y., facility started up a $20 million precision sizing mill. The new sizing mill enables Republic to produce round and hex-shaped bars and coils with closer-than-standard tolerances for the near-net forging and cold-forming industries.
n The Department of Commerce issued an affirmative preliminary circumvention ruling determining that Chinese imports of cut-to-length carbon steel plate that include economically and metallurgically insignificant amounts of boron are subject to the antidumping duty order on CTL plate.
n Sapa Profiles North America, Rosemont, Ill., announced its plan to invest another $50 million dollars in its North America aluminum extrusion operations in 2011. This follows capital investments of nearly $40 million in 2010.
n Steel exports from the United States increased by 29 percent in 2010, with increases registered in all markets except Africa and Asia, due primarily to a decline in exports to China. U.S. exports totaled 9.3 million tons in 2010, according to data from the American Iron and Steel Institute, Washington, D.C.
n U.S. imports and exports of brass mill products rose in March, reported the Copper and Brass Fabricators Council, Washington, D.C. Imports of brass mill products totaled 44.0 million pounds, up 4.9 percent. Exports were up 10.4 percent to 24.0 million pounds.
n The Renco Group Inc. purchased Severstal North America’s operations at Warren, Ohio; Wheeling, W.Va.; and Sparrows Point, Md. The Renco Group, a family-owned holding company with interests across a range of manufacturing industries, formed RG Steel LLC to manage the new steel assets. With an estimated 7.5 million tons of steel capacity at the three locations, RG Steel is the nation’s fourth-largest steel company.
n Macsteel Service Centers USA, in the process of being acquired by Klockner & Co., has added a new company to its portfolio. The Newport Beach, Calif., service center company acquired the assets and business of Steel Coil Services, Catoosa, Okla. SCS was a subsidiary of U.S. Steel Corp.
n Metals USA Holdings Corp., Fort Lauderdale, Fla., acquired Dallas-based Richardson Trident Co. The nonferrous company, the largest acquired by Metals USA since its 2010 IPO, had sales of approximately $148 million on 23,000 tons shipped in 2010.
n Chicago-based Ryerson Inc. acquired Singer Steel Co., a full-service processor based in Streetsboro, Ohio. The 85-year-old Singer had approximately $50 million in revenue in 2010.
n Sunbelt-Turret Steel Inc. acquired an 82,000-square-foot warehouse in Portland, Ore. The company opened a sales office in Portland in 2010. The facility represents the 11th location for Turret Steel/Sunbelt-Turret Steel group.
n Hydro Aluminum’s Extrusion North America unit completed the first phase of a $1 million-plus revitalization project to streamline the operations and increase the output at its North Liberty, Ind., facility.
n The rate of growth of steel shipments from service centers in the United States and Canada sagged during April, according to MSCI. Steel shipments from U.S. service centers rose 11.3 percent during the month, down from 19 percent year-over-year growth recorded in March. Shipments from Canadian metal centers rose 4.5 percent above those of April 2010, down from the 19.1 percent year-over-year increase recorded in March.
n Steel Dynamics Inc., Fort Wayne, Ind., and Barcelona, Spain-based LaFarga Group formed a partnership to construct a $39 million U.S. facility to produce wire rod from recycled copper. Operating under the SDI LaFarga LLC name, the partners began looking for potential sites for the new mill in Allen County, Ind.
n The Timken Company announced plans to increase its annual steelmaking capacity by 120,000 tons across its steel manufacturing facilities in Canton, Ohio. The company is achieving this boost through a series of improvements at its Harrison Steel Plant that build upon the $60 million rolling-mill investment completed there in 2008.
n ThyssenKrupp Steel USA’s new mill in Calvert, Ala., produced the first coated prime coil on its No. 1 hot-dip galvanizing line, marking a milestone for the company. The HDGL lines are the last of the carbon steel startup’s mills to begin production. The facility’s hot-strip mill began production in July 2010, followed by its cold-roll mill in September.
n Republic Engineered Products acquired two facilities from BCS Industries Inc. The Canton, Ohio-based steelmaker acquired a heat-treatment facility in Cleveland and a cold-drawn steel bar processor in Memphis, Tenn.
n The late-April storms that ravaged the southern U.S. hit one metals producer particularly hard. Independence Tube’s mill in Decatur, Ala., suffered considerable damage in an April 27 tornado, though employees suffered no injuries.
n Sunshine Metals acquired the marine supply house Metal Sales, located in Harvey, La. Founded in 1999 by Robert Carey, Metal Sales remains a traditional marine alloy and armor distributor with a focus on precision cutting.
n The Brussels-based World Steel Association forecast apparent steel use would increase by 5.9 percent to nearly 1.36 billion metric tons in 2011, following 13.2 percent growth in 2010. In 2012, it forecasts that world steel demand will grow a further 6.0 percent to reach a new record of 1.44 billion tons.
n Cleveland-based Olympic Steel Inc. and Chicago Tube and Iron Company, Romeoville, Ill., agreed to merge in a $156 million deal that combines one of the industry’s largest general-line metals distributors with one of the industry’s largest tubular specialists. The combined companies have approximately $1.5 billion in sales, 1,600 employees, four million square feet of facilities, and 30 locations throughout the United States and Mexico.
n Two of the country’s leading steel service centers entered a joint venture to construct a new heavy-gauge temper mill cut-to-length line in Houston. Steel Warehouse Co., South Bend, Ind., and Triple S Steel, Houston, will partner on the new line, to be constructed by mid 2012.
n Germany’s ThyssenKrupp AG, one of the world’s largest metals producing and distribution companies, announced plans to divest several properties in North America—possibly including its new stainless mill in Calvert, Ala. Among many strategic developments discussed at the company’s supervisory board meeting in May were plans to spin off its stainless steel division into a separate company and to sell its ThyssenKrupp Waupaca business.
n Gerdau S.A. announced plans to expand its special bar quality capacity in the United States by 400,000 tons through 2014. The Brazilian steelmaker is also exploring the construction of another SBQ facility in North America.
n Scott Brass and Aluminum expanded its services and production by purchasing the assets of Aluminum Services LLC, Clarksburg, W.Va. The company was renamed Scott Aluminum and operates as a minimill, specializing in a limited group of alloys with short lead times.
n Specialty metals companies Carpenter Technology Corp. and Latrobe Specialty Metals Inc. agreed to merge. Carpenter acquired its Pennsylvania neighbor in a $558 million transaction a short time after Latrobe announced plans to take the company public.
n Metals USA, Fort Lauderdale, Fla., entered a four-year agreement with Canada’s Lakeside Steel to provide slitting and warehousing services in support of the steelmaker’s new steel pipe and casing mill in Thomasville, Ala.
n West Coast service center company Farwest Steel Corp., Eugene, Ore., purchased 20 acres of land at the Port of Vancouver USA for the purpose of constructing a distribution, processing and fabricating facility at the site.
n Universal Stainless & Alloy Products Inc., Bridgeville, Pa., acquired the assets of fledging producer Special Metals, North Jackson, Ohio. Known as Patriot Special Metals, the greenfield facility includes a radial forge and a vacuum induction melting facility scheduled to be completed by Universal Stainless for production in the first quarter of 2012.
n Wheatland Tube announced plans to make a significant investment in its drawn-over-mandrel mechanical tubing product capabilities. The investment will expand Wheatland Tube’s total DOM production capacity and its size range capabilities.
n Responding to President Obama’s call for employers and community colleges to work together to connect students with jobs, The Manufacturing Institute and the National Association of Manufacturers announced the goal of credentialing 500,000 community college students with skill certifications aligned to manufacturers’ hiring needs.
n Chicago-based Feralloy Corp., a subsidiary of Reliance Steel and Aluminum Co., formed a joint venture with custom-roll-formed products maker Pyramid Mouldings to provide complete solutions for the growing western solar market. The joint venture is known as Feralloy Pyramid Structural Solutions.
n Houston-based Ranger Steel expanded into the southeastern U.S. with the opening of its newest distribution center in Memphis, Tenn. The facility is located on the Mississippi River at Kinder Morgan’s 35-acre mid-river terminal.
n Canada’s Samuel, Son & Co. Ltd. acquired Basic Stainless Inc., a service center operating from an 80,000-square-foot facility in Marshfield, Wis., with branches in Green Bay and Minneapolis. The acquisition continued Samuel’s expansion into the U.S. market.
n Marmon/Keystone, Butler, Pa., doubled the size of its Monterrey, Mexico, location to 54,000 square feet.
n Reliance Steel & Aluminum Co., Los Angeles, acquired Houston-based Continental Alloys & Services Inc. Continental focuses on high-end steel and alloy pipe, tube and bar products.
n Kaiser Aluminum Corp., Foothill Ranch, Calif., expanded its Kaiser Alexco hard alloy aerospace extrusion facility in Chandler, Ariz.
n The U.S. International Trade Commission completed its five-year review on stainless steel coiled plate from five countries, determining that trade actions should remain in place for another five years on imports from Belgium, Korea, South Africa and Taiwan, including a countervailing duty against South Africa. However, the commission lifted the trade sanctions on imports from Italy.
n Severstal North America launched a new five-stand, six-high, 72-inch-wide coupled pickle line tandem cold mill at its plant in Dearborn, Mich. When fully operational, the new $450 million facility has a capacity of 2.1 million net tons.
n Carpenter Technology Corp., Wyomissing, Pa., announced plans to construct a new 400,000-square-foot manufacturing facility in response to demand for premium products from the aerospace and energy industries. The new facility ultimately will be capable of producing 27,000 tons per year of additional premium product.
n Evraz Inc. NA announced plans to expand its Portland, Ore., facility with the addition of API pipe manufacturing capacity. The expansion is scheduled to be complete by August 2012 and will bring the mill’s total capacity up to 250,000 tons of API pipe and structural squares, rounds and rectangles.
n Kaiser Aluminum Corp. announced plans to further expand heat-treat plate capacity at its Trentwood rolling mill in Spokane, Wash. The investment of $21 million to debottleneck various processing centers is expected to increase the rolling mill’s heat treat plate capacity by 5 percent as it comes on stream in 2013.
n U.S. service centers shipped 31.1 million tons of steel products year to date through September, an increase of 15.9 percent from 2010, according to the MSCI.
n The United States was on track to import 22 percent more finished steel than in 2010.
n Steel Technologies LLC, Louisville, Ky., got the go-ahead for its new flat-rolled steel processing and pickling facility in Monterrey, Mexico. The facility, with processing capability in excess of 800,000 tons, is expected to be operational by the end of 2012.
n Dennen Steel Corp. broke ground on its new 50,000-square-foot manufacturing facility at Yellow Creek Port in Iuka, Miss. The project represents a company investment of more than $7.4 million and will initially create 50 new jobs in northeast Mississippi.
n O’Neal Industries Inc., Birmingham, Ala., through its subsidiary, United Performance Metals, acquired Plus Ten Stainless Inc., a provider of precision cold saw cut stainless steel, nickel alloy and stainless plate. Plus Ten operates a single processing and distribution facility in Benicia, Calif.
n Eastern Metal Supply, Lake Worth, Fla., expanded its reach with the opening of a 35,000-square-foot distribution center in Birmingham, Ala.
n Alcoa announced plans to expand its Davenport, Iowa, rolled products plant in a $300 million project designed to meet rising demand from the automotive market. Alcoa Davenport Works produces aluminum sheet and plate for a variety of industries through its 220-inch wide mill, the largest in the world.
n Hussey Copper Ltd., a 163-year-old supplier of bus bar and other copper products, filed for Chapter 11 bankruptcy protection. Hussey has facilities in Leetsdale, Pa., and
n North America’s publicly traded service center companies were all profitable during the year’s third quarter, but the earnings were down compared to the previous quarter.
n Pennsylvania Steel Co., Bensalem, Pa., made its first expansion into the Southeast with the acquisition of Schwartz Steel Service, Gastonia, N.C. The 30-year-old company serves the western Carolinas with a complete line of metal products, specializing in carbon bar.
n Houston-based Ranger Steel Services established a specialty plate division and expanded its product line with Normalized steel plate for high-pressure applications.
n ThyssenKrupp’s stainless facility in Calvert, Ala., began producing flat products in widths up to 72 inches. The company’s new hot-strip annealing and pickling line and cold-rolling mill went into production.
n Leavitt Tube made a multimillion-dollar investment in several equipment upgrades at its Chicago headquarters. Leavitt upgraded its W80 large structural tubing mill with a new quick change cartridge tooling system and purchased a new mid-size W50 structural tubing mill.
n A.M. Castle & Co. Oak Brook, Ill., announced plans to acquire Houston-based Tube Supply Inc., a value-added distributor of specialty tubular and bar products for the oil and gas industry. Castle expected to close the $165 million transaction by the end of first-quarter 2012.
n Canadian service center giant Samuel, Son & Co. Ltd. further expanded its presence in the United States with the acquisition of Doral Steel. Doral is a supplier of carbon flat-rolled products throughout North America, with locations in Toledo, Ohio, Clinton, Tenn., and a processing agreement for use of a slitter and cut-to-length line in Monterrey, Mexico.
n Ryerson Inc. opened its newest distribution facility in Salt Lake City, Utah. The new 54,000-square-foot warehouse is the company’s second in the region.
n Republic Steel will invest $85.2 million to build a 1-million-ton electric arc furnace at its Lorain, Ohio, facility. The investment is being made to meet growing customer demand for the company’s SBQ steel.