MCN's Service Center Top 50
The Metal Distribution Industry's Giants
In its annual survey, Metal Center News ranks the largest, most successful service centers in North America.
By Tim Triplett, Editor-in-Chief
As a group, total revenues of the industry's Top 50 service center companies inched up less than 1 percent last year as the economy’s recovery and steel prices continued to disappoint. The Top 50’s combined revenues totaled approximately $51.9 billion in 2012, up only slightly from $51.6 billion the previous year, according to the findings of the latest Metal Center News survey.
This year’s MCN survey reveals a Service Center Top 50 ranking that ranges from Reliance Steel & Aluminum Co. with over $8.4 billion in annual sales down to Friedman Industries with $136 million. The list includes 15 companies that took in over a billion dollars last year.
The most notable change to this year’s Top 50 is the absence of Metals USA, the eighth largest service center organization in North America with annual revenues around $1.9 billion. Reliance acquired Metals USA and its 48 locations in April in a transaction valued at about $1.25 billion. Reliance’s annual sales are now more than double those of its nearest competitor, Ryerson Inc., which reported $4.025 billion for 2012. Reliance’s 2013 sales could top $10 billion once Metals USA’s volume is factored in.
Rounding out the Top 10 are: Kloeckner Metals Corp.; Samuel, Son & Co., Limited; ThyssenKrupp Materials NA Inc.; Russel Metals Inc.; O’Neal Industries; Steel Technologies; Worthington Steel Co.; and Olympic Steel Inc. New to this year’s Top 50 ranking are Farwest Steel Corp. at No. 33, Adelphia Metals at No. 39, Ratner Steel at No. 47 and Unimet Steel Supply at No. 49.
For its annual Top 50, MCN polled the industry’s largest players in July and August and ranked them based on total revenues for their last completed fiscal year, which for most was calendar year 2012. With half the current fiscal year in the books, respondents were also asked to forecast their revenues for 2013. If the average projection of 5 percent holds true, the Top 50 could see their combined revenues grow to nearly $54.5 billion this year.
Market conditions remain highly unpredictable, however, much like in 2012. At this point last year, respondents were predicting an average 10 percent annual sales gain, which failed to materialize for most. Collectively, the industry’s Top 50 market leaders still have a long way to go to regain the $60 billion peak they achieved in 2008 (see Top 50 Combined Revenues chart).
Despite expectations that 2012 would be a growth year, some of the industry’s largest service center organizations apparently got smaller. As a group, the Top 50 companies operated about 1,235 stocking locations in 2012, totaling about 110 million square feet. That compares to 1,300 stocking locations and 112 million square feet the year before. These facilities are staffed by a combined workforce of approximately 55,600 employees, down slightly from 56,200 employed the previous year.
Other industry data supports MCN's findings. The Metals Service Center Institute reports that service center shipments of steel and aluminum products finished 2012 at about the same level as 2011. A slowdown in the second half wiped out most of the gains earlier in the year. For full-year 2012, U.S. service centers shipped about 41.2 million tons of steel, just 1.3 percent more than in the previous year. U.S. service center shipments of aluminum products totaling about 1.5 million tons showed a decrease of 0.9 percent from 2011, according to MSCI.
The industry’s lack of momentum has carried over into 2013, casting doubt on the 5 percent forecast. For the first half of 2013, U.S. service center shipments of steel products totaled 21.1 million tons, off by 4.6 percent compared to the stronger half of 2012. Likewise, U.S. aluminum shipments year to date were down 6.8 percent.
Steel prices in 2012 also contributed to the weak service center revenues. The Midwest price for hot-rolled sheet saw its high around $750 a ton in January, but declined to nearly $580 by the fall, according to various sources. In the first half of 2013, steel prices struggled to gain any traction, dipping from around $640 per ton in January to $570 at mid-year, then rebounding a bit to roughly $660 by late summer.
On the service center M&A front, relatively few large transactions were announced in the past year, with two notable exceptions: Reliance’s purchase of Metals USA earlier this year, and the merger of Namasco and Macsteel last March to form No. 3-ranked Kloeckner Metals.
To put the Top 50’s collective sales in perspective, a report issued in September 2012 by market analysts at IBISWorld in Santa Monica, Calif., estimates the U.S. metals wholesale industry generated revenues of approximately $192.0 billion in 2011. Estimating the market’s size is a dicey proposition because it is so difficult to determine where value-added processing by service centers leaves off and manufacturing begins. But using that figure as the basis, the Top 50 account for only about 27 percent of the market overall. As large as it is, No. 1-ranked Reliance only commands about a 4 percent market share.
The number of metal wholesale centers in the United States decreased from approximately 11,000 locations operated by 8,300 companies in 2002 to 9,900 locations operated by about 6,500 companies in 2011, IBISWorld estimates.
Despite years of consolidation, the service center industry remains highly fragmented. It is still home to thousands of small, service-oriented entrepreneurial businesses. Thus it’s not the Top 50, but the Bottom 6,450, that collectively command the vast majority of the metals distribution market.