Recovery’s Under Way…
Way Too Slowly
By Dan Markham, Senior Editor
Metals producers and distributors saw improved business conditions in 2010, though the pace of recovery was painfully slow, according to MCN’s review of the past year’s news events.
For the metals industry, evaluating the year gone by is all a matter of perspective. When placed against the backdrop of the previous 12 months, 2010 offered better sales and earnings for producers and distributors and improved demand in most markets. But when rated against the boom times of 2004-08, 2010 looks less like a rebound and more closely resembles a bounce along the bottom.
“What Recovery?” asked Dan DiMicco, Nucor’s top executive, during November’s CRU North American Steel Conference in Chicago. “When you look at today’s fundamentals, it’s still the worst recession since the great Depression. The reality is the economy is in sad shape.”
Both mills and service centers reported substantially improved profitability in 2010, as high-priced inventory was flushed from the system and cost-containment measures put in place during the depths of the recession began to bear fruit. Demand for many metal products strengthened considerably, though some of that was merely to restock the barren shelves at all levels of the supply chain.
Others signs were not so positive. Steel prices climbed steadily through the first half of the year, but declined just as quickly in the second half when demand levels proved insufficient to support them. Mill capacity utilization improved from its sub-40 percent levels early in 2009, but by year’s end was still struggling to reach 70 percent, with more capacity coming on line.
Despite signs of economic recovery, the unemployment rate remained near an alarming 10 percent at year’s end, with no real hope for improvement. The impact on the metals industry is clear, executives said. “Unemployment remains stubbornly high. That matters because these are the same people who would otherwise be purchasing homes or appliances or cars, all of which contain some form of the product we make,” commented AK Steel Chairman, President and CEO James Wainscott.
The sluggish recovery was mirrored by the continued slow pace of consolidation, particularly in the service center industry. While merger and acquisition activity picked up a bit during the year, deal-making was off considerably compared to the frenzied activity mid-decade. Metals USA made two acquisitions during the calendar year and Ryerson added some facilities in the Southwest, but most of the major consolidators remained on the sideline. But perhaps not for long.
“We believe it’s still a very fragmented industry, and there’s a lot of consolidation that can occur,” said Reliance Steel and Aluminum Co. Chief Financial Officer Karla Lewis at a gathering hosted by the Association of Women in the Metal Industries.
Following is a roundup of significant industry news events of the past year:
n Esmark Inc., which took a wild ride through distribution and into mill ownership a few years earlier, took the first steps to rebuild its service center company with the acquisition of Chicago-based Amtex Steel Inc. The facility was renamed Chicago Steel & Iron. Esmark also made an effort to reacquire some of the service center companies it sold to Severstal when the steelmaker bought Esmark in 2008.
n Cargill, Minneapolis, increased its investment in RPS Sheet and Plate through the acquisition of Robinson Steel’s cold-reduction lines in East Chicago, Ind., and Granite City, Ill. In the deal, Cargill took full ownership of Cargill Robinson LLC, a joint venture formed in 2007.
n O’Neal Steel Inc., Birmingham, Ala., acquired the assets of Denham & Davis, one of the largest full-line steel service centers in the Northeast. Denham & Davis, a 121-year-old company, operates facilities in Clifton, N.J., Albany, N.Y., and Slatersville, R.I.
n Chicago-based Leeco Steel opened a 53,000-square-foot facility in Chattanooga, Tenn. The facility was launched to help Leeco close an existing 600-mile gap between its facilities and its customers in the Southeast.
n Service center companies polled in Metal Center News’ annual Outlook survey expressed greater optimism about the year ahead. After declining for the previous three years, sentiment took a positive turn, with three out of four respondents placing themselves on the optimistic side of the scale, vs. only about half the year before.
n Stainless pipe maker Wilh. Schulz GMBH announced plans to build a stainless steel pipe manufacturing facility in Tunica, Miss. The $300 million facility, the German company’s first U.S. manufacturing site, will be built over the course of five years.
n The U.S. International Trade Commission found that Chinese imports had caused material injury to domestic oil country tubular goods makers. In their complaint, U.S. steel companies claimed Chinese imports doubled between 2006 and 2008 and continued to increase in the declining market of 2009.
n The Institute for Supply Management projected growth in manufacturing in 2010 in its Semiannual Economic Forecast. ISM expected 2010 revenues to increase in 13 of 18 industries.
n Buffalo, N.Y.-based Gibraltar Steel exited the steel processing business with the sale of its strip steel assets to Worthington Steel, Columbus, Ohio. In the transaction, Worthington acquired Gibraltar’s Cleveland facility, equipment and inventory from its Buffalo facility, as well as Integrated Terminals, a warehouse facility in Detroit.
n Joseph T. Ryerson & Son Inc. acquired Texas Steel Processing, a Houston-based steel plate fabricator. The move was part of Ryerson’s strategic initiative to grow in Houston and the Southwest.
n North American steel mills showed losses for full-year 2009 in their year-end reports to analysts and investors. However, most were profitable during the final quarter and all were showing improved performance compared to earlier in the year.
n Severstal announced plans to restart its Warren, Ohio, mill, which had been idled in response to weak market conditions in 2009. The company intended to restart its blast furnace late in the first quarter.
n Gerdau Ameristeel announced its intentions to keep its Sand Springs steel mill idled for the foreseeable future. The company idled the mill in the second half of 2009.
n Steel import tons totaled 16.1 million in 2009, the lowest figure since 1991, according to the American Iron and Steel Institute, Washington, D.C. The import totals represented a 50 percent decline from 2008.
n Nucor and Japan’s Mitsui & Co. entered a joint venture that makes processor Steel Technologies part of the new company, NuMit LLC. Steel Technologies already operated 23 flat-rolled steel processing facilities in North America, and will implement Nucor’s previously announced plan to develop a processing facility in Mexico.
n Mill Steel Co., Grand Rapids, Mich., expanded its product offerings and geographical reach with the acquisition of Coated Steel Corp., Birmingham, Ala. Coated Steel is a supplier of acrylic and prepainted galvalume and galvanized flat-rolled steel.
n A.M. Castle & Co., Franklin Park, Ill., opened a new 50,000-square-foot facility in Edmonton, Alberta. The new operation was designed to serve the company’s oil and gas business in the region, replacing a facility the company operated since 1996.
n Future Metals, Tamarac, Fla., opened a new facility in Wallingford, Conn. The new facility was designed to provide additional processing capabilities to serve its customer base in the Northeast and Eastern Canada.
n Swedish steelmaker SSAB forged ahead with plans to construct a new quenched and tempered line at its Mobile, Ala., facility. The new line, expected to begin production in the first half of 2012, will increase the company’s capacity for QT plate by 200,000 tons.
n National Bronze & Metal began production at its new foundry in Lorain, Ohio. The new facility, built on the site of its former foundry, allows the company to produce 1.6 to 1.8 million pounds per month, roughly four times the capacity of its previous plant.
n March shipping rates of both steel and aluminum products from the U.S. and Canada rose at double-digits compared to the previous year, according to the Metals Service Center Institute, Rolling Meadows, Ill. Steel inventories were also up slightly during the month.
n Acero Prime, a joint venture between Feralloy Corp. and Mitsui USA, announced plans to expand operations at its Ramos Arizpe, Mexico, facility. The investment includes 55,000 square feet of building expansion and a new multi-blanking line.
n Steelmakers and their trade groups banded together to express their opposition to the Environmental Protection Agency’s plan to use the Clean Air Act to bring stationary sources of emissions under its control. Under the EPA’s plan, regulations on stationary sources of emissions, such as steel mills, would take effect in January 2011.
n The Copper and Brass Fabricators Council took its concerns over the pricing volatility of red metals to the Commodity Futures Trading Commission. CBFC officials noted that the price of copper had risen more than 100 percent since the end of 2008 despite an increase in the quantity of copper stored in warehouses during that same timeframe.
n The United States imported 2.07 million tons of steel, including 1.6 million tons of finished steel, in April, the highest total since January 2009, according to AISI.
n Roger B. Sippey retired from Feralloy Corp. after 42 years with the Chicago-based service center company. Sippey served as president and CEO of the company, now a subsidiary of Reliance Steel & Aluminum Co., since 2007. Carlos M. Rodriguez-Borjas assumed the roles of president and chief operating officer.
n Horizon Steel expanded its Illinois operations through the acquisition of the former MC Steel Co.’s equipment and facility in Wheeling, Ill.
n Roll Coater, Indianapolis, acquired coil coating assets from Material Sciences Corp., including processing equipment from MSC’s Plant No. 7 in Elk Grove Village, Ill.
n Severstal North America sold four companies from its Northern Steel Group to Aurora Resurgence, a Los Angeles-based equity firm. Miami Valley Steel Service, Piqua, Ohio; Premier Resource group, Lombard, Ill.; Electric Coating Technology, East Chicago, Ind.; and U.S. Metals and Supply, St. Louis, were all acquired by the equity firm, which renamed them New Star Metals.
n U.S. Steel Canada Inc. announced plans to sell its No. 1 Bar Mill, and No. 3 Bloom and Billet mill at its Hamilton Works facility to Germany’s Max Aicher Inc.
n World crude steel production was 30.6 percent higher in the third quarter than in March 2009, the Brussels-based World Steel Association reported. Additionally, mill capacity utilization reached 80.2 percent in March, up 15 percent from same month the previous year.
n Esmark Steel Group reacquired five of its former service centers as it continued to rebuild its distribution company. The company acquired Century Steel and Sun Steel in Chicago Heights, Ill., Independent Steel in Cleveland, plus the intellectual property assets, brand names and trademarks of Chicago-based Great Western Steel and Homewood, Ill.-based North American Steel.
n Sunbelt-Turret Steel Inc. opened a new sales location in Portland, Ore. The new facility is the 10th location for the company.
n Ternium S.A. and Nippon Steel Corp. formed a joint venture in Mexico to manufacture and sell hot-dipped galvanized and galvannealed steel sheets to the Mexican automotive market. The new facility, located near Monterrey City, will have a capacity of 400,000 metric tons annually.
n Atlanta-based Novelis reported net income of $405 million for its fiscal year, a substantial recovery from the $1.9 billion loss from the previous year.
n Economic activity in the manufacturing sector grew for the 11th consecutive month, according to the Institute for Supply Management, Phoenix. The overall economy enjoyed its 14th straight month of growth.
n Carol Stream, Ill.-based Tri Star Metals, an Illinois-based distributor of stainless and aluminum bars, merged with Pinnacle Metals, a wire and bar, stainless steel and nickel alloys production company located in Freeport, Ill.
n Russel Metals announced plans to open a new 20,000-square-foot service center in Terrebonne, Quebec, to be operated by Acier Leroux, a Russel Metals division.
n Chicago-based Ryerson announced plans to search for a successor to Chief Executive Officer Stephen E. Makarewicz. The 63-year-old Makarewicz told the company he planned to retire by age 65.
n Skyline Steel, a subsidiary of ArcelorMittal, announced plans to construct a steel pipe manufacturing facility at the Port of Longview in Washington. The facility will produce rolled, welded and spiral pipe for the western United States.
n Tubing manufacturer RathGibson, Lincolnshire, Ill., emerged from bankruptcy protection with a new owner, Wayzata Investment Partners. The company stayed active throughout the bankruptcy process, completing the construction of its U-Bend Manufacturing Center and achieving ISO certification at two sites.
n Dennen Steel Corp., a Midwestern manufacturer and distributor of metal products, expanded its geographic footprint to the Southeast. Dennen announced plans to invest $7.4 million to locate operations at Yellow Creek Port in Iuka, Miss., where it will manufacture slit steel coil, stampings, fabricated metal parts, and tooling and assemblies.
n East Chicago-based Robinson Steel changed its name to Robinson Laser, exiting the service center business to focus its efforts on laser part production. Along with the name change, the company launched a new web presence that allows for real-time price checking, among other features.
n Metals USA, Fort Lauderdale, Fla., acquired J. Rubin & Co., a carbon steel bar, plate and laser-cut flat-rolled products distributor with operations in Illinois, Wisconsin and Minnesota.
n Ryerson acquired the remaining 20 percent stake in its Ryerson China Limited joint venture. Ryerson and Van Shung Chong Holdings formed the joint venture, which operates processing and service centers in five Chinese locations, in 2006.
n Severstal North America idled the hot-end facilities at its Sparrows Point, Md., mill as a result of weakened market demand.
n Employees at PTC Alliance facilities in Alliance, Ohio, and Darlington, Pa., ratified new labor agreements, clearing the way for the company’s sale to Black Diamond Capital Management LLC. PTC Alliance, a manufacturer of welded and cold-drawn mechanical steel tubing and other products, filed for bankruptcy protection in October 2009.
n Red metal shipments remained well ahead of 2009, according to the Copper and Brass Servicenter Association, Overland Park, Kan. Daily shipping levels were up almost 26 percent compared to the same month in 2009, while shipments of total copper products also were up almost 10 percent.
n Revenues of the nation’s top service centers declined by nearly 37 percent in 2009, according to the Metal Center News ranking of the Top 50 service centers in North America. Reliance Steel & Aluminum Co., Los Angeles, remained the nation’s largest service center company with 2009 revenues of $5.2 billion.
n SFI Gray, Houston, was acquired by Chicago-based Ryerson. SFI Gray is a precision flame-cutting company specializing in carbon and alloy steel plate.
n Finnish steelmaker Outokumpu completed a $58 million upgrade at its stainless steel quarto production facility in New Castle, Ind.
n The Timken Co., Canton, Ohio, announced plans to invest $50 million in upgrades at its facilities. The investment will include a new intermediate finishing line at the Gambrinus Steel Plant and an expansion of the steel lay-down yard at its Harrison Steel Plant.
n Gerdau Ameristeel restarted operations at its fabrication plant in Nashville, Tenn. The operation was shut down in May when flooding on the Cumberland River plunged much of the facility under more than four feet of water.
n Kaiser Aluminum Corp., Foothill Ranch, Calif., acquired the Nichols Wire facility in Florence, Ala. Nichols manufacturers bare mechanical alloy wire products, nails and aluminum rod.
n The American Iron and Steel Institute reported steel imports were up 51 percent through the first nine months of the year compared to 2009. The finished steel annualized total was 34 percent ahead of the pace from the previous year.
n The World Steel Association upgraded its global steel forecast for 2010. The Brussels-based organization predicted steel use would increase this year by 13.1 percent to 1.27 billion metric tons, more than 35 million tons ahead of its April Short Range Outlook forecast.
n Gerdau Ameristeel entered an agreement with Ameron International, Tokyo Steel and Mitsui & Co. to acquire all of the shares of TAMCO, a California-based minimill. TAMCO is one of the largest rebar mills in the western United States, with annual capacity of 500,000 tons.
n Nucor Corp. selected St. James Parish, La., as the site for its planned $750 million ironmaking facility. The first phase of the 2.5-million-ton ironmaking facility will employ DRI technology, though the company also has plans for a coke plant, blast furnace, pellet plant and steel mill on the site.
n Steel Dynamics Inc., Fort Wayne, acquired the shuttered steel joist manufacturing businesses of Commercial Metals Co. The purchase included three joist-making plants that SDI plans to reopen in Hope, Ark., Fallon, Nev., and Juarez, Mexico.
n Reliance Steel & Aluminum Co. acquired Diamond Consolidated Industries Inc., Wyoming, Pa. The Diamond companies specialize in the manufacture of specialty engineered perforated metals.
n ThyssenKrupp Stainless USA began delivering the first cold-rolled product from its Alabama mill. The opening followed the mid-summer launch of operations on the company’s carbon mill at the same site.
n Triple-S Steel Holdings opened a new West Coast office in Southern California, to operate under the Intsel Steel West brand name.
n Wolverine Tube, Huntsville, Ala., filed for Chapter 11 bankruptcy protection. The supplier of tubing in copper and other nonferrous alloys expected to emerge from the process within three months.
n BHP Billiton and Rio Tinto, two of the world’s largest mining companies, abandoned plans to create a joint venture in Western Australia. Steel producers and officials from several western countries opposed the joint venture over concerns a pact would materially affect competition in the seaborne iron ore market.
n Kaiser Aluminum Corp., Foothill Ranch, Calif., announced plans to buy Alexco LLC, a manufacturer of hard alloy extrusions based in Chandler, Ariz., for $90 million.
n Esmark Steel group acquired the assets of Kelco Metals Inc., a Schaumburg, Ill.-based steel distributor specializing in hot-rolled, cold-rolled and coated steel products.
n After watching sales and profits climb during the first half of the year, the financial performance of North American metals producers and distributors declined considerably in the third quarter. Sales and profits remained ahead of the same three months of 2009, however.
n The American Iron and Steel Institute called on the U.S. Senate to follow the lead of the House of Representatives to enact legislation regarding Chinese currency manipulation.
n Olympic Steel announced plans to locate a new temper mill at the U.S. Steel Gary Works facility in Indiana. Olympic will invest $25 million in the project, including the purchase of an existing 150,000-square-foot facility to house a cut-to-length line, four-high temper mill and plate burning equipment.
n Metals USA completed the second growth initiative since its IPO in April with the acquisition of an affiliate of Eagle Steel Products, Louisville, Ky. Metals USA acquired a flat-rolled service center in Jeffersonville, Ind., which it renamed Ohio River Metal Services Inc.
n National Tube Supply announced plans for its first expansion outside its Illinois headquarters with a new operation in California. The 50,000-square-foot facility will hold the same inventory found at the company’s University Park site.
n Carpenter Technology Corp., Wyomissing, Pa., announced plans to expand its Dynamet titanium wire and bar facility in Clearwater, Fla.
n Samuel, Son & Co. Ltd. acquired Georgia’s AP Specialty Metals, Alpharetta, Ga., which specializes in stainless sheet, bar and plate, and aluminum sheet.
n Former Esmark executive Craig T. Bouchard has re-entered the steel business with the launch of Shale-Inland and its first acquisitions. Shale-Inland Stamping and Fabricating LLC purchased the assets of the Illinois Range Co., Injection Plastic Corp., Midland Chutes Inc., Midland Technology Inc., Smithco Fabricators Inc., and Wisconsin Tool and Stamping Co. With the acquisitions, Shale-Inland becomes a tier one supplier to the U.S. automotive market, truck and trailer market, high quality cookware industry and the consumer tool industry.