MCN Top 50 Service Center Industry Giants
In its annual survey, Metal Center News ranks the largest, most successful service centers in North America.
By Tim Triplett, Editor-in-Chief
n Service Center Top 10 Profiles (See Below)
n The Top 50 Service Centers (Listing)
Combined revenues among the industry’s Top 50 service center companies declined by nearly 37 percent in 2009, but could rebound by nearly 25 percent this year, according to the findings of the latest Metal Center News Top 50 Survey. Based on their last full fiscal year’s results, the Top 50’s combined revenues totaled approximately $38.4 billion in 2009, down from $60.6 billion the previous year, reflecting the worst of the recession’s impact.
According to the Metals Service Center Institute, Rolling Meadows, Ill., steel shipments by all U.S. service centers declined by 36.8 percent in 2009, to 29.6 million tons. Canadian steel shipments dropped 26.4 percent, to 4.92 million tons. Similarly, total U.S. aluminum shipments were 38.4 percent below 2008 volume, while Canadian aluminum shipments were off 24.2 percent.
For its annual Top 50, MCN polled the industry’s largest players in July and August and ranked them based on total 2009 revenues. Los Angeles-based Reliance Steel & Aluminum Co. remained firmly in the top spot with $5.32 billion in sales, although down significantly from $8.72 billion in 2008. McJunkin Red Man Corp., Houston, moved into second place with $3.66 billion, down from 4.0 billion in 2008, ahead of Ryerson Inc. of Chicago with $3.07 billion, down from $5.3 billion the previous year.
Rounding out the Top 10, in order, were: ThyssenKrupp Materials NA, $2.1 billion, moving up from the No. 7 spot last year; Samuel, Son & Co., Ltd., $1.96 billion; Russel Metals, $1.73 billion; O’Neal Steel, $1.60 billion; Macsteel Service Centers USA and Namasco Corp., both with $1.20 billion; and Steel Technologies, $1.195 billion, moving into the Top 10 from last year’s 14th spot. Metals USA, with $1.1 billion in sales, dropped from the Top 10 into the 12th position this year.
The current Top 50 ranged from over $5.3 billion in annual revenues down to $126 million, including 12 companies that took in a billion dollars or more in 2009. This reflects the challenging market conditions compared to a No. 1 over $8 billion and a No. 50 over $170 million last year, with 19 in the billion-dollar club.
Because MCN polled companies this summer, with half of the current year in the record books, respondents were in a good position to forecast their expectations for the remainder of 2010. About 40 of the 50 companies offered a forecast, projecting an average sales increase of 24.6 percent this year—albeit from 2009’s depressed levels. While that’s certainly a positive trend, it will still leave Top 50 revenues more than 20 percent below the peak of 2008.
In the aggregate, this year’s Top 50 now operate a little more than 1,400 stocking locations totaling 120 million square feet—about the same as reported last year. These facilities are staffed by a combined workforce numbering around 53,900, down about 4 percent from the 56,000 on the job in 2009. With sales on the increase, it appears the industry is almost done trimming facilities and staff.
The recessionary market conditions slowed, but did not halt, mergers and acquisitions in the service center sector during the past year. Most noteworthy were changes in ownership resulting from Severstal North America’s exit from the distribution business.
Severstal purchased Esmark’s holdings in August 2008, including producer Wheeling-Pittsburgh Steel and several service center operations that it renamed the Northern Steel Group. Earlier this year, Severstal opted to sell its Northern Steel Group assets. Aurora Resurgence, a Los Angeles private equity fund, purchased four: 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, Mo. Aurora Resurgence’s group now goes to market as New Star Metals Inc. based in Lombard, Ill.
Esmark opted to repurchase three of its former holdings: Independent Steel, Cleveland, Ohio, and Sun Steel and Century Steel, based in Chicago Heights, Ill. Shortly after reacquiring the three service centers, the Esmark Steel Group added the assets of Chicago-based Great Western Steel, North American Steel, Homewood, Ill., and Amtex Steel (now Chicago Steel & Iron). Though they were under the former owners’ management for most of last year, Esmark officials estimate the total sales of their group of companies at about $167 million in 2009, which places Esmark Steel Group at No. 40 on MCN’s current ranking. Esmark Inc. Chairman and CEO James Bouchard and his management team, including Esmark Steel Group CEO Tom Modrowski, plan to be among the leading consolidators of the service center industry as the economy improves.
Other notable transactions in the past year:
n Worthington Steel, the steel processing segment of Worthington Industries, Columbus, Ohio, acquired the strip steel assets of Gibraltar Industries, Buffalo, N.Y., signaling Gibraltar’s exit from the processing business.
n O’Neal Steel, Birmingham, Ala., acquired the assets of full-line distributor Denman & Davis, Clifton, N.J., strengthening its position in the Northeast.
n Steel Technologies, Louisville, Ky., is now part of NuMit LLC, a joint venture between Steel Technologies’ parent Mitsui and steelmaker Nucor Corp. Nucor will allow Steel Technologies to implement the mill’s latest foray into distribution by constructing a new flat-rolled processing center in Monterrey, Mexico.
n Ryerson Inc. purchased SFI-Gray Steel Inc. and Texas Steel Processing Inc., two steel plate processors based in Houston.
n Metals USA acquired J. Rubin & Co., Rockford, Ill., expanding its reach in Illinois, Wisconsin and Minnesota.
n Tri Star Metals, Carol Stream, Ill., merged with Pinnacle Metals, Freeport, Ill., strengthening their position in the stainless and aluminum business.
n Denver-based Brown-Strauss Steel acquired B-S Steel, Kansas City, Kan., expanding its offerings of structurals, plate, bar, pipe and tube in the Midwest.
n Chriscott USA purchased the Canadian and U.S. assets of Barzel Industries, Norwood, Mass., formerly Novamerican Steel Inc.
Comparing last summer’s forecasts to the actual sales for 2009 shows that the vast majority of service center executives significantly underestimated how much the weak economy would continue to drag down their sales. On average, their mid-year projections were nearly 10 percent higher than their ultimate results. But even if this year’s projections are similarly overoptimistic, sales among the Top 50 still stand to grow by over 18 percent in 2010.
Service Center Top 10 Profiles
No. 1 Reliance Steel & Aluminum Co., Los Angeles—Despite a major decline in sales in 2009—to $5.32 billion from 2008’s $8.7 billion—Reliance easily retained its lead as the largest service center company in North America. Reliance continues to operate over 200 locations with more than 9,000 employees, although down from a workforce over 10,000 a year ago. Unusually quiet on the M&A front for the past year, Reliance execs say they are on the lookout for acquisition opportunities as the economy improves.
No. 2 McJunkin Red Man Corp., Houston—McJunkin Red Man Corp. reported $3.66 billion in 2009 revenues, a relatively modest decline from the $4.0 billion in 2008, compared to many other companies. The company claims to be the largest North American distributor of industrial pipe, valves, fittings and related products to the energy industry. It operates 245 stocking locations manned by 3,650 employees primarily in the U.S. and Canada.
No. 3 Ryerson Inc., Chicago—Ryerson’s revenues declined to $3.07 billion in 2009 from $5.3 billion in 2008 and $6.0 billion in 2007. Ryerson now runs about 100 stocking locations with over 4,000 employees. Owned by the Platinum Equity investment group, Ryerson decided not to proceed with a proposed offering of its common shares this spring due to unfavorable market conditions.
No. 4 ThyssenKrupp Materials NA, Southfield, Mich.—The North American distribution arm of the German steel giant moves up from the No. 7 spot last year with $2.1 billion in 2009 sales, down from $2.9 billion in 2008 and $3.2 billion in 2007. It currently operates 77 stocking locations manned by 3,000 employees. The company is focused on value-added processing and distribution of aluminum, copper, brass, specialty metals, steel and plastics products. Divisions include Copper and Brass Sales, AIN Plastics, OnlineMetals, Ken-Mac Metals, Thyssen
Krupp Steel Services, ThyssenKrupp Industrial Services, Lagermex and TKX Logistics. Its parent company is currently ramping up production at a new, $4 billion carbon and stainless mill in Mount Vernon, Ala.
No. 5 Samuel, Son & Co. Ltd., Mississauga, Ont.—Samuel continues to dominate metals distribution in the Canadian market (along with Russel Metals) with $1.96 billion in 2009 revenues, down from $3.22 billion in 2008 and $3.15 billion in 2007. The family-owned company now operates 86 stocking locations with nearly 4,000 employees on both sides of the U.S.-Canada border, as well as Mexico, Australia, China and the UK.
No. 6 Russel Metals, Mississauga, Ont.—Canada’s other market leader, Russel Metals, finished 2009 with $1.73 billion in total revenues, down from $3.16 billion in 2008 and $2.56 billion in 2007. The company currently operates 70 locations with over 2,500 employees. Russel carries on business in three distribution segments: metals service centers, energy tubular products and steel distributors. In a cost-saving move, Russel recently combined its Ontario long-products operations into its Cambridge facility, closing its Port Robinson location. Earlier this year, Russel announced the planned opening of a new 20,000-square-foot service center in Terrebonne, Quebec.
No. 7 O’Neal Steel, Birmingham, Ala.— The largest family-owned service center in the United States (not counting Samuel, which is based in Canada), O’Neal reported $1.6 billion in sales in 2009, down from $2.92 billion in 2008 and $2.4 billion in 2007. The company now has over 80 locations with 3,300 employees. Its Industrial Metals Group and High Performance Metals Group consist of nine leading service center brands working cooperatively to serve customers in diverse markets throughout the world. O’Neal’s most recent acquisition of full-line distributor Denman & Davis, Clifton, N.J., strengthened its position in the Northeast.
No. 8 Macsteel Service Centers USA, Newport Beach, Calif.—Macsteel USA, a division of South Africa’s Macsteel Holdings, retains the No. 8 spot with $1.2 billion in 2009 sales, down from $2.2 billion in 2008 and $1.9 billion in 2007. Macsteel now operates 30 stocking locations and employs over 1,100 workers.
No. 8 (tie) Namasco Corp., Roswell, Ga.—Also reporting $1.2 billion in 2009 sales was Namasco Corp. Namasco ranked No. 10 last year with $1.86 billion in 2008 revenues, up from $1.7 billion the year before. Namasco, along with its subsidiary Temtco Steel, is owned by Europe’s Klockner & Co. SE Group, which claims to be the largest independent distributor of metal products in the European and North American markets.
No. 10 Steel Technologies, Louisville, Ky.—Moving up into the Top 10 from the 14th spot last year is Steel Technologies, a major processor of flat-rolled steel, with over $1.19 billion in 2009 sales, down from $1.3 billion in 2008 and $1.4 billion in 2007. Its 23 facilities, with 1,300 employees, are located throughout the United States, Mexico and Canada. Steel Technologies was owned by Mitsui & Co., a Japanese trading company, until this April when it entered into a 50-50 joint venture with steelmaker Nucor Corp. Today, each company indirectly owns a 50 percent interest in Steel Technologies through their NuMit joint venture, which will serve as their platform for further expansion in the North American steel industry.