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8-2011 Service Center Market Analysts
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‘An Educated Customer is a Smarter Buyer’

Metals distributors keep customers informed through internally crafted market reports.

By Dan Markham, Senior Editor

The Berlin Metals Global Briefing, a monthly look at trends affecting the metals industry, began by accident. About a dozen years ago, owner Roy Berlin began receiving a monthly newsletter with fascinating industry data from a Mitsubishi sales office in Detroit. Berlin thought the information would be of interest to his customers, so he repackaged the material, added a little bit of his own content and sent it out.

One month, about six years ago, the newsletter didn’t arrive. Its author had passed away, and the company decided to discontinue the practice in his absence. Soon, the e-mails started arriving from Berlin’s customers to his service center in Hammond, Ind. “Where’s the newsletter?” they asked.

Berlin didn’t want to let this curious group of customers down. So he contacted a retired steel industry executive, gave him some input on what kind of information he wanted gathered from such sources as industry publications and government data, and put him to work on the Berlin Metals Global Briefing.

Berlin’s finished product goes out monthly to 500 subscribers, a cross section of customers, competitors and the curious. “People love it,” Berlin says. “It gives them an overview with some economic data on steel markets here and around the world.”

Berlin’s company is one of a few in the distribution industry providing such industry analysis for its customers and others in the business.

One of the oldest is produced by Boyd Metals, a Fort Smith, Ark.-based service center company that has been putting out its Market Report since 2004. The report was borne out of a website redesign, as Boyd was looking for ways to “separate our website and our company from the competition,” says Audie Dennis, a vice president and general manager of Boyd Metals’ Joplin, Mo., operation.

Dennis, then the company’s marketing director, was charged with putting the report together. He wrote it for six years before being promoted in 2010. “We thought it would be something that would help our customers plan and manage their businesses better, and it would be of benefit to ourselves,” Dennis says. “We gave them some information, the different variables that affect steel pricing.”

Those variables include capacity utilization, service center inventory data, ingot prices on aluminum and surcharge changes, depending on the material, says Mike Rowland, Boyd’s vice president of business development.

As was the case with Berlin Metals, the reaction from readers was immediate. Boyd’s customers and trading partners not only used it, but passed it along to their customers and vendors.

The most recent entry into the field of service center analysis is Cleveland’s Majestic Steel. Its Spoores Report debuted in April 2010.

“I had been doing a number of internal reports for about five years. It included scrap prices from different regions and prices of everything from iron ore to finished steel such as Galvalume or galvanneal,” says Josh Spoores, then market research manager with Majestic. “We put together a report, more for customers and suppliers than anything else — a communications tool.”

Majestic’s report was an immediate hit. Spoores became a fixture at metals conferences, sharing the podium with other analysts, though one with the perspective of a steel distributor, not a Wall Street player.

Earlier this year, Spoores left Majestic to form his own independent analysis service, providing the weekly Steel Reality newsletter to many of the same readers of the Spoores Report at Majestic. But his absence hasn’t curtailed Majestic’s commitment to analysis. The company now produces the weekly CORE Report, providing information on costs, supply, demand, price and the larger economy.

Majestic’s entry into the information dissemination world was well-timed. The supply chain was still recovering from the devastating effects of the 2008-09 recession, and the players were much keener to keep up with the direction of the economy in general and the steel market in particular.

Steve Chiles, chief marketing officer for Majestic, says that prices were historically pretty stable up through 2003. Since then, it’s been a rollercoaster ride, a situation exacerbated by the meltdown of 2008. “The instability in the market has customers expressing a desire to stay more informed.”

And that is ultimately why Majestic continues to do the legwork necessary to produce such a report — to provide a differentiating service to its customers.

“We’ve developed our market research as a means of transcending the traditional definition of value, which was product and service based,” says Chiles. “Those things will continue to be important, but we’re offering the additional dimension of providing timely information.”

Berlin has a similar viewpoint. “Anyone can sell steel, but not everyone does a good job of solving problems. One way is to make an educated customer. This makes a smarter buyer,” he says.

Though each company undertakes some expense to gather the information, and gives away the material free without advertising, all see it as investment in the brand. “It has given people confidence we’re a solid, reputable business,” Berlin says.

Though the marketing department is behind the CORE Report at Majestic, the company is careful to keep the product clean and simple. “You’re not seeing a bunch of Majestic Steel marketing messages in it,” says Tom Innis, director of corporate relations for Majestic. “We just want to put out the best product we can, and have our brand be associated with it.”

When Boyd Metals was kicking around the idea of the report, it initially had to convince some doubters within the company of its merits. “The first thing we had to do was get buy-ins internally,” recalls Dennis. “People wondered how much information we should share.”

Those skeptics were soon convinced as the company’s reputation grew. Not only did Boyd’s customers embrace the report, they sent it along to others who eventually became customers, too. “It’s hard to say it was all about the market report, but it did make it easier for our salesperson to get a foot in the door,” Dennis says.

“We share with them, both when the market’s going up and when it’s going down,” says Rowland, who has assumed authorship of the report. “It really establishes credibility with our customers, as long as we’re honest and shoot straight with them.”

While each of the reports attempts to provide a service and educate customers and vendors, there is considerable difference in their size and delivery. Majestic’s is a data-driven weekly, Boyd does a report every two weeks, while Berlin offers a combination of charts and commentary, but on a monthly basis.

Majestic’s Chiles says his company’s report is intentionally dry, in contrast to some of the analysis provided by the paid steel industry consultants. “We purposefully take emotion out of the discussion. We’re looking at the technicals, at objective measurements, from raw material input costs through end-use demand drivers within specific steel-intensive sectors. We avoid the editorializing of it. We want to make sure it’s an objective report that provides the facts and avoids the emotion.”

Furthermore, he says, the company knows its audience has limited time to pore over pages of technical reports. “Some of them can be rather lengthy and a little unwieldy,” Chiles says. “We want to distill it into something they can look at and get back to their day job.”

The target audience is a key difference between the service center reports and other analysis done by consultants. Many of the traditional market reports are geared toward the investment community. But these company products, as well as Spoores’ Steel Reality, are designed for steel users by steel users.

“A lot of analysts on the financial side are looking at how data impacts the equity or the bond markets. For me, it’s purely physical steel, and my information is geared toward that,” Spoores says.

Subscriptions to the products can be made through the company’s websites, www.boydmetals.com, www.berlinmetals.com, and www.majesticsteel.com. Spoores can be reached at www.steelreality.com.

  
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