The market for steel plate was hammered by the pandemic, but there are signs it’s coming off the bottom.
There was one overriding hope among industry executives surveyed about the state of the plate market: the segment has found its floor.
“Things are bottoming out. It feels like right now we’ve found a bottom from a demand standpoint in the second quarter, and we expect to see gradual growth as we go into the next three or four quarters,” says Ryan Murphy, vice president of purchasing for Lisle, Ill.-based Leeco Steel, a plate specialist.
Jerry Shaw, president and co-owner of Kenilworth, N.J.-based Benedict-Miller was not in the same room as Murphy, but his remarks were eerily similar. “I’d say we’ve seen the bottom. There are weeks with a lot of optimism and some less so, but there’s not a lot of concern it’s going to get worse.”
Of course, for many, the damage has already been done.
“When COVID hit, after one month in, a lot of our customers closed their business doors. A few of them got bought out,” says Brent Wilson, marketing manager for Precision Grinding Inc., Birmingham, Ala. “We saw a lot of people closing permanently down here in the Southeastern area.
Some of those companies, Wilson says, had owners nearing retirement age, and took the coronavirus pandemic as the sign that it was time to exit the business. Whether other operations will step in to fill the void remains to be seen. “That’s the big question, and I don’t know the answer to that. It’s something anyone in the industry ought to be worried about.”
Scott Pape, president of Warren, Ohio-based Kenilworth Steel, says the first two months of the pandemic were pretty devastating. “I’m going to say most people, our company included, saw their business off one-third to 40 percent or a little more through April and May. We’re taking some baby steps back in terms of demand, but it’s still pretty soft.”
Others agree the market has been inching ahead since the depths of the downturn. “We’ve seen probably a 15-20 percent uptick from the lowest levels,” Wilson says. “In terms of our original forecast, we’re way behind the mark and I’m sure many others are too.”
Most, but not all. “Considering everything, we think we had a pretty decent quarter. We didn’t meet our goals, but we were close to them,” says Patrick Dickerson, business development manager for TF Warren Group, which operates Premium Plate, a carbon, alloy, HSLA and stainless plate service center based in Axis, Ala.
Premium Plate’s success hinges on the markets they serve. The company is heavily tied to the new construction and repair of field-erected storage tanks. It also serves the utilities markets. “We’ve seen a slowdown in both markets, but they’re still pretty active.” Wilson says work-at-home orders from engineers have resulted in some delays in projects, “but they are moving forward.”
Another market that held up better is construction, and looks promising to climb back fairly rapidly when the pandemic eases, though that remains a question given the second wave that began to gather steam in mid-July. Murphy points to the transmission/distribution market as another segment that has managed to hold its own through the worst of the shutdowns.
In contrast, there’s oil and gas. The steel-intensive market was already reeling from a senseless global pricing war before the pandemic hit, which only exacerbated conditions. “My biggest worry is on the oil and gas side as to what is going to happen to exploration companies and how that’s going to affect the customers we deal with down in the Texas/Oklahoma/Louisiana area,” Murphy says.
The already-suffering mining industry is also lagging. “I’m in mining country, and I think mining is done from a plate standpoint. Kenilworth Steel has been pretty successful in mining over the years, and it’s 10-15 percent of what it once was. My inventory would reflect that,” Pape says.
The uneven nature of the current economic environment is being felt all over. Al Moir, president of Hartland, Wis.-based Sullivan Precision Plate relates the off-balance nature of the pandemic’s impact on business. “It’s really odd. I had one of my customers say they’re getting really busy. They had a bunch of guys laid off and they brought them back,” he says. “The same day, one of my other customers tells me they laid off 28 people.
“In past recessions, all companies were laying people off. This is bizarre, because you have one extreme to the other,” Moir says.
The government offered some aid to companies at the outset, though nothing to follow up on the initial CARES Act. “Through the worst of the shutdowns, we relied on some of the funding from the government to help us get through. Once that ran out, we had to make some tough decisions, shuffling some people and doing a few other things to keep people on board,” Moir says.
Letting people go may be unavoidable in some circumstances, but given the yearslong difficulty the industrial economy has had with luring quality workers to the seg,emt, particularly on the shop floor, it’s a route few executives want to travel. The trained operator may be quickly brought on board by a competitor, leaving the service center in an even-more difficult position when things turn again.
Managing through the situation has been difficult on many fronts, particularly as some communication was made more difficult by stay-at-home orders and other measures enacted to protect everyone. “This would have been a great time to have face-to-face conversations with people, to see how it’s affected them. It’s a little hard to engage folks when you don’t have in-person conversations with them,” says Wilson.
On the other hand, the forced use of certain technologies to engage with suppliers and customers may result in methods of doing business that outlast the current conditions. “We think Zoom or Microsoft Teams or any type of program like that is a good tool. It’s good in commercial, in engineering and purchasing. It’s another way of communicating with people we need to,” says Dickerson.
Exactly when things return to normal is hard to gauge. This is not following the typical recessionary playbook in a lot of ways. “With the pandemic, it’s week to week and it changes,” says Benedict-Miller’s Shaw.
Most of the plate-producing mills have remained up and running throughout the coronavirus surge, though some capacity has come offline. It certainly hasn’t affected availability. “We’re able to get everything we want,” says Dickerson. “Mills have an OK backlog considering what’s going on in the market.”
Pricing came down earlier in the year, which is keeping imports out of the market. Plate product imports were all down double-digits through the end of May, the American Iron and Steel Institute reported.
Pape believes the pandemic could become an impetus to pare down the domestic plate sector to a more sensible level. “We have at least one too many mills. We certainly have too many service centers,” he says. “I would not be surprised to see a mill exit the plate business.”
The excess supply of suppliers is also bothersome, he says, as it leads to unhealthy behavior. Quoting management writer Peter Drucker, Pape says, “If you’re in a commodity business, you have the ability to be as smart as your dumbest competitor.”
Right now, most of those competitors are keeping their stocks very low, which is generally appreciated throughout the supply chain. “Everyone is hungry for orders, but no one is interested in inventory,” says Damien Brennan, vice president of Clarington, Ohio-based American Heavy Plates.
Pape agrees. “People will tell you, ‘I’m not keeping a piece of plate over the weekend,’” he says. “It’s funny, but it’s true. The term that encapsulates the market right now is ‘risk avoidance.’”
That attitude might be crucial to survival, Brennan says. “In this kind of market, every 1-2 percent you can save in operations is critical to keeping the lights on for another six months while this works out.”
Truly and forcefully getting out of this environment may require a little bit of help. And the industry largely agrees what form that would take. “There are only a few things that can move the needle appreciably. One would be a stimulus bill, which is on everyone’s mind,” Murphy says.
Indeed it is. Executives across the country recognize the potential for a stimulus bill, possibly attached to one of the coronavirus relief packages, is the single greatest source of hope.
“There is still a lot of work that needs to be done here in the U.S. from an infrastructure standpoint,” says Leeco’s Murphy. “That will be a big boost for the plate market and keep it strong. Whether it’s the federal government or state or local governments, we’re going to have to spend money to rebuild and upgrade our infrastructure over the next 20 years.”
“If this infrastructure bill they keep throwing around gets traction and gets passed, that will be good for everybody – the mills, the fabricators, the service centers,” says Dickerson. “That would be a very good shot in the arm for everyone in the steel industry.”
The frustrating thing for industry players is a good public works bill is not just a selfish call to aid the industry. Every public study and survey indicates a significant project is an absolute must.
“It needs to be done. This is not pork. Our infrastructure is suffering tremendously,” Dickerson says.
Until then, the plate market will have to hope that the worst is in the past. Of course, in business, looking at the bright side can be a prerequisite to success, or at least to good mental health.
“Most people have felt that if they can weather something as nasty as this pandemic is, and come out relatively unscathed, they have proved to themselves internally they can take whatever comes our way,” Wilson says. ?
Caption: American Heavy Plates specializes in large plate orders.
(Photo courtesy American Heavy Plates.)