Once again, Metal Center News has published its annual ranking of the Top 50 “largest, most successful” service centers in the industry. That they are the largest is just a matter of toting up their revenues. Whether that makes them the most successful is open to debate.
As a group, the Top 50 took in a combined $51.7 billion in 2012, up only slightly from $51.6 billion the previous year, the result of disappointing sales and pricing levels. Market leader Reliance Steel & Aluminum accounted for $8.44 billion of that total. Fifteen companies reported annual sales over a billion dollars. Yet collectively, the Top 50 market leaders still have a long way to go to regain the $60 billion peak they achieved in 2008.
Compared to the average service center—a small business with one or two locations and about $20 million in annual revenues—the Top 50 certainly seem big. But are they “successful?” Profitability would be a good measure. But with the exception of the handful of service center organizations that are publicly traded, the rest are privately held and won’t discuss their earnings this side of the IRS. In fact, at one point MCN floated the idea of doing a series of Top 10s by product category, rather than one big Top 50, to see which distributors are the largest players in each of the major market segments: flat-rolled steel, pipe and tube, aluminum, stainless, etc. That project also went nowhere as most service centers want to keep their individual market share, or lack thereof, proprietary.
Examining service centers’ collective market share more closely offers some insights, however. Analysts at IBISWorld estimate the size of the U.S. metals wholesale industry at around $192.0 billion. 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 holds about a 4 percent market share.
Despite all the talk about industry consolidation, the service center industry remains highly fragmented. IBISWorld estimates the number of U.S. metals wholesalers at around 9,900 locations operated by 6,500 companies. Thus it's the "Bottom 6,450" that can lay claim to the vast majority, 73 percent, of the market. It’s the "Bottom 6,450" that populate the largest customer group for North American mills. And it's the "Bottom 6,450"—manned by fathers and sons, mothers and daughters, nieces, nephews and friends working shoulder to shoulder every day—who gain emotionally as well as financially from their tight-knit family-owned enterprises.
Dollars and cents are not the only measures of success. As you read this month’s Top 50 report, consider for a moment that perhaps it’s the companies on the bottom that are really on top.