Steel Mills

Reliance Steel Expects Pricing to Rise Steadily Thru 2nd Quarter

Written by Ryan Packard

April 23, 2014

Reliance Steel & Aluminum, the largest metals service center in the United States, announced earnings earlier today. The company reported net income of $87.2 on sales totaling $2.09 billion. Sales included the recent acquisitions of Metals USA and Haskins Steel. The company reported an 8.4 percent improvement in same store sales over the same quarter last year.
 
David Hannah, Chairman and CEO of Reliance, reported in the company’s earnings conference call, “Our first quarter results reflect the anticipated seasonal pickup in demand relative to the fourth quarter of 2013, along with a general demand improvement and a moderate increase in average price per ton of metal sold. The pricing improvement during the first quarter is an encouraging sign after a very difficult pricing environment throughout most all of 2013. In fact, improved pricing and stronger demand led to sequential increases in net sales per day for the 3 months in a row during the quarter, a trend we have not experienced since early 2012. Slow but steady economic improvement over the past year led to a solid increase in first quarter demand, which resulted in an 8.4% year-over-year increase in our same-store tons sold. Despite positive demand trends, pricing unfortunately remained lower on a year-over-year basis. This lower pricing somewhat offset the stronger year-over-year demand, and led to a 4.4% reduction in our same-store average price per ton sold.”

Hannah continued by commenting on what is to come from the second quarter of 2014. “As the U.S. economy maintains its slow but steady recovery, we expect metals pricing and demand to continue to improve throughout the second quarter.”

The company reported automotive (which is mostly a tolling business for Reliance) continued to be quite strong.

Gregg Mollins, President and Chief Operating Office, said in his prepared statement that, “Energy, that being oil and natural gas, is still doing quite well and we have a strong position in this market. We expect demand and pricing to improve in 2014.

“Heavy industries, such as rail cars, barge and tank manufacturers, wind and transmission towers, are strong. Agricultural and construction equipment makers in North America are still busy, and we do quite well in this industry. Nonresidential construction continues along its path of slow and steady recovery with the demand still well below peak levels. We are cautiously optimistic that this important end market will continue to grow throughout 2014.

“As for pricing on carbon steel products, the recent rounds of price increases on flat-rolled products have held. Although there has been supply disruptions at the producer level, we sense there is more discipline being practiced by the North American mills. Price increases on plate, mini-mill products and wide-flange beams have all been accepted in the marketplace in spite of higher import levels. Lead times for the most part are 8 to 12 weeks, and the mills are busy. Let’s hope this healthy trend continues.”

Hannah closed the report with comments on the mid-quarter price drop and next quarter. “…One of the things that we all have to keep in mind is that mid-quarter, carbon steel prices really kind of leveled out, and then started down and that — whatever caused that, whether it was imports coming in because of the spread or whether it was weather related, who knows. All we know is that margins tightened up because prices were actually coming down slightly in the middle of the quarter, and that continued really until just recently. So that’s an important thing to keep in mind. And then looking forward in our guidance for the next quarter. We’re anticipating that prices will continue to go up. Not significantly, but we’re looking at some price increases steadily through the quarter and we’re not anticipating any leveling of or drop in prices during the next 3 months.”

Ryan Packard

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