Ryerson Posts Best Q2 Since '08, Shies Away from Imports

The Chicago-based metals service center sees a “longer duration recovery” in fixed assets and in manufacturing thanks to supportive monetary, fiscal and trade policy as well as to anticipated infrastructure investment, decarbonization, strong demand fundamentals and mill consolidation, Lehner said.

Such factors – as well as an increased appetite for recycled industrial metals – will probably result in “higher floors and ceilings” for both demand and prices over the next several years, he said.

And the outlook is still “net positive” even when viewed against headwinds such as labor shortages, snarled supply chains, increased geopolitical risks, and the latest “twists and turns” of the COVID-19 pandemic, he said.

As for the here and now: “Elevated pricing dynamics are an ongoing consequence of supply being unable to meet demand in the short term,” Lehner said.

All told, Ryerson recorded net income of $112.9 million in the second quarter of 2021 after losing $25.6 million in the second quarter of last year on revenues that increased nearly 84% to $1.42 billion over the same period, according to its second quarter earnings report.

Shipments were 559,000 tons in the second quarter of this year, up 21% from 462,000 tons in the year-ago quarter. And average selling prices were $2,538 per ton ($126.90 per cwt) in the second quarter of 2021, up 51.9% from $1,671 per ton in the second quarter of 2020.

Ryerson’s primary commodities are carbon steel, stainless steel and aluminum. The company also sells nickel as well as brass, copper and bronze.

Price increases were highest on the carbon steel side. Average carbon steel selling prices were up 60.7% year-over-year in the second quarter compared to 49.3% on the stainless side and 23.5% on the aluminum front, according to data released along with earnings. The company has mostly been able to manage or pass along higher costs not only when it comes to materials but also when it comes to transportation, company executives said.

And despite surging U.S. steel prices, Ryerson doesn’t intend to turn to the import market for relief.

“Imports are a comforting distraction at this point even though the numbers are up,” Lehner said. Most of the increased foreign tonnage is slab, but imports of finished goods are up as well, he acknowledged.

The problem is knowing when imports will arrive. Import lead times are “all over the place” but share one thing: they are all very extended. And the Delta variant has put additional uncertainty into the equation when it comes to foreign steel, Lehner said.

“Getting those orders filled and getting them dependably across the water is a challenge. There is no doubt that folks are going to look to import more as a relief valve,” he said. “But we are not importing more, and we really don’t see the opportunity as being all that attractive relative to the risk.”

As for inventories, Ryerson ended the second quarter with 63 inventory days of supply, up from 61 days in the first quarter. Inventory levels are slightly below the company’s targets and reflect industry-wide tightness, the company executives said.

On the acquisitions front, Ryerson is pleased with the integration of Central Steel and Wire, the Chicago-based service center it acquired in 2018. The deal was a “heavy lift” for Ryerson, and the company is not itching to undertake a similarly transformative buy, Lehner indicated.

“But we’ll keep our eyes and ears open,” he said, noting that the company had a strong pipeline of potential “bolt on” acquisitions.

By Michael Cowden, Michael@SteelMarketUpdate.com