AK Steel
Average Selling Price Sets Record at $1,135
A record-selling price for its steel delivered a strong start to 2008 for AK Steel, Middletown, Ohio.

The company’s average price of $1,135 per ton was a 5 percent increase over the $1,078 figure in the first quarter of 2007 and the $1,079 per-ton level in the fourth quarter. Higher spot and contract steel prices, coupled with increased raw material surcharges, drove the higher price.

As a result, AK Steel reported net income of $101.1 million, a jump of 61.2 percent compared to the $62.7 million in the first three months of 2007. Net sales were up 4.1 percent to $1.79 billion.

The new average selling price record was just one of the highlights in the first quarter, President and CEO James Wainscott told shareholders and analysts during the company’s first-quarter conference call.

“At $108 per ton, our operating profit ranks as its best-ever in the company. During the first quarter, we set a monthly production record for stainless slabs. And at Butler, Zanesville and Coshocton, we set records in stainless and electrical steel shipments.”

The operating profit per ton of $108 was an increase of 40 percent compared to the first quarter of 2007.

Wainscott is projecting more of the same in the second quarter, anticipating another record performance. “We expect second quarter shipments to increase to approximately 1.7 million tons, up nearly 8 percent from the first quarter. We expect our second quarter average selling price to be another record, increasing $100 per ton over the first quarter.”

Wainscott said the company’s increased input costs for carbon scrap, iron ore and natural gas will be approximately $70 per ton. “The prices we pay for iron ore, scrap and purchased slabs are at their highest levels in history. As the least integrated of integrated steel producers, we are receiving a full frontal assault from these extraordinary cost increases.”

The price of iron ore pellets has jumped nearly 90 percent this year, No. 1 scrap bundles are up to more than $550 per ton, and purchased slabs are selling for more than $800 per ton, he said.

AK has been able to pass along most of the raw material cost increases through seven carbon steel price increases totaling more than $400 per ton. Still, as existing contracts expire, AK and other steelmakers will make further adjustments.

“Upon expiration of the various agreements, we’ll be truing up prices that reflect cost and the current market situation. I think it’s fair to say that fixed price agreements will soon be a thing of the past,” Wainscott said. “Steel companies have had a lousy one-sided business model, where we accepted all of the risk on commodity inputs, including iron ore, and that will not work going forward.”

AK Steel announced a planned 18-day shutdown of the blast furnace at Middletown Works, which will cost approximately $40 million. The maintenance shutdown is a week longer than the company’s typical outages.

Also in the works for AK Steel is work on the No. 5 electric arc furnace at Butler Works, which could result in a 40 percent increase in melting capacity and the possibility of taking the company out of the market for purchased slabs. AK Steel also announced plans for a new coke battery at Middletown Works that will allow it to become self-sufficient in terms of company-wide coke requirements.

But for the immediate future, Wainscott said, the company expects great things. “Our second quarter has the potential to be the best in the history of the company. Frankly, I’d be disappointed if it wasn’t.”

Alcoa
Higher Input, Energy Costs Compress Earnings
Higher input and energy costs and a weaker dollar compressed Alcoa’s earnings during the first quarter. The Pittsburgh-based aluminum producer reported net income of $303 million in the quarter, less than half the total posted in both the previous quarter and the same quarter in 2007. Alcoa reported net income of $632 million in the fourth quarter of 2007 and $662 million in the first quarter of 2007.

Revenues for first-quarter 2008 were $7.4 billion, down from the previous quarter. The total was a 6.0 percent increase when the packaging and consumer business is excluded. Alcoa sold that portion of its business during the first quarter.

“We have generated strong returns in the face of challenging economic conditions and three of our segments—primary, flat-rolled and engineered products and solutions—achieved substantial after-tax operating income growth,” said Alain Belda, Alcoa chairman and CEO during his most recent conference call with analysts and investors. “Upstream margins were squeezed by higher energy costs and a weaker U.S. dollar, but the global market remains tight and prices are near historic highs, primarily driven by demand in Asia, especially China.”

In first-quarter 2008, management approved a realignment of Alcoa’s reportable segments to better reflect the core businesses in which Alcoa operates and how they are managed. This realignment consisted of eliminating the extruded and end-products segment and realigning its component businesses.

In the flat-rolled segment, Alcoa reported after-tax operating income of $41 million, up $56 million from the previous quarter. The segment benefited from improved performance in the Russian business, as well as slightly higher volumes and an improved mix offset by higher energy and alloy material costs.

“Sequentially the segment showed marked improvement, but is down on a year-over-year basis,” said Chuck McLane, executive vice president and chief financial officer. “Weak market conditions within automotive, commercial transportation and distribution have persisted from the fourth quarter. Additionally, higher alloying material costs, particularly magnesium and manganese, have hurt results.”

Alcoa officials acknowledged some sluggish times ahead in North America, but overall are positive about both the short-term and long-term outlook. End-use markets in North America are expected to drop 5 percent this year, following on a 10 percent dip in 2007.

“Weak end markets in North America and Europe are not significantly affecting the overall strong aluminum fundamentals. Because of that macro strength, coupled with growth projects coming to fruition, ongoing productivity improvements and a host of innovative products, we are clearly optimistic about the future,” said Klaus Kleinfeld, president and chief operating officer.

Belda said the supply-demand balance supports high prices for aluminum. A projected worldwide excess has been depleted by power and weather issues in China and South Africa.

“While we’ve seen weakness on the consumption side, we’ve also seen constraints on the supply side. We believe the net impact of the well-publicized weather and power issues in places like China and South Africa will dampen global production by approximately by 700,000 tons. That lowers the projected surplus to less than 100,000 tons, or essentially in balance for the year,” McLane said.

Also in the first quarter, the company committed more than $748 million to investments, including the new Juruti bauxite mine and Sao Luis refinery in Brazil, the strategic investment with Chinalco in Rio Tinto plc, and the acquisition of two aerospace fastening companies. In the quarter, capital expenditures totaled $748 million, 60 percent of which was devoted to growth projects. Capital expenditures for the year are expected to top $3 billion.

Carpenter Technology
Energy, Aerospace Bolster Weak Demand Elsewhere
Carpenter Technology Corp., Wyomissing, Pa., reported net income from continuing operations of $50.8 million for its fiscal third quarter ended March 31, down from the record net income of $64.3 million set a year earlier.

The third quarter 2008 results reflected reduced demand in Carpenter’s economically sensitive industrial, automotive and consumer end-use markets, combined with higher operating costs, company officials said. Demand in the global energy and aerospace markets was strong in the third quarter.

Including results of discontinued operations, and the net gain on the sale of Carpenter’s ceramics business, net income totaled $120.0 million, vs. $66.6 million for the third quarter a year earlier.

“Our third-quarter financial results fell short of our original expectations due to reduced demand in our economically sensitive markets, and higher operating costs,” said Anne Stevens, chairman, president and chief executive officer. “However, we have good overall top-line momentum on the business moving forward, and we achieved record sales this quarter in the energy and aerospace markets as a result of strong demand, particularly in international markets. Based on current conditions, fourth quarter sales and earnings should be at or above this quarter’s performance. We expect our full-year financial results to be at record levels for the fourth consecutive year.”

Net sales from continuing operations of $509.8 million were 1.2 percent lower than a year ago. Adjusted for surcharge revenue, sales from continuing operations were essentially flat with a year ago.

Nucor
Fifth Consecutive Record in First-Quarter Earnings
Nucor Corp., Charlotte, N.C., posted record first-quarter net earnings for the fifth consecutive year.

Consolidated net earnings for first-quarter 2008 were $409.8 million, an increase of 7.5 percent compared to first-quarter 2007 net earnings of $381.0 million, and an increase of 12 percent from fourth-quarter 2007 net earnings of $364.8 million.

Nucor’s consolidated net sales increased 32 percent to a record $4.97 billion compared with $3.77 billion in the first quarter of 2007 due to a 15 percent increase in average steel sales price per ton, an 11 percent increase in average steel products sales price per ton, and a significant increase in steel products shipments attributable to acquisitions made in 2007.

Nucor achieved its record-setting earnings during a period of dramatic increases in the cost of raw materials, which is a testimony to the company’s upstream investment in scrap processing operations and its broad product line.

“With our product line so diversified, Nucor’s performance is not tied to any one market,” Nucor Chairman Dan DiMicco told analysts and investors during last month’s first-quarter conference call.

Contributing to the increase in sales was the February acquisition of SHV North America Corp., owner of The David J. Joseph Co. and its affiliates, for a cash purchase price of $1.4 billion. DJJ, which now operates as a wholly owned subsidiary of Nucor Corp., has been the broker of ferrous scrap to Nucor since 1969.

In the steel mills segment, steel production increased 4 percent to 5,831,000 tons in the first quarter, compared with 5,585,000 tons produced in the first quarter of 2007. It was also an increase of 4 percent over the 5,586,000 tons produced in the fourth quarter of 2007.

Total steel shipments increased to 5,951,000 tons in the first quarter, about a 5 percent hike over both the previous quarter and first-quarter 2007.

Steel shipments to outside customers of 5,203,000 tons in first-quarter 2008 remained flat compared with 5,229,000 tons in the first quarter of 2007, and increased 2 percent over the 5,078,000 tons shipped in the fourth quarter of 2007.

Nucor got a major boost from its own downstream operation, which is its mills’ largest customer. First-quarter shipments from Nucor mills to inside customers totaled 748,000 tons, up 74 percent from the year-ago quarter. “Nucor’s vertical integration into downstream steel products enhances our steel mills’ long-term performance by providing our steelmaking operations with a profitable base load of volume through the economic cycle,” said John Ferriola, chief operating officer of steelmaking operations.

In the steel products segment, steel joist production during the first quarter was 132,000 tons, compared with 121,000 tons in the first quarter of 2007, an increase of 9 percent. Steel deck sales increased 9 percent from 106,000 tons in the first quarter of 2007 to 116,000 tons in this year’s first quarter. Cold-finished steel sales increased 51 percent to 136,000 tons, compared with 90,000 tons in the first quarter of 2007.

In addition to their strong captive downstream customer base, Nucor officials emphasized their growing export business. Nucor expects to soon conclude a 50/50 joint venture with the Duferco Group, Lugano, Switzerland, for the production of beams in Italy and the distribution of beams in Europe and North Africa.

Nucor’s 2008 first-quarter exports exceeded 500,000 tons with robust exports from its sheet, bar and plate mills in particular, Ferriola said. “Nucor steel mills are taking advantage of attractive export opportunities. We benefit from having a number of our mills on major rivers and on both coasts. Also, our purchase of a 75 percent interest in Nova Steel, the Switzerland-based steel trading company, has proven invaluable to our international marketing activities. We will continue to work to build profitable, long-term relationships in export markets. However, we will not grow our export business at the expense of our long-term domestic customers.”

Nucor officials said they expect to identify the location for a new processing center in Mexico by the end of the year. The center will have a 500,000-ton capacity and will be equipped for pickling, slitting, cut-to-length and blanking of Nucor steel, and possibly steel from other customers.

Nucor forecasts continued strength in its sheet, plate, beam and bar businesses due to the solid global demand for steel. In its downstream businesses, the company expects conditions to continue to be good, particularly for rebar fabrication, cold-finish bars, steel grating, and wire rod and mesh products. “We are extremely excited by the growth opportunities we see in 2008 and beyond,” DiMicco said.

Steel Dynamics
Record Sales, Earnings Defy Weak Economy
An across-the-board increase in steel shipments drove Steel Dynamics Inc. to record sales and earnings during the first quarter. The Fort Wayne, Ind.-based steelmaker reported first quarter net income of $143 million on sales of $1.9 billion.

The net income represented a 39.5 percent increase on the first quarter of 2007 and was 46 better than the fourth quarter of 2007. Net sales were more than double the figure from the first three months of 2007 and were up 31 percent from the final quarter of 2007.

Steel Dynamics reported total shipments of 1.6 million tons, with increased sequential shipping in all six of the company’s steelmaking operations. Flat-rolled steel shipments from the company’s flat-roll division and The Techs were the strongest, totaling 947,000 tons, an increase of 13 percent on the fourth quarter of 2008. Shipments by the four long-products steel mills increased 7 percent sequentially.

The company’s first-quarter results also were bolstered by two major acquisitions, The Techs in July 2007 and OmniSource Corp. in October 2007. During the quarter, OmniSource experienced strong demand for recycled ferrous scrap, both from Steel Dynamics and other minimills, integrated mills and foundries. President and CEO Keith Busse said SDI’s favorable inventory position entering the quarter put it in position to capitalize on the high demand.

“Prices for both flat-rolled steel and scrap climbed faster and higher than we had anticipated, accelerating the margin growth we had predicted for the second quarter. Current market conditions suggest that resource cost increases can be offset by surcharges and selling price adjustments resulting in growing margins,” Busse said.

The company reported an average selling price increase of $72 to $782 per ton vs. the fourth quarter of 2007. The price was also $136 higher than the average price from the same quarter in 2007. And the price only looks to go higher in the second quarter.

“Our outlook for 2008 continues to be very positive,” Busse said. “Even with weakness in the U.S. economy, we continue to see strong demand for flat-rolled steels, due principally to constrained domestic supply, low steel inventories and limited steel imports. Second-quarter backlogs for structural steel, merchant bars and SBQ remain strong due to relatively steady demand, as well as limited import activity.”

One area of weakness is in steel sheets, said Mark D. Millett, president and chief operating officer of the company’s flat-rolled steel and ferrous resources division.

“We continue in an intriguing market for sheet products. Domestic steel demand remains very low, if not anemic, due to poor residential construction, poor automotive, a recessionary economy and the loss of manufacturing to foreign shores,” Millett said. “Service centers and distributors have diminished credit capacity and a reluctance to speculate given the uncertainty of the market. Service center inventories remain low, and they’re essentially purchasing for their immediate needs.”

Buffering SDI and other producers against reduced domestic demand is the lack of import options, which Busse believes will continue through most of the year.

“As long as global steel demand remains high and global steel prices meet or exceed U.S. prices, we should expect that steel imports into the U.S. will remain at a low level, especially in light of a weak dollar,” Busse said. “We’re still probably looking at being steel short for some time. People could become desperate for supply and may well go abroad, but I don’t think there’s the likelihood of huge import activity impacting the market in the next quarter or two.”

In contrast, while Steel Dynamics is not a major exporter, the company is seeing greater opportunities in that arena.

“I think if the dollar remains weak, and I don’t see it strengthening in the short run, there will be considerable opportunity, not just for billet export activity but also finished tonnage. We’re talking to several trading houses about exporting greater quantities of SBQ abroad. It’s going to open up some opportunities for all of us that may not be there right now,” Busse said.

U.S. Steel
Net Income Up Over Weak Fourth Quarter
While it was a “substantial improvement” over fourth-quarter 2007, United States Steel Corp., Pittsburgh, reported a 13.9 percent decrease in net income in the first quarter vs. the year-earlier period. U.S. Steel’s net income for the first three months of 2008 was $235 million compared with $273 million in first-quarter 2007 and $35 million in the fourth quarter. Its net sales for the quarter, at $5.2 billion, were up 38.3 percent vs. the first three months of 2007 and 14.6 percent from the fourth quarter of last year.

“North American steel market fundamentals continued to improve during the first quarter with spot hot-roll prices increasing dramatically, as much as $110 a ton from September through March,” said John P. Surma, U.S. Steel’s chairman and chief executive officer. In the second quarter, spot hot-roll prices are moving well above previous record highs, which is good news for U.S. Steel, he added, given that spot sales account for about 50 percent of the steelmaker’s total shipments.

U.S. Steel also has been experiencing spot price increases in its European and tubular market segments. In tubular products, it has announced a series of price increases since November for most sizes and applications ranging from $430 to $675 a ton.

Surma observed that both flat-rolled inventories and imports are currently at historically low levels, as imports continue to be affected by high freight rates, a relatively weak U.S. dollar and the strength of global steel markets. The sustainability of this trend will depend on the strength of the North American economy, particularly for the second half of the year, he said.

Gretchen R. Haggerty, U.S. Steel’s executive vice president and chief financial officer, expects the company’s segment income from operations to increase “substantially” in the second quarter “as realized price increases are expected to surpass the continuing increases in scrap and other raw material costs.”

In addition to spot price increases, U.S. Steel has been making moves to recover market prices for its contract business, as well. In its tubular business segment, U.S. Steel imposed a $250 a ton surcharge, effective with May 1 shipments, on all seamless and electric resistance weld products, including oil country tubular goods, line pipe, standard pipe, drawn over mandrel tubing and hot-finished tubing.

The company is taking a slightly different approach for its flat-roll sector, which Surma maintains is “much different” from the tubular sector. In flat-roll, it has been attempting to make arrangements on a customer-by-customer basis “to attain the market price in as rapid a manner as possible” without jeopardizing its relationship with those customers.

U.S. Steel is also making moves to firm up the control it has on raw material availability and cost. One such move has been the expansion of its Keetac taconite pellet plant in Keewatin, Minn., where it is in the process of restarting a mothballed pellet line. When up and running, the line will give the steelmaker an additional three million tons of iron ore pellet capacity.

While U.S. Steel is a very large user of natural gas, Surma said the steelmaker has given no serious thought to getting back into the oil and gas business (as it had been when under the USX Corp. umbrella). “We are reasonably proficient in what we do—making and selling steel. Getting into exploration, production and taking on reserve risk [for natural gas] is not something we have much of an appetite for.” 

First-Quarter Report
and Outlook: Service Centers

A.M. Castle
‘No Recessionary Impact’ on Business So Far
A.M. Castle & Co., Franklin Park, Ill., reported record sales of $393.5 million during the first quarter of 2008. The figure represented a 4.8 percent increase over the $375.4 million posted during the same period in 2007. Net income of $13.8 million, however, was down 12.8 percent.

“Overall end-market activity in the first three months of 2008 remained healthy,” said Michael Goldberg, president and CEO of A.M. Castle. “Demand in the oil and gas markets, and in our plate products serving the heavy equipment and infrastructure markets, was especially strong in the first quarter. Given our focus on strategic end markets that exhibit favorable demand drivers on a global scale, we have not seen any significant recessionary impact in our business to date, and material prices remain at favorably high levels,” Goldberg added.

Metal segment sales totaled $362.3 million in the first quarter of 2008, 4.5 percent higher than the first quarter of 2007. The Metals UK Group, acquired in January, contributed to the sales increase. Excluding Metals UK Group activity, average tons sold per day in the metal segment increased 1.4 percent vs. the first quarter of 2007, recovering from the lower levels the company experienced in the second half of 2007. Metal prices also increased 3.1 percent vs. the first quarter of last year.

“Margin rates in our aerospace business were comparable to the fourth quarter of 2007, reflecting the continuing oversupply of aluminum plate throughout the supply chain,” Goldberg said. “Though our own inventory levels have improved, we do not expect a better overall market balance of supply to demand for this product until the latter half of 2008. Margin performance in the balance of our metals business improved slightly during the first quarter, in part due to a tightening of supply in certain grades of carbon plate.”

Looking ahead to the second quarter, the company expects its solid performance to continue, as consumer-driven markets such as automotive and residential construction do not directly affect most of its sales.

Additionally, the company announced the completion of its Oracle ERP system implementation. “Both the system and the locations where it was installed are fully operational,” Goldberg said.

Metals USA
Metals Prices to Get Even Higher: Gonçalves
Metals USA President Lourenço Gonçalves accurately forecast the staggering increase in steel prices during the first quarter, and his company benefited with sales revenues $26.4 million higher than the same period a year earlier.

At the Houston-based company’s January conference call, Gonçalves said hot-band prices would top $1,000 per ton this year, a number achieved during the first quarter. With the high prices coming, Gonçalves said Metals USA positioned its inventory to take advantage.

“Everyone is now fully aware that steel prices are increasing rapidly as mills pass along their rising costs. We saw this coming and successfully positioned Metals USA accordingly. In addition to expanded margins, our results were also influenced by a 2.4 percent increase in shipped volume. Our customer base has demonstrated a resiliency that appears to be contrary to the economic news of the day.”

Just as important, Gonçalves said, Metals USA’s customers were also well prepared for the coming price hikes.

“Our objective is to keep our customers well positioned vs. their competitors. One of the more valuable services we provide is insight regarding future metal prices and demand trends. Fortunately, we are able to position our customers to be in front of the curve,” Gonçalves said.

Metals USA reported sales of $489 million during the quarter, 5.7 percent higher than during the first quarter of 2007. Net income of $3.8 million was flat compared to the first quarter of the previous year, though the company’s EBITDA was up $5.6 million from the same period.

Though the domestic automotive and residential construction markets show no signs of improving, Gonçalves believes the general economy is at or near the bottom. Moreover, he said many domestic manufacturers are just now beginning to realize the substantial offshore opportunities, taking advantage of the weak U.S. dollar. “We fully expect important sectors to export their products,” he added.

Though Metals USA is in good health entering the second quarter, some competing service centers are not as well positioned to compete in the new steel environment, Gonçalves said. “Service centers are clearly not immune to the pressures of escalating prices for the steel they buy. We are beginning to hear chatter in the market about liquidity squeezes occurring with some fairly large service centers. Some seasoned management teams are finding the current environment challenging.”

The tightness in the market, exaggerated by some competitors’ lack of capital to restock inventory, has created an influx of new customers for Metals USA—and some who don’t become customers.

“We know they are coming to buy from Metals USA because other service centers do not have inventory. We are treating it on a case-by-case basis. We are turning down a lot of newcomers. We are being careful not to allow panic buying among our customers. The real demand continues to be good. We have to be careful not to support fake demand.”

As for pricing going forward, Gonçalves said all signs point to continued high prices for steel due to increases in the costs for key inputs, as well as energy and transportation. He also expects North American mills to schedule maintenance shutdowns, keeping the price high.

Olympic Steel
Record Earnings Outpace Industry
Olympic Steel Inc., Cleveland, reported net sales for first-quarter 2008 totaling $274.9 million, a 6 percent increase over the first quarter a year ago. First-quarter 2008 net income totaled $13.2 million, compared to a net income of $5.3 million in last year’s first quarter.

Olympic’s tons sold increased 1.2 percent to 315,000, which compares favorably to a 4.8 percent decline in year-over-year industry steel shipments reported by the Metals Service Center Institute.

“We are pleased to report record first-quarter earnings results, while maintaining a strong balance sheet and capital structure, positioning us well for the current market,” said Michael D. Siegal, chairman and CEO. “As carbon steel prices and working capital needs are rising to unprecedented levels, we actually reduced outstanding debt by maintaining our strict disciplines over working capital and credit risk management. We enter the second quarter with significant borrowing capacity available under our credit facility, allowing us to fully participate in the high stakes steel market as liquidity requirements increase dramatically in the second quarter.”

At the same time, Olympic plans to spend $40 million on capital improvements this year, including new satellite processing facilities such as the recently announced expansion in South Carolina, and a new Red Bud stretcher leveler cut-to-length line expected to become operational in Minneapolis during the second quarter.

“Our outlook remains favorable, supported by strong global steel demand, a weak U.S. currency, service center inventory at historically low levels, and rapidly rising energy, transportation and steel-making raw material costs. We believe we are appropriately positioned in terms of inventory, value-added processing capabilities and liquidity to continue performing well through the higher-priced and seasonally stronger second quarter,” Siegal concluded.

Reliance
First-Quarter Results ‘Better Than Anticipated’
Reliance Steel & Aluminum rode rising metal prices to record sales during the first quarter of 2008. The Los Angeles-based service center company posted record first-quarter sales of $1.91 billion, a 3.6 percent increase over the same period in 2007. Net income for the quarter totaled $107.4 million, just off the $111.7 million posted during the first quarter of the previous year.

“In general, the first quarter turned out a bit better than we anticipated,” Chairman and CEO David Hannah told investors and analysts during the company’s quarterly conference call. “The prices of most of the metals we sell were going up, with the largest increases taking place in carbon steel products. Those prices have continued upward since February faster and higher than we expected, and that contributed to our strong first-quarter results.”

The key for the company was the ability to “pass the increases on to our customers as fast or faster than we received the higher-priced materials.” The company’s success in that regard led to gross-profit margins of 25.8 percent, a few points above Reliance’s margins in the fourth quarter of 2007.

“The key for improving on margins is passing the increases through before you receive that high-priced material,” President and Chief Operating Officer Gregg Mollins said. “With the magnitude of these recent increases, its more difficult to pass through $170 to $180 per ton increases today. We feel very confident we can get some of that. Whether we can get it all on 100 percent of our customers, that’s not going to happen.”

Reliance officials noted that conditions are the same for everyone in the industry, and that it is unlikely other service centers will be selling for less in the current environment.

“The smaller service centers are in the same boat we’re in,” Hannah said. “It may be more critical for them to get those increases passed through, since they are smaller and they need to turn their cash. But I don’t think their circumstances are really any different than ours. We’re just two different-sized businesses.”

But Hannah acknowledged that Reliance has an advantage over smaller competitors in sourcing material. “The market now for metal is tight. There may be some opportunities for us, because of the size of the company, to acquire metal from producers that some others can’t get their hands on.”

Despite the rising price of carbon steel, the foreign markets have not stepped in to fill the material void. “Imports have actually gotten tighter,” Mollins said. “The very few offerings actually out there are at unattractive prices and the quantities they’re offering are significantly lower than historical levels. Imports, as far as we’re concerned, are gone.”

Mollins said the conditions facing the steel industry now are unlike anything in the past. “The opportunity to buy more inventory than you need is just not there, whether you’re a service center or one of our service center customers.”

Looking forward, Reliance officials said the outlook is positive for the second quarter, with prices expected to stay flat or increase, while margins will also improve. They weren’t as comfortable forecasting demand.

“We don’t see any slowdown happening, but we don’t see anything taking off,” Hannah said. “We think demand will be relatively steady in the second quarter. We don’t feel comfortable predicting that demand is going to increase in the next quarter as it normally does, simply because of the economic uncertainties out there.”

At the start of the second quarter, Reliance added another company to its stable with the acquisition of Dynamic Metals International LLC, Bristol, Conn. Dynamic, a distributor of specialty metals, will operate as a subsidiary of Reliance’s Service Steel Aerospace Corp.