Updated February 10, 2010

• Service Center Inventories, Shipments
  Increase in December
• Severstal Restarting Warren Mill
  as Market Conditions Improve
  
• Dinner to Celebrate 100 Years of Scouting
• Worthington Acquires Gibraltar’s
  Remaining Processing Business
• Metals USA Profitable
  Despite 4th-Quarter Loss
• Shipment Declines Leveling Off for Red Metals

Service Center Inventories, Shipments
Increase in December
Inventories of steel and aluminum products at service centers in the United States and Canada rose slightly in December as shipments of those products declined seasonally, according to the latest Metals Activity Report from the Metals Service Center Institute, Rolling Meadows, Ill. Final 2009 shipment numbers demonstrate how significantly the recession impacted the industrial metals industry.

But, for the first time in more than a year, the monthly rate of decline in steel shipments moved into the single digits in the United States and was flat in Canada.

Steel product activity
December shipments of steel products from U.S. service centers totaled 2.24 million tons, a decline of just 5.5 percent compared with December 2008 volume. In all, 2009 steel product shipments totaled nearly 29.6 million tons, a year-over-year decline of 36.8 percent. Year-end steel inventories totaled 6.14 million tons, down 29.0 percent from the end of 2008. At December shipping rates, that stockpile equaled a 2.7-month supply.

Shipments from Canadian service centers totaled 322,400 tons in December, identical to December 2008. Canadian steel shipments for all of 2009 were down 26.4 percent, to 4.92 million tons. Canadian service center steel inventories at the end of December were 1.04 million tons, or 10.5 percent lower than a year ago and equal to a 3.2-month supply.

Aluminum product activity

December shipments of aluminum products from U.S. service centers totaled 79,100 tons, 16.5 percent lower than December 2008 shipments. Total U.S. service center aluminum shipments of 1.04 million tons were 38.4 percent below 2008 volume. Aluminum inventories at the end of the year of 279,000 tons were 21.7 percent lower than a year ago and, at December shipping rates, equaled a 3.5-month supply.

In Canada, aluminum shipments from service centers totaled 7,700 tons in December, or 20.1 percent below year-ago volume. Canadian service centers shipped 125,500 tons of aluminum in 2009, a decline of 24.2 percent from 2008 shipments. The year-end inventory of aluminum products in Canada was 29,200 tons, 13.1 percent below a year ago and, at December shipping rates, equaled a 3.8-month supply.

Severstal Restarting Warren Mill
as Market Conditions Improve
OAO Severstal plans to restart its Warren, Ohio, mill, which had been idled as a result of weak market conditions. Severstal Warren, a fully integrated steel plant, is scheduled to restart its blast furnace, steelmaking and hot-strip mill facilities late in first-quarter 2010.

The company is seeking a new contract with the United Steelworkers to cover Severstal Warren and all of Severstal North America's USW-represented facilities.

“Our North American strategy remains to be a long-term market leader, serving domestic and export customers with light flat-rolled steel from five plants. Severstal North America anticipates an improving market for its products over 2010, and we are encouraged by the support we are receiving from all constituencies to resume operations at Warren,” says Sergei A. Kuznetsov, CEO.

While the market outlook in North America remains fragile, management is confident that the improving trading environment warrants the restart of these facilitates. These actions demonstrate the group's long-term commitment to the market, Severstal officials add.

In addition, Severstal North America's Mountain State Carbon coke-making subsidiary in Follansbee was expected to ramp up to full production by the end of January.

As previously announced, company’s cold-rolling complex returned to operation in December, while the Severstal Wheeling coating lines returned to service in late January.

Dinner to Celebrate 100 Years of Scouting
The Chicago Area Boy Scouts of America will celebrate 100 years of scouting with the 2010 Metals Industry Dinner Show. This year’s event will be held April 29 at the Hyatt Regency in Chicago.

The event begins with a reception and silent auction at 6 p.m., followed by dinner and entertainment. Dan Zecca of Macsteel Service Centers USA will be honored as the 2010 Good Scout Recipient.

Sponsorship opportunities are available. Proceeds from the dinner will support the Chicago Area Boy Scouts of America.

To register, visit http://events.chicagobsa.org.

Worthington Acquires Gibraltar’s
Remaining Processing Business
Worthington Steel, the steel processing segment of Columbus, Ohio-based Worthington Industries, has acquired the strip steel assets of Gibraltar Industries Inc., Buffalo, N.Y. The acquisition will expand the capabilities of Worthington Steel’s cold-rolled strip business, while signaling Gibraltar’s exit from the processing business.

Worthington acquired Gibraltar’s Cleveland facility with the added capabilities to roll wider and lighter gauge material along with oscillate slitting. Also included in the transaction were the equipment and inventory of Gibraltar’s Buffalo facility, and Integrated Terminals, a warehouse facility in Detroit. Gibraltar will begin to close its Buffalo facility and work with Worthington Steel to coordinate customer accounts as they are transferred to Cleveland and Columbus.

As part of the transaction, Worthington also acquired a 31 percent interest in Samuel Steel Pickling, a joint venture with operations in Cleveland and Twinsburg, Ohio.

“We are bringing together two leading steel processing companies well known for a commitment to high-quality products and superior customer service,” says John McConnell, Worthington’s chairman and CEO. “This is an excellent growth opportunity for steel processing to add higher margin business, while enhancing our capacity to serve existing customers, and new customers in new markets.”

The completion of this transaction finalizes Gibraltar’s exit from steel processing businesses and establishes the company as a manufacturer and distributor of products for the building and industrial markets. The transition included the sale of Gibraltar’s steel strapping business in 2006, the 2007 sale of its Hubbell Steel business, and the 2008 sale of its SCM powdered metal business.

Quarterly results improve
Earlier in the month during its quarterly conference call, Worthington reported that improvements in its steel processing segment drove a profitable second quarter. The company reported net earnings of $23.2 million during the quarter, which ended Nov. 30. In the corresponding quarter during the previous fiscal year, Worthington reported a net loss of $164.7 million. The company cited increased margins due to higher steel prices, tighter cost controls, improved inventory management and operational efficiencies for the performance.

“We had a very good quarter driven by improved volumes and spreads in steel processing and the benefits of our transformation efforts,” said McConnell. “Over the past two years, we have reduced costs, resized our businesses, reduced debt and conserved cash across the company to produce positive results in a down cycle.”

Worthington reported net sales of $448 million during the quarter, a 7.3 percent increase from the previous quarter, but 39.9 percent behind the second quarter of the previous year.

“Reiterating what we stated at the end of our first quarter, we continue to operate in a historically low demand environment. While we are generally optimistic about the gradual return of the economy, we do not believe we will know how quickly our markets will rebound until the end of the third quarter, at the earliest,” McConnell said.

Metals USA Profitable
Despite 4th-Quarter Loss
Metals USA reported a fourth-quarter loss, but still remained profitable for 2009.

The Houston-based service center reported a net loss of $4.4 million during the fourth quarter, a 37.1 percent improvement from the $7 million loss posted during the same period of 2008. For the full year, Metals USA reported net income of $3.5 million, a 95 percent drop from the $72.6 million reported during the previous year.

Net sales in the fourth quarter totaled $245.3 million, down 46.2 percent vs. the same three months in 2008. Full-year sales were down almost 50 percent, from $2.16 billion in 2008 to $1.1 billion in 2009.

"Last year's market conditions allowed us to demonstrate our ability to efficiently manage our working capital needs in a declining steel pricing environment. In addition to inventory reduction initiatives, we also implemented significant permanent cost-cutting actions and made opportunistic debt repurchases at discounted prices, thereby allowing us to pay down a meaningful portion of our outstanding debt," Chairman, President and CEO Lourenço Gonçalves told investors and analysts.

The company enjoyed continued solid performance in its flat-rolled division, which reported net income of $6.8 million following $8.9 million in income during the third quarter. The plates and shapes division reported income of $3.0 million after reporting a profit of $7.9 million the previous quarter, while building products posted a loss of $1.3 million during the quarter.

Gonçalves pointed to numerous positive signs about the steel market as 2010 opens, including domestic steel mills bringing steel capacity back while service centers maintain lower inventory levels, suggesting real demand is improving. Other positive trends include rising raw material costs and improved end-user confidence.

"We are pleased to have shown that our service center business model works both when the economy is doing well as in 2008, or poorly like last year. We see the current business environment with rising steel prices and longer mill lead times as positive indications that market fundamentals are already improving in 2010," he said.

Shipment Declines Leveling Off for Red Metals
The latest member survey from the Copper & Brass Servicenter Association, Overland Park, Kan., shows relatively steady shipping levels from November to December, supporting a cautiously optimistic mood among red metals producers and distributors.

Total copper shipments in December actually increased by 2 percent over November, while alloy shipments declined by only 3 percent. The biggest positive gains were in copper plate shipments, which jumped 31 percent in December, and in shipments of other alloy sheet, coil and strip, which increased 13 percent.

In contrast, service center shipments of copper pipe and tube declined by 12 percent, while other alloy plate (200 series) dropped by 33 percent.

Copper and brass executives expect general economic activity to remain fairly steady for the next three months. About 73 percent of producers predict activity will remain about the same, while 27 percent expect activity to increase. Service centers are a little more optimistic, with 54 percent predicting an increase and almost all the rest pegging conditions to remain about the same. Few, if any, expect activity to decrease.

CBSA members also reported fewer workers on short time or layoff in December--29 percent for service centers and 45 percent for mills.