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Canada''s perspective: like service centers in the United States, Canadian distributors are enjoying the benefits of record-high steel prices. But concerns about the strength of Canada''s currency cast a shadow over 2005.

Article Excerpt
Though the economies of Canada and the United States are inextricably linked, the Canadian market has some distinct differences that present both challenges and opportunities for metals distributors.

During the recent recession, Canada's economy was actually stronger than that of the United States. Steel sales in Canada, which are heavily automotive, fared well despite the downturn as automakers defied the slump with sustained production, recalls Wayne Bassett, president of Samuel, Son & Co., Mississauga, Ontario, Canada's largest service center company.

Key to Canada's strength during that period was the relatively weak Canadian dollar, which offered a big competitive advantage to Canadian manufacturers. In 2003, however, the Canadian dollar strengthened by 22 percent, and that trend has since continued. Last month, Canada's dollar hit an 11-year high of Cdn $1.26 vs. $1.00 U.S. The currency's advance makes Canadian goods more expensive and hurts demand for exports, which account for 40 percent of Canada's annual output.

Currency shifts can have a bigger impact on business than even the price of steel, Bassett notes, as the steel component may only represent 20 percent of the cost of a manufactured product. "Generally speaking, steel prices, exchange adjusted, are about the same on both sides of the border," he says.

Business is good for service centers in the United States and Canada, but the U.S economy definitely has the upper hand today. "When mills are sold out or on allocation, service centers tend to pick up a little more business than normal," Bassett says....

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