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Article Excerpt
PANELISTS:
* Steven Bergman, president, ASD; owner and president, Premier Steel, Englewood, N.J.
* James Barnett, president, Grand Steel Products, Detroit.
* William Vitucci, vice president and chief financial officer, Vitco Steel Supply Corp., Posen, Ill.
* Maurice F. Loeffel Jr., president, Loeffel Steel Products Inc., Barrington, Ill.
* Thomas J. Ferkany, general manager sales, flat-rolled steel products, Titan Steel Corp., Baltimore.
* Robert Pelles, president, Premium Metals, Cleveland.
MCN: What is your outlook for your business in 2005, based on current activity?
Barnett: The majority of our business is non-automotive. Our activity level at the moment is steady. Inquiries for new business dropped off by about a third since the second half of last year, but somehow at the end of the month our sales volume has been pretty steady.
Bergman: Premier Steel enjoyed a very nice year in 2004. Ever since the holidays, there has been a lull in order entries. We don't see the activity that we saw the first 11 months of last year. People seem to have high levels of inventory, and the panic felt last year doesn't seem to be evident in the market. Things have slowed down, but not dramatically.
Vitucci: We are a carbon flat-roll house. Our order and activity level is down seasonally, but our inquiry levels are up dramatically.
Loeffel: We came off a record December. Our inventory levels are also up. We are non-automotive and more in metal fabrication for construction. Customers are only ordering two to three weeks out, so we are seeing a softening.
Ferkany: Certainly, inventories are higher than they were over the past six months. Activity for January is starting to pick up. From Thanksgiving through Christmas, there was a drop-off compared to the previous four to five months. Our business is situated between automotive, construction and HVAC. Big Three automotive is slower than it was in the last year. The transplant business is still fairly robust. Construction and HVAC are still going along at a steady pace.
Pelles: We are a carbon flat-roll service center. Our business seasonally corrected in November and December through the first week of January. Beginning the second week of January, order entry has been tremendous, and our shipping level is starting to gain significant momentum. Our mix is automotive, automotive aftermarket and people who are supplying OEMs, in the last two weeks, business has picked up rapidly.
MCN: To what do you attribute your current market conditions?
Bergman: We probably have a little more inventory than we would like because last year presented us with a very uncertain supply, and we loaded up when we could. That was at the end of summer. Things started to ease off in the fourth quarter, and we had a lot of offshore steel coming in, which softened the market somewhat. It's just an inventory quagmire that has to ease its way through the supply chain before things tighten up again.
Loeffel: The softening is occurring because inventory levels are high. Typically, at this time of year, the mills have more material available. With distributors having high inventories, we are not buying as much. We try to micromanage our inventories, and we try to buy for short-term periods as opposed to laying in for any length of time. With the uncertainty in the industry--with all the consolidations and control changing hands--we are all wondering how things will change. Our customers are only looking to buy two to three weeks out. They don't want to book their shipments until they need it.
MCN: Is the excess inventory a result of orders placed late last year and just arriving now?
Ferkany: Part of that is import material that came in August through December. Warehouses up and down the East Coast are full of coils. When you run into the holidays, business slows down and your order book tends to drop off a little. Those are the two main reasons [for the excess]. Construction customers are confident about their forecasts for the first half of the year. The only sign of weakness we've seen is with the Big Three automakers. Other than that, every customer we talk to is upbeat about the first half.
MCN: So demand is not necessarily weakening; it's an oversupply issue.
Vitucci: I would go a step further and say our end-use customer base--in fear of a first-quarter price increase announced in late October and early November--did a lot of hedge buying in a heavy inventory market. A lot of our competition undercut their pricing to move inventory for fear of where the market was going. Those orders are being completed now. So there has been a little softening on the buying side from your contract "fill-in" customers, but their inquiries are still coming through. They're trying to figure out where the market is going, but they aren't willing to make a commitment. In the Midwest, we aren't seeing any import products. The prices were too high in August; nobody in the Midwest bought it. If it's here, it's in dealers' hands....
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