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MCN top 50 service center industry giants: Metal Center News ranks the largest, most successful service centers in North America. Once again, Ryerson remains No. 1, but Reliance has closed the gap.

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Combined revenues among the industry's Top 50 service centers grew by about 9 percent in 2006, topping the $50 billion mark for the first time. Though still growing, the pace appears to be slowing from the 20 percent rate reported in 2005, reflecting moderating market conditions compared to the boom of the previous few years.

MCN polled the industry's largest players in July and August and ranked them based on total revenues from their last full fiscal year, calendar year 2006. Chicago-based Ryerson Inc. remains on top of the Top 50 with $5.9 billion in 2006 revenues, up from $5.80 billion the previous year. Not far behind is Reliance Steel & Aluminum Co. at $5.74 billion, up from $5.54 billion in 2005. No. 3 ThyssenKrupp Materials NA has seen strong growth--to $3.18 billion in 2006 from $2.35 billion in 2005--but remains well back of the two market leaders. Thirteen companies in this year's ranking have topped the $1 billion mark.

Reliance, as the market's most prolific acquirer, has been steadily gaining ground on Ryerson in the past few years. In July, Ryerson officials agreed to a purchase offer estimated at $2 billion from Platinum Equity, a California-based investment firm. Platinum Equity already owns the PNA Group, ranked No. 12 in this year's survey, which includes Feralloy, Delta Steel, Infra-Steel and Metal Supply Co. Last month, stockholders gave Ryerson's board and management a vote of confidence and cleared the way for the sale to proceed. If the deal is finalized, Platinum Equity will have control of both Ryerson and the PNA Group, with combined sales of nearly $7.5 billion, putting some distance between it and Reliance.

In total, the Top 50 generated combined revenues of approximately $50.5 billion last year, nearly half of all sales by metals distributors in North America, according to rough industry estimates. This compares to $46.3 billion generated by the Top 50 in last year's MCN survey. Service centers remain the largest single customer group for North American mills, buying, processing and reselling one-quarter or more of all the steel, aluminum, copper and brass produced each year.

Because respondents are polled in late summer each year, they are not only asked to report their last full fiscal year's results, but also to forecast their expectations for the remainder of the current year. For the past few years, the market's actual results have exceeded executives' combined expectations, but not this time. Halfway through 2006, respondents forecast growth averaging nearly 12 percent for the year, a bit higher than the eventual 9 percent gain.

Based on mid-year 2007 predictions by the leading service centers, MCN forecasts that aggregate revenues for the Top 50 will increase by a further 4 to 6 percent this year. Clearly, many service center executives expect business activity to ease further in light of uncertain economic conditions and slowdowns in such key markets as residential construction and automotive.

Service centers achieved solid growth in 2006 despite declining metals prices. Various sources report that both the price of steel and aluminum peaked in summer 2006--hot-rolled steel to around $650 per ton and aluminum to around $1.30 per pound. By year's end, however, steel had declined by nearly $100 per ton, though aluminum had recovered to near mid-year levels after dipping precipitously in early fall.

2007 has seen similar price volatility, which no doubt tempered executive's forecasts for this year's growth. As of midsummer, the price of hot-band, at less than $515 per ton, was near the past year's low, while aluminum remained flat with an LME price around $1.25 per pound.

In the aggregate, this year's Top 50 operate about 1,175 stocking locations totaling more than 107 million square feet of warehouse and processing space, while employing about 59,000 workers. This is down from 1,330 locations, 116 million square feet and 60,000 workers reported in last year's survey. The difference may reflect the weakening market conditions and the rationalization of facilities among consolidating companies.

Several major mergers were finalized in the past year or so, continuing the consolidation trend that is reshaping metals distribution. More than 20 deals were announced in 2006, and about 15 through the first eight months of 2007. Notable among them:

* Platinum Equity's bid for Ryerson Inc. (see Service Center News for more detail).

* Reliance Steel & Muminum's acquisitions of Earle M. Jorgensen Co. and Yarde Metals last year, followed by a string of smaller purchases including Crest Steel Corp., the Encore Group, Industrial Metals and Surplus Inc., Athens Steel Inc. and Clayton Metals.

* O'Neal Steel's 2006 acquisitions of Timberline Steel and Ferguson Metals, following on the heels of its 2005 purchase of TW Metals.

* Edgen's purchase of Murray International Metals last year, and PetroSteel International earlier this year. The company now goes to market as Edgen Murray.

* A.M. Castle's acquisition of Transtar Metals last fall, which has strengthened the company's position in the specialty metals and aerospace markets.

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